OREANDA-NEWS. Fitch Ratings says that AyT Cedulas Cajas Global, FTA's (the programme) series IV, VII, XIV and XVI ratings are not affected by the reduction to zero, or close to zero, of the euro drawable amount under the liquidity facilities. The programme is a multi-issuer cedulas hipotecarias (MICH) transaction, collateralised by Spanish mortgage covered bonds.

The MICH notes payable coupon rate is being floored to zero due to the prevailing negative Euribor rate, which stands at approximately -0.2% and is the index that determines the notes' coupon rate. Having no access to liquidity funds is not a material problem for the programme so long as the interest payment obligations under the notes are also equal to zero. Liquidity drawable amounts will revert back to positive euro figures when the reference Euribor index moves back into positive territory.

Liquidity support is one of the key rating drivers for the analysis of MICH transactions. Fitch believes that timely liquidity support allows the programme to bridge the time needed by an alternative manager or insolvency administrator of a defaulted issuing bank to restore the cash flows from the mortgage cover pool securing the cedulas hipotecarias of that bank (see Fitch's Rating Criteria for Multi-Issuer Cedulas Hipotecarias, and Multi-Issuer Cedulas Hipotecarias OC Tracker, both dated July 2015 at www.fitchratings.com for further details).

Liquidity support also allows the programme to cover any extraordinary expenses that may arise, especially if defaults occur and recovery proceedings need to be initiated. For AyT Cedulas Cajas Global, in the absence of drawable amounts on the respective liquidity facilities, any extraordinary expense would be only covered by the existing layer of excess spread of approximately 2bps per year in gross terms on a notional of EUR5.4bn.

The excess spread is available for the programme under a "use it or lose it" format and therefore it is not accumulated into a reserve account. Nonetheless, Fitch believes any future extraordinary expense would be manageable by the programme with the existing excess spread, and also by cash management alternatives that could be considered by the transaction trustee. There have not been any extraordinary expenses with an impact on the programme to date since closing in 2006, and no assets have defaulted or failed to make payments as per the initial terms.

Based on information provided to Fitch by the transaction trustee (Haya Titulizacion SGFT), series VII and XIV have a zero drawable amount under their respective liquidity facilities as of today, while series IV and XVI have drawable amounts greater than zero but are expected to reduce to zero at their next interest payment date when the payable coupon rate is reset based on three-month Euribor.