DBRS Ratings GmbH (DBRS) confirmed its ratings on the Series A and Series B notes issued by Caixabank Consumo 3 F.T. (the Issuer) at A (high) (sf) and CC (sf), respectively.
The rating on the Series A notes addresses the timely payment of interest and the ultimate repayment of principal on or before the legal maturity date in March 2053. The rating on the Series B notes addresses the ultimate payment of interest and repayment of principal on or before the legal maturity date.
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 as of the June 2019 payment date;
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables;
-- The current credit enhancement (CE) available to the notes to cover the expected losses at their respective rating levels.
The Issuer is a securitisation collateralised by a portfolio of consumer loans granted by CaixaBank, S.A. (Caixabank) to individuals in Spain. The portfolio consists of unsecured and mortgage loans, including standard contracts and drawdowns from a revolving credit line (Disposiciones de Crédito Hipotecario). At closing, the EUR 2.5 billion portfolio consisted of loans granted to borrowers primarily in Catalonia (32.7% of the initial portfolio balance), Andalusia (17.4%), and Madrid (11.9%). The transaction closed in July 2017, with no revolving period.
As of the June 2019 payment date, loans that were 30 to 60-days delinquent represented 0.4% of the outstanding collateral balance and 60 to 90-day delinquencies represented 0.2%, while delinquencies greater than 90 days represented 3.8%. Gross cumulative defaults were 1.9% of the original portfolio balance, with cumulative recoveries of 1.6% to date.
DBRS conducted a loan-by-loan analysis on the remaining pool of receivables and updated its base case PD and LGD assumptions to 6.3% and 63.8%, respectively, for the unsecured consumer loans in the portfolio, and to 8.6% and 29.9%, respectively, for the mortgage loans in the portfolio.
CE is provided to the Series A notes by the subordination of the Series B notes and the cash reserve, while CE to the Series B notes is provided solely by the cash reserve following the full repayment of the Series A notes. As of the June 2019 payment date, CE to the Series A notes increased to 23.2% from 11.0% at closing, while CE to the Series B notes increased to 8.4% from 4.0%.
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. This reserve was funded to EUR 98.0 million at closing through a subordinated loan granted by CaixaBank and, from the September 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 of 4% of the outstanding principal balance of the Series A and Series B notes. Since closing, the reserve has remained at EUR 98.0 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 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 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 27 July 2018, when DBRS confirmed its ratings of the Series A notes at A (high) (sf) and the Series B notes at CC (sf).
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 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 mortgage receivables are 9.7% and 49.8%, respectively. The base case PD and LGD of the current pool of unsecured consumer loan receivables are 8.6% and 29.9%, 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 remain at A (high) (sf), ceteris paribus. If the PD increases by 50%, the rating on the Series A notes would be expected to remain at A (high) (sf), ceteris paribus. Furthermore, if both the PD and LGD increase by 50%, the rating on the Series A notes would be expected to decrease to A (low) (sf).
Series 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 (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 (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)
The ratings on the Series B notes would not be affected by a change in either the PD or LGD.
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: 18 July 2017
DBRS Ratings GmbH
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60311 Frankfurt am Main Deutschland
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
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- European RMBS Insight Methodology
-- European RMBS Insight: Spanish Addendum
-- Legal Criteria for European Structured Finance Transactions
-- Interest Rate Stresses for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
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.