DBRS Ratings GmbH (DBRS Morningstar) confirmed its ratings on the Notes issued by IM BCC Capital 1, FT (the Issuer) as follows:
-- Class A Notes at AA (sf)
-- Class B Notes at BBB (sf)
-- Class C Notes at BB (sf)
The confirmations follow an annual review of the transaction and is based on the following analytical considerations:
-- The overall portfolio performance as of the October 2019 payment date, particularly with regard to low levels of delinquencies and defaults.
-- Base case probability of default (PD), recovery rate, and expected loss assumptions on the remaining receivables.
-- The current available credit enhancement to the Notes to cover the expected losses assumed in line with their respective rating levels.
The rating on the Class A Notes addresses the timely payment of interest and the ultimate repayment of principal on or before the legal maturity date in April 2037. The ratings on the Class B Notes and Class C Notes address the ultimate payment of interest and principal on or before the legal maturity date.
The transaction is a cash flow securitisation collateralised by a portfolio of term loans originated and serviced by Cajamar Caja Rural, S.C.C. (Cajamar), granted to small and medium-size enterprises and self-employed individuals based in Spain.
In December 2018, the transaction was amended, including an extension of the revolving period by 18 months until April 2020 and change of certain concentration limits; an increase of the Class A Notes balance by EUR 11.2 million to their original EUR 700.0 million balance; and repurchase of all defaulted loans, as well as loans in arrears by 31 days or more.
On 13 November 2019, DBRS Morningstar transferred the ongoing coverage of the ratings assigned to the Issuer to DBRS Ratings GmbH from DBRS Ratings Limited. The lead analyst responsibilities for this transaction have been transferred to Alfonso Candelas.
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.
As of 30 September 2019, the overall portfolio consisted of an aggregate principal balance of EUR 746.2 million. The current cumulative default ratio was at 0.17% while the 90+ delinquency ratio stood at 0%.
DBRS Morningstar conducted a loan-by-loan analysis on the outstanding pool of receivables and updated its default rate assumptions. The average portfolio base case PD assumption has been maintained at 2.2%.
Class A to E Notes amortise pro rata, unless certain sequential amortisation events have occurred to date. As a result of the pro rata amortisation, credit enhancement has just slightly increased to 39.2%, 15.6%, and 8.8% from 38.8%, 15.0%, and 8.3% for Class A, B, and C Notes, respectively. The credit enhancement for the rated notes is provided by the subordination of the junior notes and a reserve fund.
The reserve fund is currently funded at EUR 19.1 million. After the first 12 months of the transaction, it is funded at a target level of 2.0% of the aggregate balance of the Class A to Class D Notes, subject to a floor of EUR 9.6 million, and is available to cover shortfalls in the senior expenses and interest and principal of the Class A to Class D Notes.
The structure also benefits from a commingling reserve account at closing to mitigate any potential disruptions of the payment of senior expenses and interest on the Class A Notes. This is currently funded at EUR 0.7 million.
Banco Santander SA (Santander) acts as the account bank for the transaction. Based on the DBRS Morningstar reference rating of Santander of A (high), one notch below its DBRS Morningstar 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 Morningstar 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 Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.
DBRS Morningstar analysed the transaction structure in its proprietary Excel-based 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 Morningstar has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.
A review of the transactions 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 “Global Methodology for Rating Sovereign Governments” at:
The sources of data and information used for these ratings include servicer and investor reports provided by the Originators and BNP Milan, and loan-by-loan data from the European DataWarehouse GmbH.
DBRS Morningstar did not rely upon third-party due diligence in order to conduct its analysis.
At the time of the initial rating, DBRS Morningstar was supplied with third-party assessments. However, this did not impact the rating analysis.
DBRS Morningstar considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.
DBRS Morningstar does not audit or independently verify the data or information it receives in connection with the rating process.
The last rating action on the transaction took place on 20 December 2018, when DBRS Morningstar assigned its AA (sf), BBB (sf), and BB (sf) ratings to the Class A, B, and C Notes, respectively.
The lead analyst responsibilities for this transaction have been transferred to Alfonso Candelas.
Information regarding DBRS Morningstar ratings, including definitions, policies and methodologies, is available on www.dbrs.com.
To assess the impact of changing the transaction parameters on the ratings, DBRS Morningstar considered the following stress scenarios, as compared to the parameters used to determine the rating (the Base Case):
-- PD Rates Used: Base case PD of 2.2%, a 10% and 20% increase on the base case PD.
-- Recovery Rates Used: Base case recovery rate of 35.4% at the B (sf) rating level, and a 10% and 20% decrease in the base case recovery rate. Note that the percentage decreases in the recovery rates are assumed for the other stress recovery rate levels.
In relation to the Class A Notes, DBRS Morningstar concludes that a hypothetical increase of the base case PD by 20%, ceteris paribus, would lead to a confirmation of the Class A Notes at AA (sf). A hypothetical decrease of the recovery rate by 20%, ceteris paribus, would also lead to a confirmation of the Class A Notes rating at AA (sf). A scenario combining both a hypothetical increase in the PD by 20% and a hypothetical decrease in the recovery rate by 20% would lead to a downgrade of the Class A Notes to A (high) (sf).
With regards to the Class B Notes, DBRS Morningstar concludes that a hypothetical increase of the base case PD by 20%, ceteris paribus, would lead to a downgrade of the Class B Notes to BBB (low) (sf). A hypothetical decrease of the recovery rate by 20%, ceteris paribus, would also lead to a downgrade of the Class B Notes rating to BBB (low) (sf). A scenario combining both a hypothetical increase in the PD by 20% and a hypothetical decrease in the recovery rate by 20% would lead to a downgrade of the Class B Notes to BB (high) (sf).
Finally, for the Class C Notes, DBRS Morningstar concludes that a hypothetical increase of the base case PD by 20%, ceteris paribus, would lead to a downgrade of the Class C Notes to BB (low) (sf). A hypothetical decrease of the recovery rate by 20%, ceteris paribus, would lead to a confirmation of the Class C Notes rating at BB (sf). A scenario combining both a hypothetical increase in the PD by 20% and a hypothetical decrease in the recovery rate by 20% would lead to a downgrade of the Class C Notes to B (sf).
For further information on DBRS Morningstar 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: Alfonso Candelas, Senior Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 10 December 2018
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Ratings issued and monitored by DBRS Ratings GmbH are noted as such on the DBRS Morningstar 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 Morningstar’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.
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
-- Rating CLOs and CDOs of Large Corporate Credit
-- Cash Flow Assumptions for Corporate Credit Securitizations
-- 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
-- Master European Structured Finance Surveillance Methodology
A description of how DBRS Morningstar 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.