Jan 10 - Fitch Ratings says that AyT Cedulas Cajas Global, FTA’s (AyT CCG or the programme) notes’ ratings will not be affected by the introduction of a voluntary early amortisation option. Moreover, no rating impact is expected from the partial replacement of the liquidity reserves for Series VII, XXII, XIV, and XVI by a guarantee by the European Investment Fund (EIF, ‘AAA’/Stable/‘F1+').
On 9 January 2013 AyT CCG’s management company published a relevant fact on the website of the Spanish securities regulator (CNMV) announcing the two events in relation with all or some series of the programme’s notes.
The agency believes that the modification of the programme’s documentation that introduces the option of the notes of a given series voluntary early amortisation has no impact on the ratings. This is because the amortisation would not change the concentration characteristics of the affected series even if exercised at a price below par (always with the agreement of those investors willing to amortise their notes early). The early amortisations will only be possible if the ratings of all series of the programme are not affected by the amortisation of a given series.
The agency understands that the motivation for the early amortisation mechanism is the willingness of originators to profit from favourable market conditions. These profits will help them improve their capital ratios. Another effect of the early amortisations is the increase of the originators’ overcollateralization ratios resulting from the reduction of the outstanding balance of cedulas hipotecarias (CH).
The early amortisation mechanism may hence result in some notes being repurchased by the programme at prices potentially below face value. This may result in a voluntary trading loss for investors, as they will have the option and not the obligation to participate in the early amortisation. The notes will be retired at the series level and the amortisation will reduce the principal amount of the notes of the affected series within the programme.
Fitch notes that the early amortisation might affect the liquidity requirements at the programme level, but would not modify any other characteristics of the transaction. Portfolio composition, payment terms, interest rates, etc., will all remain unchanged.
AyT CCG’s management company also announced that four first demand guarantee agreements had been signed between Instituto de Credito Oficial (ICO, ‘BBB’/Negative/‘F2’) and EIF. By these agreements the four liquidity cash deposits held at the account bank of the issuer, Barclays Bank PLC, Spanish branch (‘A’/Stable/‘F1’) will be totally or partially withdrawn:
AyT CCG, Series VIII is now supported by a guarantee from EIF covering 80% of ICO obligations as Liquidity Line (LL) provider, and the remainder 20% will continue to be deposited with Barclays;
AyT CCG, Series XII is now supported by a guarantee from EIF covering 83% of ICO obligations as LL provider, and the remainder 17% will continue to be deposited with Barclays;
AyT CCG, Series XIV is now supported by a guarantee from EIF covering 100% of ICO obligations as LL provider; and
AyT CCG, Series XVI is now supported by a guarantee from EIF covering 17% of ICO obligations as LL provider, and the remainder 83% will continue to be deposited with Barclays.
The agreements are consistent with Fitch’s counterparty criteria and provide adequate counterparty risk coverage to support the rating of AyT CCG’s referenced series. The liquidity line amounts not covered by the guarantee from EIF will continue to be deposited at Barclays for Series VIII, XII and XVI.