Tunisia | Moody’s recalibrates Tunisia’s national rating scale

Tunis, Tunisia, Capital Markets in Africa: Moody’s Investors Service has repositioned the national scale ratings (NSRs) of four tranches in two Tunisian structured finance transactions in conjunction with the recalibration of the Tunisian national rating scale.

NSRs, which provide a measure of relative creditworthiness within a single country, are derived from global scale ratings (GSRs) using country-specific maps. The adoption of a revised correspondence between Moody’s GSRs and the Tunisian national scale follows the publication of Moody’s updated methodology “Mapping National Scale Ratings from Global Scale Ratings”

With fewer than 10 fundamental issuers in Tunisia rated by Moody’s, the new map has been designed using the standard approach, whereby the map design is selected from a set of standard maps based upon the anchor point, or the lowest GSR that can map to a Aaa.tn. Structured finance ratings are not taken into consideration in the determination of the map design. Per the standard approach, Tunisia’s anchor point is being lowered to Ba3, which is equal to the sovereign bond rating, from the previous level of A1. In addition, in order to clarify the meaning of NSRs, overlap — where two GSRs can correspond to the same NSR — has been eliminated from the Tunisian national scale map, so every NSR now maps back to just one GSR. However, all GSRs from B1 to Caa3 will map to at least two ratings on the national scale. As a result of these changes, all GSRs above Ca will correspond to NSRs as many as nine notches higher on the Tunisian scale than they did previously.

Consequently, the NSRs assigned to three Tunisian structured finance tranches in two transactions are being repositioned four notches higher, while one tranche in one transaction is being repositioned seven notches higher. There are no NSRs currently assigned to fundamental issuers in Tunisia. The repositioned NSRs of individual issuers do not signify a change in credit risk, since the GSRs for these issuers remain unchanged.

As a result of the recalibration, the level of risk associated with a particular Tunisian NSR level has changed in many cases. NSRs have no inherent absolute meaning in terms of default risk or expected loss; they are ordinal rankings of creditworthiness relative to other domestic issuers within a given country. A historical probability of default and/or expected loss consistent with a given NSR can be inferred from the GSR to which it maps back at that particular point in time. However, both the probability of default and the expected loss of an NSR may change if and when a country’s national scale is remapped. 

ISSUERS AND RATINGS AFFECTED 
Issuer: FCC BIAT-CREDIMMO 1 
….TND2.5M Parts S Notes, Upgraded to Aaa.tn (sf); previously on Jun 4, 2015 Upgraded to A1.tn (sf) 
….TND10.5M Parts P2 Notes, Upgraded to Aaa.tn (sf); previously on Jun 4, 2015 Upgraded to A1.tn (sf) 

Issuer: FCC BIAT-CREDIMMO 2 
….TND4M Parts P3 Notes, Upgraded to Aaa.tn (sf); previously on Jun 4, 2015 Upgraded to A1.tn (sf) 
….TND4M Parts S Notes, Upgraded to Aaa.tn (sf); previously on Jun 4, 2015 Upgraded to Baa1.tn (sf)

RATINGS RATIONALE 
NSRs are assigned by applying the published correspondence from GSRs. Where a single GSR maps to multiple NSRs, rating committees assigned higher or lower NSRs to individual issuers and debts depending on their relative credit position within the same GSR category, using the same methodologies as were used to determine the GSRs themselves. GSR for the affected tranches remain unchanged at Baa2(sf) for Parts S and Parts P2 of FCC BIAT-CREDIMMO 1 and Parts P3 notes of FCC BIAT-CREDIMMO 2 and Ba1 (sf) for Parts S Notes of FCC BIAT-CREDIMMO 2. 

Factors that would lead to an upgrade or downgrade of the NSRs: 
The NSRs would face downward pressure if their corresponding GSRs are downgraded, unless this is in conjunction with a sovereign rating action that results in another recalibration of the Tunisian national scale with an offsetting impact on NSRs. In addition, the NSRs may be repositioned downwards if Tunisia’s sovereign is upgraded and the map is revised accordingly, but the corresponding GSRs have not changed as a result of the sovereign action. Because of the higher granularity of national scales, NSRs may also face pressure due to changes in creditworthiness that are not sufficient to cause a change in the corresponding GSR, measured using the same methodologies used to determine the GSR. 

Factors that would lead to an upgrade or downgrade of the GSRs: 
Factors or circumstances that could lead to an upgrade of the ratings are (1) a lower probability of high-loss scenarios owing to an upgrade of the country ceiling; (2) performance of the underlying collateral that exceeds Moody’s expectations; (3) deleveraging of the capital structure; and (4) improvements in the credit quality of the transaction counterparties. 

Factors or circumstances that could lead to a downgrade of the ratings are (1) an increased probability of high-loss scenarios owing to a downgrade of the country ceiling; (2) performance of the underlying collateral that does not meet Moody’s expectations; (3) deterioration in the notes’ available CE; and (4) deterioration in the credit quality of the transaction counterparties.