DBRS Ratings GmbH (DBRS) confirmed its rating on the Class A notes issued by FT RMBS Prado IV (the Issuer) at AAA (sf).
The confirmation follows an annual review of the transaction and is based on the following analytical considerations:
-- Portfolio performance in terms of delinquencies and defaults, as of the December 2018 payment date.
-- Portfolio default rate (PD), loss given default (LGD) and expected loss assumptions for the remaining collateral pool.
-- The current available credit enhancement (CE) to the Class A notes to cover the expected losses at the AAA (sf) rating level.
FT RMBS Prado IV is a securitisation of residential mortgage loans secured by first-lien mortgages originated and serviced by Unión de Créditos Inmobiliarios S.A., E.F.C (UCI or the Seller) in Spain. The Issuer used the proceeds of the Class A notes and Class B notes to fund the purchase of the mortgage portfolio from the Seller.
PORTFOLIO PERFORMANCE AND ASSUMPTIONS
The performance of the collateral portfolio is within DBRS’s expectations. As of December 2018, loans more than 90 days in arrears represented 0.4% of the outstanding performing portfolio collateral balance. There have been no defaulted receivables reported since the transaction closed in April 2017.
DBRS conducted a loan-by-loan analysis on the remaining pool and updated its PD and LGD assumptions to 31.3% and 47.0%, respectively, at the AAA (sf) rating level.
The CE to the Class A notes has increased to 23.79% from 21.79% at origination. The Class A notes benefit from the subordination provided by the Class B notes. An amortising reserve fund (RF), financed through a subordinated loan provided by UCI, provides liquidity support and is available to cover senior expenses as well as interest on the Class A notes. The RF is currently at its target level of EUR 8.93 million, or2.5% of the outstanding portfolio balance, and subject to a floor of 1% of the initial portfolio balance.
Banco Santander SA (Santander) acts as the account bank for the transaction. Based on the account bank reference rating of Santander at A (high), which is one notch below the DBRS Long-Term Critical Obligations Rating (COR) of AA (low), the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS considers the risk arising from the exposure to the account bank to be consistent with the rating assigned to the Class A notes, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology.
Santander also acts as the swap counterparty for the transaction. DBRS’s COR of Santander is above the First Rating Threshold as described in DBRS's "Derivative Criteria for European Structured Finance Transactions" methodology.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the rating is the “Master European Structured Finance Surveillance Methodology.”
DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.
A review of the transaction legal documents was not conducted as the 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 this rating include reports from the Management Company, Santander de Titulización, SGFT, 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 rating, 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 this rating 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 19 February 2018, when DBRS confirmed its rating on the Class A notes at AAA (sf).
The lead analyst responsibilities for this transaction have been transferred to Alfonso Candelas.
Information regarding DBRS ratings, including definitions, policies and methodologies, is available at 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):
-- DBRS expected a lifetime base case PD and LGD for the pool based on a review of the current assets. Adverse changes to asset performance may cause stresses to base case assumptions and therefore have a negative effect on credit ratings.
-- The base case PD and LGD assumptions for the remaining portfolio collateral are 7.6% and 21.6%, respectively. At the AAA (sf) rating level, the corresponding PD is 31.3% and the LGD is 47.0%.
-- The Risk Sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the Base Case assumption. For example, if the LGD increases by 50%, the rating on the Class A notes would be expected to be at AA (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Class A notes would be expected to be at AA (low) (sf), assuming no change in the LGD. Furthermore, if both the PD and the LGD increase by 50%, the rating on the Class A notes would be expected to be at A (low) (sf).
Class A notes risk sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD, expected rating of AA (high) (sf)
-- 50% increase in PD, expected rating of AA (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (low) (sf)
For further information on DBRS historical default rates published by the European Securities and Markets Authority (“ESMA”) in a central repository, please 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: Vito Natale, Managing Director
Initial Rating Date: 23 March 2017
DBRS Ratings GmbH
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Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259
The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies.
-- Master European Structured Finance Surveillance Methodology
-- European RMBS Insight: Spanish Addendum
-- European RMBS Insight Methodology
-- Legal Criteria for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
-- Interest Rate Stresses for European Structured Finance Transactions
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 firstname.lastname@example.org.