Banco Sabadell is pushing out a first-time €1.75 billion (US$1.92 billion) securitization of small business loans through a newly established trust platform.
The loan securitization by the fifth-largest banking group in Spain includes a €1.448.1 billion in Series A notes and €301.9 million in Series B notes. Moody’s Investors Service on Wednesday assigned provisional ‘Aa3’ ratings to the Series A notes and ‘B2’ to the Series B.
The bonds are the first to be issued by the recently formed IM Sabadell Pyme 10, Fondo De Titulizacion (“Fondo”), and will be backed by loans originated from 2013 to 2015 to small/medium-sized enterprise and self-employed individuals, according to Moody’s. The portfolio’s credit enhancement level is 19%.
Banco Sabadell will continue as servicer of the loans in the pool, which consists of 18,060 contracts with an average seasoning of 2.8 years (Moody’s considers that “high seasoning”) and remaining terms averaging 7.3 years.
Moody’s reports 34% of the portfolio is secured by first-lien mortgage guarantees. No loans are in arrears, and any that fall behind by 30 days by closing will be excluded from the pool.
The loans are concentrated in Catalonia (33.6%) and Madrid (17.3%).
Moody’s report credit challenges to the pool are its 15.75% concentration in construction and building sectors; the lack of an interest-rate hedge mechanism; as well as the trust’s lack of distance from the originator/servicer.
Moody’s assumed a mean default rate of 10.5% for the pool.