EUR 110 million Series 4 Notes, Assigned Baa3 (sf)
This issuance constitutes an increase in the total amount of Series 4 Notes issued in May 2011. With this new issuance, the total Series 4 notes is now EUR 1.510 billion.
Moody's also affirms the existing ratings of notes issued by Fondo de Titulización del déficit del sistema eléctrico, FTA:
Series 1, affirmed at Baa3(sf)
Series 2, affirmed at Baa3(sf)
Series 3, affirmed at Baa3(sf)
Series 4, affirmed at Baa3(sf)
Series 5, affirmed at Baa3(sf)
Series 10, affirmed at Baa3(sf)
Moody's has not rated EUR125 million Series 6 Notes issued by FADE on 18 November 2011, EUR125 million Series 7 Notes issued by FADE on 9 December 2011, EUR200 million Series 8 Notes issued on 7 February 2012, EUR492.3 million Series 9 initially issued on 10 February 2012 and increased on 15 Febraury 2012 and 31 October 2012, EUR125 million Series 11 issued on 22 February 2012 or EUR844 million Series 12 issued on 29 February 2012.
The rating of the notes takes into account the specific nature of this transaction and unique structure, which differs substantially from other electricity tariff securitisations and is recognised by a Spanish government royal decree. Moody's assigned the ratings primarily based on: (i) an evaluation of the guarantee from the government of Spain, which guarantees the interest and principal payments on the notes; (ii) the current rating of the government of Spain (Baa3/(P)P-3); and (iii) an evaluation of the structural features of the transaction.
The rating of the notes is fully linked to the rating of the government of Spain, as the claims of the issuer under the guarantee represent an unconditional, irrevocable, legal, valid and binding obligation of the Spanish government, as confirmed by the transaction's legal counsel. Furthermore, if the government of Spain failed to make the required payments under the guarantee, this could trigger an event of default if the management company considered this course of action in the best interest of the noteholders.
The rating of the notes does not consider the additional support that could be brought by the security over the assets due to (a) the potentially large cash-flow mismatches between the assets and the rated liabilities, and (b) the level of predictability of the assets timing of payment based on the available information.
This transaction is a securitisation of credit receivables attributed to certain Spanish utility companies and recognised by Spanish government royal decree. The securitisation allows the utility companies to obtain compensation for shortfalls in the settlement of their regulated activities in the electricity market ("tariff deficit"). The tariff deficit is the difference between the costs incurred to supply the power and the regulated tariffs charged to the end users. The compensation is considered a fixed cost and a fixed amount is added to the electricity bills of the consumers in order to cover this deficit over the next 15 years. The Spanish electricity regulator (Spanish Comisión Nacional de Energia) sets, administers and receives these amounts and passes them on to the specified utilities companies.
The issuer has acquired a portion of the tariff deficit receivables generated in 2012. This share accounts for approximately EUR111.91 million as of the closing date. The issuer previously issued series 1, series 2, series 3, series 4, series 5 and series 10 for a total amount of EUR 11.477 billion (rated Baa3 (sf)), plus Series 6, Series 7, Series 8, Series 9, Series 11 and Series 12 for an amount of EUR1.91 billion (not rated by Moody's) as part of the programme. The issuer will be able to acquire additional tariff deficit receivables over the five years following the first issuance and issue new series notes, as well as issue notes to refinance existing series over the next 20 years. All series of notes will rank pari passu.
Both interest and principal due under the notes will be guaranteed by the Government of Spain (rated Baa3 /(P)P-3).
The main features of the guarantee granted by the Government of Spain are:
o The guarantee is irrevocable and unconditional
o The maximum limit for the programme amount is EUR22 billion. This limit may be increased to EUR25 billion, subject to ongoing approval of the guarantee limit in the General State Budget Law.
o The obligations assumed shall be enforceable on the date where the guaranteed obligation becomes due (principal or ordinary interest).
o The structure envisions that the guarantee will be enforced by the management company (on behalf of the investors).
o The amounts due under the notes accrue penalty interest from due payment date. This penalty interest is covered by the government guarantee from the date the interest / principal payments are due (i.e. from the payment date when a shortfall occurs and needs to be covered by the guarantee), as long as the management company requires the payment to the guarantor within five days from the payment date.
In addition, a credit line granted by Instituto de Credito Oficial for a maximum amount of EUR2 billion will be available to cover the issuer's regular senior expenses as well as interest and principal on all series of notes.
Moody's did not perform any cash flow analysis or simulation of stress scenarios as the rating is based on the rating of the Spanish government through the guarantee.
The rating addresses the expected loss posed to investors by the legal final maturity of the notes (2034). In Moody's opinion, the structure allows for ultimate payment of interest and principal on the Notes. Moody's ratings address only the credit risks associated with the transaction. Other non-credit risks have not been addressed, but may have a significant effect on yield to investors.
The provisional rating on the EUR110 million issuance under Series 4 was assigned on 13 November 2012.
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Greg O'Reilly Analyst Structured Finance Group Moody'sInvestors Service Ltd. One Canada SquareCanary WharfLondon E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Ning Loh VP - Senior Credit Officer Structured Finance Group JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Releasing Office: Moody's Investors Service Ltd. One Canada SquareCanary WharfLondon E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 (C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.
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