LONDON & MADRID - (Business Wire) Fitch Ratings has today upgraded one tranche of GC FTGENCAT II, FTA and affirmed the rest. The transaction is a small- and medium-sized enterprise (SME) collateralised debt obligation (CDO). Fitch has taken the following rating actions:
--EUR59,434,529 class AG notes (ISIN ES0316872003): affirmed at 'AAA'; Outlook Stable;
--EUR14,858,632 class AS notes (ISIN ES0316872011): affirmed at 'AAA'; Outlook Stable; assigned 'LS3'
--EUR17,600,000 class BG notes (ISIN ES0316872029): affirmed at 'AAA'; Outlook Stable;
--EUR17,600,000 class BS notes (ISIN ES0316872037): upgraded to 'AAA' from 'AA'; Outlook Stable; assigned 'LS3'
--EUR31,300,000 class C notes (ISIN ES0316872045): affirmed at 'A'; removed from Rating Watch Negative; assigned Stable Outlook and 'LS3'.
The rating actions reflect the transaction's stable performance as evidenced by low delinquency levels, and a significant de-leveraging which has substantially increased credit enhancement (CE) levels compared to those at closing.
The portfolio has amortized to 13.6% of its initial balance at closing. The resulting de-leveraging of the transaction's capital structure has increased relative CE levels supporting the rated notes. This is the primary driver of the upgrade of the class BS notes which are now supported by 39% CE.
Portfolio performance has been stable. Arrears of more than 90 days amounts to 0.9% of the total outstanding balance and cumulated defaults amount to only 0.1% of the portfolio balance at closing.
Class AG and BG notes also benefit from an unconditional guarantee of the Generalitat de Catalunya (rated 'A+/F1', Outlook Negative, by Fitch) which covers the ultimate payment of interest and principal on these notes. The current 'AAA' ratings for these notes reflect the sufficiently robust CE levels which exceed Fitch's loss expectation in the highest rating scenario. Both notes would be 'AAA' independent of the guarantee.
Using its Rating Criteria for European SME CLOs (see reference below), Fitch has assumed the probability of default of the unrated SME loans to be commensurate with the 'B' rating category. Based on observed delinquencies and the origination process of the respective banks in Spain, the benchmark probability of default is adjusted upward or downward. Delinquent loans are notched down depending on the time the loans have been in arrears. Recoveries for loans secured by first lien real estate is adjusted for property indexation and market value stress based on the criteria but second lien mortgages are treated as senior unsecured loans.
GC FTGENCAT II, FTA is a securitisation of a static portfolio which as of closing amounted to EUR950 million consisting of 10,864 loans to SMEs advanced by, and purchased from the following originators: Caja de Ahorros y Pensiones de Barcelona ('AA-/F1+', Outlook Negative), Banco Espanol de Credito ('AA/F1+', Outlook Stable), Banco Pastor, Banco Popular Espanol ('AA-/F1+', Outlook Negative), Banco Santander ('AA/F1+', Outlook Stable), Banco Sabadell ('A+/F1', Outlook Negative), Banco Bilbao Vizcaya Argentaria ('AA-/'1+', Outlook Positive). This transaction closed in April 2003.
Applicable Criteria 'Rating Criteria for European Granular Corporate Balance-Sheet Securitisations (SME CLO)', dated 23 July 2009, 'Global Structured Finance Rating Criteria', dated 30 September 2009 and 'Criteria for Structured Finance Loss Severity Ratings,' dated 17 February 2009 are available on 'www.fitchratings.com'.
Additional information is available at www.fitchratings.com.
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