DBRS Ratings GmbH (DBRS) upgraded its rating to AA (high) (sf) from A (high) (sf) on the Series A Notes and confirmed its CC (sf) rating on the Series B Notes, issued by IM BCC Cajamar PYME 2, FT (the Issuer).
The rating on the Series A Notes addresses the timely payment of interest and the ultimate payment of principal on or before the legal final maturity date. The rating on the Series B Notes addresses the ultimate payment of interest and principal on or before the legal final maturity date.
The rating actions follow an entire review of the transaction and are based on the following analytical considerations:
-- The deleveraging of the transaction, accelerated by the repurchase of part of the portfolio by Cajamar Caja Rural, Sociedad Cooperativa de Credito (Cajamar or the Originator).
-- Portfolio performance, in terms of delinquencies and defaults, as of 30 November 2018.
-- Portfolio default rates, recovery rates and expected loss assumptions for the remaining collateral pool.
-- The credit enhancement (CE) available to the Series A and Series B Notes to cover the expected losses at their respective rating levels.
The issuer is a cash flow securitisation collateralised by a (static) portfolio of term loans originated by Cajamar to small and medium-sized enterprises (SMEs) and self-employed individuals based in Spain.
PORTFOLIO PERFORMANCE AND ASSUMPTIONS
The portfolio is performing within DBRS’s expectations. As of 30 November 2018, the portfolio consisted of 8,743 loans with an aggregated principal balance of EUR 488.6 million. There were no cumulative defaults reported and the 90+ delinquency ratio stood at 0.7%.
DBRS conducted a loan-by-loan analysis on the remaining pool and updated its default rate and recovery assumptions.
The CE available to all rated notes continues to increase as the transaction deleverages. As of the November 2018 payment date, the CE available to the Series A Notes and Series B Notes was 55.3% and 6.1%, respectively, up from 27.0% and 3.0%, respectively, at closing.
The transaction benefits from a EUR 30.0 million Reserve Fund (RF), available to cover missed interest on the Series A Notes, and once the Series A Notes are fully paid, interest on the Series B Notes throughout the life of the deal. The RF cannot be amortised during the life of the transaction and will be replenished up to its required/initial level of EUR 30.0 million on each payment date if it was used by the SPV on previous payment dates.
Banco Santander SA (Santander) acts as the account bank for the transaction. The account bank reference rating of A (high) – being one notch below the DBRS public Long-Term Critical Obligations Rating of Santander at AA (low) – is consistent with the Minimum Institution Rating, given the rating assigned to the notes, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the ratings is: “Rating CLOs Backed by Loans to European SMEs.”
DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the surveillance section of the principal methodology.
A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent rating action.
Other methodologies referenced in this transaction are listed at the end of this press release.
These may be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies.
For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Rating Sovereign Governments” methodology at: http://dbrs.com/research/333487/rating-sovereign-governments.pdf.
The sources of data and information used for these ratings include reports and information provided by the Management Company InterMoney Titulización S.G.F.T., S.A. and loan-level data from the European DataWarehouse GmbH.
DBRS did not rely upon third-party due diligence in order to conduct its analysis.
At the time of the initial ratings, DBRS was supplied with third-party assessments. However, this did not impact the rating analysis.
DBRS considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.
DBRS does not audit or independently verify the data or information it receives in connection with the rating process.
The last rating action on this transaction took place on 3 May 2018 when DBRS finalised its provisional ratings of the Series A and Series B Notes at A (high) (sf) and CC (sf), respectively.
The lead analyst responsibilities for this transaction have been transferred to Alfonso Candelas.
Information regarding DBRS ratings, including definitions, policies and methodologies, is available on www.dbrs.com.
To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the Base Case):
-- Probability of Default Rates Used: Base case PD of 3.6%, a 10% increase of the base case and a 20% increase of the base case PD.
-- Recovery Rates Used: Base case recovery rates of 28.7% at the AA (high) (sf) stress level and 41.3% at the CCC (low) (sf) stress level for the Series A Notes and Series B Notes, respectively, a 10% and 20% decrease in the base case recovery rates. Note that the percentage decreases in the recovery rates are assumed for the other stress recovery rate levels.
For the Series A Notes, DBRS concluded that a hypothetical increase of the base case PD by 20%, ceteris paribus, would lead to a confirmation of the Series A Notes at AAA (sf), and a hypothetical decrease of the recovery rate by 20%, ceteris paribus, which would lead to a confirmation of the Series A Notes at AAA (sf). A scenario combining both an increase in the base case PD by 10% and a decrease in the base case recovery rate by 10%, ceteris paribus, would also lead to a confirmation of the Series A Notes at AAA (sf).
For further information on DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.
Ratings assigned by DBRS Ratings GmbH are subject to EU and US regulations only.
Lead Analyst: Alfonso Candelas, Senior Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 24 April 2018
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The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies.
-- Legal Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Rating CLOs Backed by Loans to European SMEs
-- Rating CLOs and CDOs of Large Corporate Credit
-- European RMBS Insight Methodology
-- European RMBS Insight: Spanish Addendum
-- Operational Risk Assessment for European Structured Finance Servicers
-- Interest Rate Stresses for European Structured Finance Transactions
-- Cash Flow Assumptions for Corporate Credit Securitizations
A description of how DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375.
For more information on this credit or on this industry, visit www.dbrs.com or contact us at email@example.com.