13.11.2012 12:44
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Moody's assigns definitive ratings to FTA PYMES SANTANDER 4's SME CDO notes

EUR 3,180 million of securities rated

Madrid, November 13, 2012 -- Moody's Investors Service has assigned the following definitive ratings to the debt to be issued by FTA PYMES SANTANDER 4 (the Fondo):

....EUR2252.5M Serie A notes, Assigned A3 (sf)

....EUR397.5M Serie B notes, Assigned Baa2 (sf)

....EUR530.0M Serie C notes, Assigned Ca (sf)

FTA PYMES SANTANDER 4 is a securitisation of standard loans and credit lines granted by Banco Santander (Baa2/P-2; Negative Outlook) to small and medium-sized enterprises (SMEs) and self-employed individuals.

At closing, the Fondo -- a newly formed limited-liability entity incorporated under the laws of Spain -- will issue three series of rated notes. Santander will act as servicer of the loans and credit lines for the Fondo, while Santander de Titulización S.G.F.T., S.A. will be the management company (Gestora) of the Fondo.

RATINGS RATIONALE

As of October 2012, the provisional asset pool of underlying assets was composed of a portfolio of almost 32,000 contracts granted to SMEs and self-employed individuals located in Spain. In terms of outstanding amounts, around 67.1% corresponds to standard loans and 32.9% to credit lines. The assets were originated mainly between 2009 and 2012, with a weighted average seasoning of 0.62 years and a weighted average remaining term of 3.33 years. Around 7.5% of the portfolio is secured by first-lien mortgage guarantees. Geographically, the pool is concentrated mostly in Madrid (19.7%), Catalonia (20.7%) and Andalusia (13.6%). At closing, there will be no loans more than 30 days in arrears.

In Moody's view, the strong credit positive features of this deal include, among others: (i) a relatively short weighted average life of 2.0 years; (ii) a granular pool (effective number of obligors over 2,000); and (iii) a geographically well-diversified portfolio. However, the transaction has several challenging features: (i) a strong linkage to Santander related to its originator, servicer, accounts holder and liquidity line provider roles; (ii) a relatively high exposure to the construction and building industry sector (20% according to Moody's industry classification); (iii) no swap in place; and (iv) a complex mechanism that allows the Fondo to compensate (daily) the increase on the disposed amount of certain credit lines with the decrease of the disposed amount from other lines, and/or the amortisation of the standard loans. These characteristics were reflected in Moody's analysis and ratings, where several simulations tested the available credit enhancement and 20% reserve fund to cover potential shortfalls in interest or principal envisioned in the transaction structure.

The ratings are primarily based on the credit quality of the portfolio, its diversity, the structural features of the transaction and its legal integrity.

In its quantitative assessment, Moody's assumed a mean default rate of 9.88%, with a coefficient of variation of 53.7% and a recovery rate of 35.0%. Moody's also tested other set of assumptions under its Parameter Sensitivities analysis. For instance, if the assumed default probability of 9.88% used in determining the initial rating was changed to 12.88% and the recovery rate of 35% was changed to 25%, the model-indicated rating for Serie A, Serie B and Serie C of A3(sf), Baa2(sf) and Ca(sf) would be Baa1(sf), Ba2(sf) and Ca(sf) respectively. For more details, please refer to the full Parameter Sensitivity analysis included in the New Issue Report of this transaction.

The global V Score for this transaction is Medium/High, which is in line with the score assigned for the Spanish SME sector and representative of the volatility and uncertainty in the Spanish SME sector. V-Scores are a relative assessment of the quality of available credit information and of the degree of dependence on various assumptions used in determining the rating. The main source of uncertainty in the analysis relate to the Transaction Complexity. This element has been assigned a Medium/High V-Score, as opposed to Medium assignment for the sector V-Score. For more information, the V-Score has been assigned accordingly to the report " V Scores and Parameter Sensitivities in the EMEA Small-to-Medium Enterprise ABS Sector " published in June 2009.

The methodologies used in this rating were "Moody's Approach to Rating CDOs of SMEs in Europe" published in February 2007, "Refining the ABS SME Approach: Moody's Probability of Default assumptions in the rating analysis of granular Small and Mid-sized Enterprise portfolios in EMEA", published in March 2009 and "Moody's Approach to Rating Granular SME Transactions in Europe, Middle East and Africa", published in June 2007. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

In rating this transaction, Moody's used ABSROM to model the cash flows and determine the loss for each tranche. The cash flow model evaluates all default scenarios that are then weighted considering the probabilities of the Inverse Normal distribution assumed for the portfolio default rate. On the recovery side Moody's assumes a stochastic (normal) recovery distribution which is correlated to the default distribution. In each default scenario, the corresponding loss for each class of notes is calculated given the incoming cash flows from the assets and the outgoing payments to third parties and noteholders. Therefore, the expected loss or EL for each tranche is the sum product of (i) the probability of occurrence of each default scenario; and (ii) the loss derived from the cash flow model in each default scenario for each tranche.

As such, Moody's analysis encompasses the assessment of stressed scenarios.

On 21 August 2012, Moody's released a Request for Comment seeking market feedback on proposed adjustments to its modelling assumptions. These adjustments are designed to account for the impact of rapid and significant country credit deterioration on structured finance transactions. If the adjusted approach is implemented as proposed, the rating of the notes affected by today rating action may be negatively affected. See "Approach to Assessing the Impact of a Rapid Country Credit Deterioration on Structured Finance Transactions", (http://www.moodys.com/research/Approach-to-Assessing-the-Impact-of-a-Rapid-Country-Credit--PBS_SF294880) for further details regarding the implications of the proposed methodology changes on Moody's ratings.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

The rating has been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

Information sources used to prepare the rating are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's did not receive or take into account a third-party assessment on the due diligence performed regarding the underlying assets or financial instruments in this transaction.

Further information on the representations and warranties and enforcement mechanisms available to investors are available on http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF306671

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Moody's Investors Service may have provided Ancillary or Other Permissible Service(s) to the rated entity or its related third parties within the two years preceding the credit rating action. Please see the special report "Ancillary or other permissible services provided to entities rated by MIS's EU credit rating agencies" on the ratings disclosure page on our website www.moodys.com for further information.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Luis Mozos Vice President - Senior Analyst Structured Finance Group Moody's Investors Service Espana, S.A. Calle Principe de Vergara, 131, 6 Planta Madrid 28002 Spain JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Monica Curti Vice President - Senior Analyst Structured Finance Group Telephone:+39-02-9148-1100 Releasing Office: Moody's Investors Service Espana, S.A. Calle Principe de Vergara, 131, 6 Planta Madrid 28002 Spain 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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MIS, a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Shareholder Relations -- Corporate Governance -- Director and Shareholder Affiliation Policy."

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This credit rating is an opinion as to the creditworthiness or a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors. It would be dangerous for retail investors to make any investment decision based on this credit rating. If in doubt you should contact your financial or other professional adviser.

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