DBRS Ratings GmbH (DBRS) took the following rating actions on CaixaBank PYMES 8, FT (the Issuer):
-- Series A Notes confirmed at A (sf)
-- Series B Notes upgraded to CCC (low) (sf) from CC (sf)
The rating on the Series A Notes addresses the timely payment of interest and the ultimate payment of principal on or before the legal maturity of the notes in January 2054. The rating on the Series B Notes addresses the ultimate payment of interest and the ultimate payment of principal on or before the legal maturity.
The rating actions follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance in terms of delinquencies and defaults as of the April 2019 payment date.
-- Base case probability of default (PD), and updated recovery rates on the remaining receivables.
-- The credit enhancement (CE) available to the rated notes to cover the expected losses at their respective rating levels.
The Issuer is a cash flow securitisation collateralised by a portfolio of bank loans originated and serviced by CaixaBank, S.A. (CaixaBank) to self-employed individuals and small and medium-sized enterprises (SMEs) based in Spain. The transaction closed in November 2016.
PORTFOLIO PERFORMANCE AND ASSUMPTIONS
The portfolio is performing within DBRS’s expectations. As of May 2019 date, the 90+ delinquency ratio was 1.2% and the cumulative default ratio was 1.6%. DBRS conducted a loan-by-loan analysis on the remaining pool and updated its default rate and recovery assumptions.
The CE available to all the rated notes has continued to increase as the transaction deleverages. As of May 2019, the CE available to the Series A Notes and Series B Notes was 33.6% and 8.1%, respectively (up from 24.8% and 5.9%, respectively, in May 2018). CE is provided by subordination and the reserve fund. The reserve fund is available to cover senior expenses as well as missed interest and principal payments on the notes once the Series A Notes have paid in full.The increase in the CE prompted the confirmation and upgrade of the ratings.
CaixaBank acts as the account bank for the transaction. Based on the account bank reference rating of CaixaBank at A (high), one notch below its 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 Series A Notes, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology.
The transaction structure was analysed in Callisto, DBRS’s proprietary cash flow engine.
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 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 CaixaBank Titulización, S.G.F.T., S.A.U. 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 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 latest rating actions on this transaction took place on 28 June 2018, when DBRS confirmed the ratings on the Series A and Series B Notes at A (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 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 2.1%, a 10% and 20% increase on the base case PD.
Recovery Rates Used: Base case recovery rate of 27.3% at the A (sf) stress level and 33.1% at the CCC (low) (sf) level, and a 10% and 20% decrease in the base case recovery rates.
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 Series A Notes at A (sf) and downgrade of Series B Notes to CC (high) (sf). A scenario combining both an increase in the PD by 10% and a decrease in the recovery rate by 10% would also lead to a confirmation of the Series A Notes at A (sf) and downgrade of Series B Notes to CC (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: Gareth Levington, Managing Director
Initial Rating Date: 22 November 2016
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.
-- Rating CLOs Backed by Loans to European SMEs
-- Legal Criteria for European Structured Finance Transactions
-- Interest Rate Stresses for European Structured Finance Transactions
-- Rating CLOs and CDOs of Large Corporate Credit
-- European RMBS Insight Methodology
-- European RMBS Insight: Spanish Addendum
-- Cash Flow Assumptions for Corporate Credit Securitizations
-- Operational Risk Assessment for European Structured Finance Servicers
-- Master European Structured Finance Surveillance Methodology
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.