News Column

Fitch Downgrades Su Casita Trust Class A to 'CCsf', Affirms Class B at 'D(mex)vra'

May 12, 2014

MONTERREY, Mexico--(BUSINESS WIRE)-- Fitch Ratings has taken the following rating actions on Su Casita Trust:

Class A Floating Rate Notes due 2035

--Long-term rating downgraded to 'CCsf' from 'CCCsf';

--Unenhanced national long-term rating downgraded to 'CC(mex)vra' from 'CCC(mex)vra'.

Class B UDI-Indexed Notes due 2035

--National long-term rating affirmed at 'D(mex)vra'.

The transaction is backed by mortgage loans originated by Hipotecaria Su Casita, S.A. de C.V., SOFOM, E.N.R. (Su Casita), and currently being serviced by Patrimonio S.A. de C.V. SOFOL.

KEY RATING DRIVERS

The rating actions on the class A notes reflect the following: (i) the transaction's continuous exposure to liquidity risk, (ii) decrease in enhancement levels, (iii) asset quality deterioration, and (iv) an expected compression on recoveries for non-performing loans and real estate owned assets (REOs). The rating of the class B notes considers the notes' structural subordination to the class A notes, and increased exposure to liquidity risk resulting in defaults on scheduled interest payments.

The class B notes missed the coupon payment for the first time in May 2011. Since then, this default has been temporarily cured, but given the transaction's dual waterfall and its exposure to liquidity risk, the class B notes have defaulted on multiple scheduled interest payments.

As of the April 2014 distribution date, class A overcollateralization (excluding +90 days delinquent loans from the loan pool) stands at -71.8% and -55.6% when excluding +180 days delinquent loans. Both levels negatively compare with those observed 12 months ago which were -44.6% and -36%, respectively.

Loans delinquency ratios and exposure to REOs remain high. As of the April 2014 distribution date, +90 days delinquent loans represent 25.9% of their original loan balance and 54.7% of their aggregate outstanding balance. Late delinquent loans (+180 days) are gradually increasing and could result in lengthy recovery processes, especially if the current primary servicer is substituted in the future until a new servicer is chosen.

Interest payments on the class A and class B notes are increasingly reliant on recoveries and REO sales. For the past 12 months, REOs sales have been sporadic and the observed recovery rates have stabilized around an average of 45% (of the respective loan outstanding balance).

RATING SENSITIVITIES

Ratings on the class A notes could be upgraded if enhancement levels significantly increase, and liquidity risk is mitigated.

Ratings on the class A notes could be further downgraded if the underlying pool of assets continues deteriorating or recoveries are weaker than expected. As of this date, Fitch's recovery estimate (RE) for the class A notes is RE 90%.

Current assigned ratings reflect the performance of the securitized mortgage loan portfolio, which is, the main payment source for both rated notes. Fitch's ratings do not address any external credit protection provided by a third party not rated by Fitch.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (May 8, 2014);

--'Rating Criteria for RMBS in Latin America' (Feb. 13, 2014);

--'RMBS Latin America Criteria Addendum - Mexico' (July 31, 2013).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661

Rating Criteria for RMBS in Latin America

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732815

RMBS Latin America Criteria Addendum - Mexico

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=714999

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=829720

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.



Fitch Ratings

Primary Analyst

Rene Ibarra

Senior Director

+52 (81) 8399 9130

Fitch Mexico S.A. de C.V.

Prol. Alfonso Reyes 2612, Monterey, N.L.

or

Secondary Analyst

Gregory Lane

Associate Director

+1-312-606-2304

or

Committee Chairperson

Juan Pablo Gil

Senior Director

+56-2-2499-3306

or

Media Relations:

Elizabeth Fogerty, +1-212-908-0526 (New York)

elizabeth.fogerty@fitchratings.com


Source: Fitch Ratings


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