DBRS Ratings GmbH (DBRS) confirmed its ratings on the Class A Notes and Class B Notes (the Notes) at AA (low) (sf) and BB (high) (sf), respectively, issued by CaixaBank Consumo 4, Fondo de Titulización (the Issuer).
The confirmations follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults and losses;
-- Portfolio default rate (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables;
-- Current available credit enhancement (CE) to the Notes to cover the expected losses at their respective rating levels.
The rating on the Class A Notes addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date in July 2056. The rating on the Class B Notes addresses the ultimate payment of interest and principal on or before the legal final maturity date.
The Issuer is a securitisation of unsecured consumer loans granted to individuals residing in Spain by CaixaBank, S.A. (CaixaBank), which is also the Servicer of the portfolio and acts as the Issuer Account Bank. At closing, the static EUR 1.7 billion collateral portfolio consisted of loans granted primarily to borrowers in Catalonia (33.4% of the initial portfolio balance), Andalusia (17.3%), and Madrid (10.7%). The transaction closed in May 2018.
As of the April 2019 payment date, loans that were 0 to 30 days, 30 to 60 days and 60 to 90 days delinquent represented 1.1%, 0.5% and 0.2% of the outstanding principal balance, respectively, while loans more than 90 days delinquent amounted to 2.4%. Gross cumulative defaults amounted to 0.3% of the original principal balance.
DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and has updated its base case PD and LGD assumptions on the outstanding portfolio to 6.7% and 65.7%, respectively.
CE to the Class A Notes is provided by subordination of the Class B Notes and the cash reserve. As of the April 2019 payment date, CE to the Class A Notes increased to 17.0% from 12.0% at closing. CE to the Class B Notes is provided by the cash reserve, following the full repayment of the Class A Notes. CE to the Class B Notes increased to 5.7% from 4.0% at closing.
The transaction benefits from an amortising reserve fund available to cover senior expenses and all payments due on the senior-most class of notes outstanding at the time. This reserve was funded to EUR 68.0 million at closing through a subordinated loan granted by CaixaBank and, from the July 2019 payment date onwards, as long as the reserve has been replenished to its target level on the previous payment date, it will amortise to its target level, which is 4% of the outstanding principal balance of the Notes. Since closing, the reserve has remained at EUR 68.0 million.
CaixaBank acts as the issuer account bank provider for the transaction. Based on the account bank reference rating of CaixaBank at A (high), which is one notch below the DBRS public Long-Term Critical Obligations Rating 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.
The transaction structure was analysed in Intex DealMaker.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the ratings 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 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 investor and servicer reports provided by CaixaBank Titulización, S.G.F.T., S.A (the Management Company) and loan-level data provided by 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 30 May 2018, when DBRS finalised its provisional ratings assigned to the Class A and Class B Notes.
The lead analyst responsibilities for this transaction have been transferred to Daniel Rakhamimov.
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 ratings, DBRS considered the following stress scenarios as compared with the parameters used to determine the ratings (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 of the current pool of loans for the Issuer are 6.7% and 65.7%, respectively.
-- 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 decrease to A (high) (sf), ceteris paribus. If the PD increases by 50%, the rating on the Class A Notes would be expected to decrease to A (low) (sf), ceteris paribus. Furthermore, if both the PD and LGD increase by 50%, the rating on the Class A Notes would be expected to decrease to BBB (sf).
Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD, expected rating of A (high) (sf)
-- 50% increase in PD, expected rating of A (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (sf)
Class B Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in LGD, expected rating of BB (sf)
-- 25% increase in PD, expected rating of BB (high) (sf)
-- 50% increase in PD, expected rating of BB (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BB (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of B (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of B (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of B (sf)
For further information on DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see:
Ratings assigned by DBRS Ratings GmbH are subject to EU and US regulations only.
Lead Analyst: Daniel Rakhamimov, Senior Financial Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 25 May 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 European Consumer and Commercial Asset-Backed Securitisations
-- 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.