DBRS Ratings GmbH (DBRS) confirmed its A (high) (sf) rating on the Series of Notes (the Notes) issued by BBVA Empresas 4 FTA (the Issuer).
The rating on the Notes addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date.
The confirmation follows an annual review of the transaction and is based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults and losses, as of the April 2019 payment date.
-- Base case probability of default (PD), and updated recovery rates on the remaining receivables.
-- Current available credit enhancement to the Notes to cover the expected losses at their A (high) (sf) rating level.
The Issuer is a securitisation collateralised by a portfolio of bank loans originated and serviced by Banco Bilbao Vizcaya Argentaria S.A. (BBVA) to corporates and small and medium-sized enterprises based in Spain, established in July 2010.
As of April 2019, loans in arrears more than 90 days represented 47.5%, up from 41.5% as of April 2018, while the cumulative default ratio stood at 5.5%, slightly up from 5.4% one year ago.
DBRS conducted a loan-by-loan analysis on the remaining pool and updated its portfolio default and recovery assumptions on the outstanding portfolio to 37.8% and 57.0%, respectively, at the A (high) (sf) rating level. The PD was maintained at 3.8%.
The credit enhancement for the Notes is provided by the Reserve Fund (RF). As of April 2019, it increased to 123.4% from 92.5% last year.
The RF is available to cover senior expenses, missed interest payments and offset any losses from defaulted credit rights. The RF is currently at its target level of EUR 42.5 million.
BBVA acts as the account bank for the transaction. Based on the account bank reference rating of BBVA at A (high), one notch below DBRS Long-Term Critical Obligation 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 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 rating is the “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 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 this rating include reports provided by the Management Company, Europea de Titulización S.A., S.G.F.T., 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 not 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 the Issuer took place on 28 June 2018 when DBRS confirmed the rating of the Notes at A (high) (sf).
The lead analyst responsibilities for this transaction have been transferred to Shalva Beshia.
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”):
-- PD Rates used: base case PD of 3.8% a 10% increase of the base case and a 20% increase of the base case PD.
-- Recovery Rates used: base case recovery rates, corresponding to a recovery rate of 57.0% at the A (high) (sf) stress level for the Notes, 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.
DBRS concludes that a hypothetical increase of the base case PD by 20% or a hypothetical decrease of the recovery rate by 20%, ceteris paribus, would lead to a confirmation of the Notes at A (high) (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 Notes at A (high) (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: Shalva Beshia, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 7 November 2012
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Geschäftsführer: Detlef Scholz
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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
-- Operational Risk Assessment for European Structured Finance Servicers
-- 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
-- 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 firstname.lastname@example.org.