Moody's Investors Service said it has introduced additional analytical steps for existing Spanish small- and mid-sized enterprises (SME) ABS deals.
Moody's monitors the performance of transactions backed by loans to SMEs by comparing the actual transaction performance data versus the initial expectations.
Part of the monitoring process includes assessing variations in the portfolio characteristics throughout the life of the transaction.
In early 2009, Moody's enhanced its methodology for rating SME ABS transactions. The rating agency notes that it conducted a rating sweep on EMEA ABS SMEs when the refined methodology was released in March 2009, which included the review of a large number (around 20) of Spanish SME deals (the largest ABS SME sector in Europe). In addition, 18 Spanish SME deals were placed on review in Q1 2009 due to performance concerns.
"The rating actions reflected Moody's revised anticipations for the performance of the Spanish SME sector in the current down cycle. Specifically, Moody's had increased its probability of default (PD) assumption on SME pools across Europe to incorporate expectations that European SME default rates are likely to greatly exceed the levels observed in historical performance data" said Alberto Barbachano, a Moody's Vice President.