Overview
- Following our analysis of the transaction's performance and the application of our relevant criteria, we upgraded the class A notes in EUROMAX VI ABS and affirmed our ratings on the class B, C, and D notes.
- At the same time, we downgraded the class E notes
- EUROMAX VI ABS is a cash flow mezzanine structured finance CDO with a portfolio that predominantly consists of mortgage-backed securities.
LONDON (S&P Global Ratings) Dec. 17, 2019--S&P Global Ratings today took various rating actions on the notes issued by EUROMAX VI ABS Ltd.
Specifically, we have:
- Raised to 'AAA (sf)' from 'A+ (sf)' our rating on the class A notes;
- Lowered to 'CC (sf)' from 'CCC- (sf)' our rating on the class E notes; and
- Affirmed our ratings on the class B, C, and D notes.
Today's rating actions follow our analysis of the transaction's performance and the application of our relevant criteria (see "Related Criteria").
Since our last review, the class A notes have continued to amortize, with only 0.04% of their initial balance now outstanding (see "EUROMAX VI ABS Ltd. Class A Notes Upgraded On Increased Credit Enhancement; All Other Ratings Affirmed," published on June 8, 2018). The credit enhancement for the class A notes has significantly increased since our last review, and supplemental test results are now commensurate with an 'AAA (sf)' rating. Therefore, we have raised our rating on the class A notes to 'AAA (sf)' from 'A+ (sf)'.
Since our last review, the class B notes have continued to receive timely interest payments. We recognize that their credit enhancement has decreased to 9% of the asset pool from 12%, and this in part explains the downward rating pressure observed in our credit and cash flow analysis. However, as part of our analysis, we also took into account the impact negative Euro Interbank Offered Rate (EURIBOR) rates are having on this class of notes. For example, on the last four payments dates, the class B notes have received between €7,000 and €13,000 as a result of negative EURIBOR rates. On this basis, and considering that this class will become the most senior outstanding, our analysis shows that the available credit enhancement for the class B notes remains commensurate with their current rating. We have therefore affirmed these notes at 'B+ (sf)'.
The class C, D, and E notes have continued to defer their interest payments and pay-in-kind (PIK). In our opinion, the full repayment of these notes significantly depends on the market value of the defaulted assets in the portfolio, in addition to the current credit enhancement they benefit from. This includes, for example, assuming whether defaulted assets are able to realize a higher recovery than anticipated under our analysis. Therefore, in our view, the class C and D notes remain commensurate with their current ratings, taking into account all of the above factors.
For the class E notes, even after incorporating the above recovery analysis, we believe this class is still highly vulnerable to nonpayment. For example, even if we were to assume full credit to defaulted assets, we note that available credit enhancement remains insufficient to repay principal in full. We have therefore lowered to 'CC (sf)' from 'CCC- (sf)' our rating on the class E notes.
EUROMAX VI ABS is a cash flow mezzanine structured finance collateralized debt obligation of a portfolio that predominantly consists of mortgage-backed securities. The transaction closed in April 2007, and Collineo Asset Management GmbH manages it. In our analysis, the largest performing asset currently comprises 20% of the available collateral.
Related Criteria
- Criteria | Structured Finance | General: Methodology To Derive Stressed Interest Rates In Structured Finance, Oct. 18, 2019
- Criteria | Structured Finance | CDOs: Global Methodology And Assumptions For CLOs And Corporate CDOs, June 21, 2019
- Criteria | Structured Finance | General: Counterparty Risk Framework: Methodology And Assumptions, March 8, 2019
- Criteria | Structured Finance | General: Incorporating Sovereign Risk In Rating Structured Finance Securities: Methodology And Assumptions, Jan. 30, 2019
- Legal Criteria: Structured Finance: Asset Isolation And Special-Purpose Entity Methodology, March 29, 2017
- Criteria | Structured Finance | General: Global Framework For Assessing Operational Risk In Structured Finance Transactions, Oct. 9, 2014
- General Criteria: Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings, Oct. 1, 2012
- General Criteria: Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012
- Criteria | Structured Finance | CDOs: Global CDOs Of Pooled Structured Finance Assets: Methodology And Assumptions, Feb. 21, 2012
- General Criteria: Methodology: Credit Stability Criteria, May 3, 2010
Related Research
- EUROMAX VI ABS Ltd. Class A Notes Upgraded On Increased Credit Enhancement; All Other Ratings Affirmed, June 8, 2018
- Global Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic Factors, Dec. 16, 2016
- European Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic Factors, Dec. 16, 2016
| Primary Credit Analyst: | Jekaterina Muhametova, London + 44 20 7176 6764; jekaterina.muhametova@spglobal.com |
| Secondary Contact: | Emanuele Tamburrano, London (44) 20-7176-3825; emanuele.tamburrano@spglobal.com |
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