DBRS Ratings Limited (DBRS) confirmed and upgraded the following ratings on the bonds issued by IM EVO RMBS 1 FT (the Issuer):
-- Series A Notes confirmed at AA (low) (sf)
-- Series B Notes upgraded to A (high) (sf) from A (sf)
The ratings on the Series A Notes and Series B Notes (together, the Rated Notes) address the timely payment of interest and ultimate payment of principal on or before the legal final maturity date.
The rating actions follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults and losses as of the April 2019 payment date.
-- Portfolio default rate (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables.
-- Current available credit enhancement to the Rated Notes to cover the expected losses at their respective rating levels.
IM EVO RMBS 1 FT is a securitisation of Spanish prime residential mortgage loans originated by Nova Caixa Galicia (NCG, now Abanca Corporacion Bancaria S.A.) and EVO Banco S.A.U (EVO Banco). The portfolio is serviced by EVO Banco.
On 23 May 2019, DBRS transferred the ongoing coverage of the ratings assigned to the Issuer to DBRS Ratings Limited from DBRS Ratings GmbH.
Both DBRS Ratings Limited and DBRS Ratings GmbH are registered with the European Securities and Markets Authority (ESMA) under Regulation (EC) No. 1060/2009 on Credit Rating Agencies, as amended, and are registered Nationally Recognized Statistical Rating Organization (NRSRO) affiliates in the United States and Designated Rating Organization (DRO) affiliates in Canada.
Delinquencies have remained low and stable to date, with loans that were two- to three-months in arrears representing 0.0% of the outstanding portfolio balance and the 90+ delinquency ratio at 0.1%, as of the April 2019 payment date. Under the servicer definition, loans are classified as defaulted once they exceed 12 months of arrears. Under this definition, defaults remain low, reaching a cumulative amount of 0.1% of the initial portfolio balance four years after the DBRS initial rating. Recoveries started to be recorded from July 2018 and stand at 38.2% of the defaulted balance, which is EUR 333,769.
DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and has updated its base case PD and LGD assumptions to 3.2% and 12.7%, from 3.7% and 17.8%, respectively. The decrease in the PD and LGD assumptions is due to the decrease in current indexed LTV (to 50.4% from 52.4%) and a reduction in the proportion of borrowers classified in higher risk segments according to the “European RMBS Insight Methodology”.
As of the April 2019 payment date, credit enhancement to the Series A Notes was 18.7%, up from 13.8% at the DBRS initial rating. Credit enhancement to the Series B Notes was 10.2%, up from 7.5% at the DBRS initial rating. The increase in credit enhancement reflects the current sequential amortisation of the Rated Notes. The Rated Notes can amortise on a pro-rata basis once certain triggers have been breached. Credit enhancement to the Series A Notes includes subordination of the Series B Notes and the Reserve Fund, while the Series B Notes benefit solely from the support provided by the Reserve Fund.
As of April 2019, the Reserve Fund is at its target amount of EUR 37.5 million (10.2% of the outstanding balance of the Rated Notes). The Reserve Fund covers senior fees, interest shortfall and principal losses on both Series of Notes.
Banco Santander SA acts as the account bank for the transaction. Based on the account bank reference rating of Banco Santander SA 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 Series 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 reports provided by InterMoney Titulización, S.G.F.T., S.A., 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 31 May 2018, when DBRS upgraded the ratings of the Series A Notes and Series B Notes to AA (low) (sf) and A (sf) from A (high) (sf) and BBB (high) (sf), respectively.
The lead analyst responsibilities for this transaction have been transferred to Andrew Lynch.
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 with 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 of the current pool of loans for the Issuer are 3.2% and 12.7%, 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 Series A Notes would be expected to fall to A (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Series A Notes would be expected to fall to A (high) (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating on the Series A Notes would be expected to fall to A (low) (sf).
Series A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (low) (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 (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (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)
Series B Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in LGD, expected rating of A (sf)
-- 25% increase in PD, expected rating of A (high) (sf)
-- 50% increase in PD, expected rating of A (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 BBB (high) (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 (high) (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 issued and monitored by DBRS Ratings Limited are noted as such on the DBRS website; however, the language and related statements in previously published press releases in respect of the relevant ratings will not be changed retroactively and will remain as part of DBRS’s historical record. The ratings issued and monitored in the European Union are marked as such in their respective rating tables. As part of this transfer, these markings will remain unchanged on all active ratings related to the Issuer.
Ratings assigned by DBRS Ratings Limited are subject to EU and US regulations only.
Lead Analyst: Andrew Lynch, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President, Head of European Surveillance
Initial Rating Date: 16 July 2015
DBRS Ratings Limited
20 Fenchurch Street
Registered in England and Wales: No. 7139960.
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
-- Operational Risk Assessment for European Structured Finance Servicers
-- European RMBS Insight Methodology
-- European RMBS Insight: Spanish Addendum
-- 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 email@example.com.
This press release was amended on 1 July 2019 to specify that DBRS transferred the coverage of the ratings assigned to this Issuer to DBRS Ratings Limited from DBRS Ratings GmbH.