Fitch Ratings-London/Paris/Madrid-08 February 2010: Fitch Ratings has today downgraded GC FTGENCAT Sabadell 1's notes and taken additional rating actions as highlighted below:
EUR345.6m class A(G) notes: downgraded to 'AA' from 'AA+'; Negative Outlook; assigned a Loss Severity (LS) rating of 'LS-1'EUR19.8m class B notes: downgraded to 'B' from 'BBB'; Negative Outlook; assigned 'LS-3'EUR5.7m class C notes: downgraded to 'CCC' from 'BB'; assigned a Recovery Rating of 'RR3'
The rating action takes into consideration both the performance of the transaction to date which, despite a relatively good historical performance, has in recent months displayed a clear shift towards a more negative trend, as well as an updated credit view of the underlying small to medium-sized enterprises' (SME) loans securitised under the transaction.
Following the increase in cumulative gross defaults to EUR7.7m from EUR4m in the six months from July to December 2009, Fitch believes that the underlying assets will continue to report a sharp deterioration in credit performance as difficult economic conditions in Spain are expected to persist through the end of 2010. The agency expects the collateral to remain under pressure in the near-term, with continued increases in late-stage arrears and defaults.
In line with its global structured finance rating criteria and taking into account its rating criteria for European granular corporate balance-sheet securitisations (SME CLO), Fitch also updated its base case default expectation for the performing collateral balance of the portfolio as well as the Recovery Rate expectations. These revised assumptions, coupled with the expected credit performance of the underlying assets, including the profile of the transaction's delinquency pipeline, result in limited credit protection being available to the noteholders which supported the notes' downgrades.
Despite current cumulative losses still being below their initial base case, Fitch believes that the losses expected to arise from the transaction in the next 12-to-18 months will result in further reserve fund draws, following the two consecutive draws which occurred in September and December 2009 of EUR1.5m and EUR2m respectively. These draws occurred as a direct result of the significant increase in defaults during the last six months.
The class A (G) notes benefit from a guarantee by the Generalitat de Catalunya (Autonomous Community of Catalonia, rated 'A+'/'F1'/Outlook Negative) to meet the ultimate payment of interest and principal on the notes.
The transaction is a cash flow securitisation of a pool of leasing contracts originated from Banco de Sabadell (rated 'A+'/'F1'/Outlook Negative) to Spanish SMEs.
Applicable criteria 'Global Structured Finance Rating Criteria', dated 30 September, 2009, 'Criteria for Structured Finance Loss Severity Ratings,' dated 17 February, 2009, 'Rating Criteria for European Granular Corporate Balance-Sheet Securitisations (SME CLO)', dated 23 July, 2009 are available at www.fitchratings.com:.
Contacts: Will Rossiter, Paris, Tel: +33 (0) 1 4429 9147; Andy Brewer, London, +44 (0) 20 7417 3481; Rui J. Pereira, Madrid, +34 91 702 5774.
Media Relations: Julian Dennison, London, Tel: +44 020 7682 7480, Email: julian.dennison@fitchratings.com.
Fitch's Recovery Ratings (RR), introduced in 2005, are a relative indicator of creditor recovery on a given obligation in the event of a default. An overview of Fitch's RR methodology can be found at www.fitchratings.com/recovery.
Additional information is available at www.fitchratings.com
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