DBRS Ratings GmbH (DBRS) confirmed its rating of the Class A Notes issued by FT RMBS Prado III (the Issuer) at AAA (sf).
The rating 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 and defaults, as of the June 2019 payment date.
-- Portfolio default rate (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables.
-- The current available credit enhancement (CE) to the Class A Notes to cover the expected losses at the AAA (sf) rating level.
The Issuer is a securitisation of residential mortgage loans backed by first-lien mortgages originated and serviced by Unión de Créditos Inmobiliarios S.A., E.F.C. (UCI or the Seller) in Spain. The Issuer used the proceeds from the issuance of the Class A Notes and a subordinated loan to fund the purchase of the mortgage portfolio from the Seller.
The performance of the collateral portfolio is within DBRS’s expectations. As of June 2019, loans with two- to three-months in arrears represented 0.2% of the outstanding portfolio balance, up from 0.0% in June 2018. As of June 2019, the 90+ delinquency ratio increased to 0.5% from 0.3% in June 2018 and the cumulative default ratio increased to 0.28% of the original portfolio balance, slightly up from 0.25% in the same period last year.
DBRS conducted a loan-by-loan analysis on the remaining pool and updated its PD and LGD assumptions on the remaining portfolio collateral pool to 26.2% and 48.2%, respectively, at the AAA (sf) rating level.
The CE to the Class A Notes consisting of subordination has increased to 34.0% in June 2019, up from 30.9% in September 2018. The transaction also benefits from an amortising reserve fund (RF) which has been funded through an additional subordinated loan and is available to cover senior expenses and interest of the Class A Notes. The RF is currently at its target level of EUR 8.8 million.
Banco Santander S.A. is the account bank of the transaction. Based on DBRS’s account bank reference rating of A (high), which is one notch below the DBRS public Long-Term Critical Obligations Rating of Banco Santander 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 rating is: “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.
The sources of data and information used for this rating include investor reports and information from Santander de Titulización, SGFT, S.A. 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 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 this transaction took place on 10 October 2018, when DBRS confirmed the rating of the Class A Notes at AAA (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 on www.dbrs.com.
To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to 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 assumptions for the remaining portfolio collateral are 6.3% and 26.0%, respectively. At the AAA (sf) rating level, the corresponding PD is 26.2% and the LGD is 48.2%.
-- 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 be at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Class A Notes would be expected to be at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and the LGD increase by 50%, the rating on the Class A Notes would be expected to fall to AA (sf).
Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (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: 10 October 2016
DBRS Ratings GmbH
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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.
-- Master European Structured Finance Surveillance Methodology
-- European RMBS Insight Methodology
-- European RMBS Insight: Spanish Addendum
-- Legal Criteria for European Structured Finance Transactions
-- 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.