Fitch Downgrades Greek SF Transactions and Covered Bonds
The rating actions follow the downgrade of Greece's IDR to 'CC' and revision of the Country Ceiling to 'CCC', as well as the downgrade of Greek banks (see "Fitch Downgrades Greek Banks to 'RD' on Capital Controls" dated 29 June 2015 on www.fitchratings.com). A full list of rating actions can be found on www.fitchratings.com or by clicking the link above.
KEY RATING DRIVERS
Lower Country Ceiling
As a result of the Country Ceiling revision to 'CCC' from 'B-', Fitch has downgraded 18 RMBS tranches to 'CCCsf', the highest achievable rating for Greek issuance.
Sovereign-linked Rating
Aeolos S.A. is a Greek ABS transaction guaranteed by the Greek government and backed by receivables from Greek airspace route charges. Fitch downgraded the notes to 'CCsf' from 'CCCsf', reflecting the strength of the connection to the Greek sovereign. The terms of the notes include a provision for noteholders to call an event of default if the sovereign defaults on other obligations. This option was not exercised when the Greek sovereign defaulted in 2012 and there appears little benefit for noteholders to exercise the option in the event of any future default.
Country Ceiling and Banks' IDRs
The downgrade of covered bonds reflect the lower Country Ceiling, as well as the downgrade of Piraeus', NBG's and Alpha's IDRs to 'RD' and their VR to 'f'.
Mitigated Transfer and Convertibility Risk
Fitch believes that the capital controls put in place may restrict money transfers to offshore-based SPVs, which could heighten the risk of missed interest payments on the securities. This risk is mitigated by the available cash reserves, currently held with 'A'-rated offshore banks, that provide sufficient liquidity to support interest on the securities for several payment periods. This was considered in determining the rating uplift over the sovereign IDR.
Suspended Discontinuity Caps
Given that Greek covered bonds issuers' 'RD' IDRs reflect an uncured payment default on other obligations than the covered bonds, Fitch no longer uses the IDR as a starting point for its covered bonds credit risk assessment. As a result, Fitch has suspended its Discontinuity Cap (D-Cap) and IDR uplift analysis, which generally determines the maximum rating notch uplift from the IDR of the issuing entities to the covered bond rating on a probability of default (PD) basis.
RATING SENSITIVITIES
Further changes in the sovereign rating and/or in the Country Ceiling will affect the rating of the highest rated SF tranches and covered bond programmes.
If strict capital controls that prevent payments to the issuers are in place for a period that extends beyond Fitch's expectations, further negative rating actions may be taken.
The ratings of the covered bond programmes are also sensitive to changes to the Greek banks' IDRs.
DUE DILIGENCE USAGE
Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pools and the RMBS and ABS transactions. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.
Fitch did not undertake a review of the information provided about the underlying asset pools ahead of the transactions' initial closing. The subsequent performance of the transactions over the years is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable.
Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.
SOURCES OF INFORMATION
Not Applicable
MODELS
Not applicable
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