DBRS Ratings GmbH (DBRS Morningstar) took the following rating actions on the notes issued by Caixabank Consumo 4, Fondo de Titulización (the Issuer):
-- Class A Notes upgraded to AA (sf) from AA (low) (sf)
-- Class B Notes confirmed at BB (high) (sf)
The rating on the Class A Notes addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date in July 2056. The rating on the Class B Notes addresses the ultimate payment of interest and principal on or before the legal final maturity date.
The rating actions follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults, and losses;
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables;
-- Current available credit enhancement to the notes to cover the expected losses at their respective rating levels.
The Issuer is a securitisation of unsecured consumer loans granted to individuals residing in Spain by CaixaBank, S.A. (CaixaBank), which is also the servicer of the portfolio and acts as the issuer account bank. At closing, the static EUR 1.7 billion collateral portfolio consisted of loans granted primarily to borrowers in Catalonia (33.4% of the initial portfolio balance), Andalusia (17.3%), and Madrid (10.7%). The transaction closed in May 2018.
As of the January 2020 payment date, loans that were 0 to 30 days, 30 to 60 days, and 60 to 90 days delinquent represented 1.0%, 0.5%, and 0.2% of the outstanding collateral balance, respectively, while loans more than 90 days delinquent amounted to 2.9%. Gross cumulative defaults amounted to 2.2% of the original portfolio balance, with cumulative recoveries of 2.1% to date.
DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of receivables and updated its base case PD and LGD assumptions to 6.5% and 64.9%, respectively.
The subordination of the Class B Notes and the cash reserve provides credit enhancement to the Class A Notes, while only the cash reserve provides credit enhancement to the Class B Notes, following the full repayment of the Class A Notes. As of the January 2020 payment date, credit enhancement to the Class A Notes increased to 21.1% from 17.0% at the time of the last rating action; credit enhancement to the Class B Notes decreased to 4.6% from 5.7% as a result of the amortisation of the cash reserve to its target balance starting from the July 2019 payment date.
The transaction benefits from an amortising cash reserve available to cover senior expenses and all payments due on the senior-most class of notes outstanding at the time. The reserve was funded to EUR 68.0 million at closing through a subordinated loan granted by CaixaBank, and from the July 2019 payment date has been amortising to its target level, which is 4% of the outstanding principal balance of the notes. The cash reserve is currently at its target balance of EUR 37.8 million.
CaixaBank acts as the account bank for the transaction. Based on the account bank reference rating of CaixaBank at A (high), which is one notch below the DBRS Morningstar public Long-Term Critical Obligations Rating (COR) 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 ratings 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 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 Morningstar 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 “Global Methodology for Rating Sovereign Governments” at: https://www.dbrs.com/research/350410/global-methodology-for-rating-sovereign-governments.
The sources of data and information used for these ratings include investor and servicer 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 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 this transaction took place on 24 May 2019, when DBRS Morningstar confirmed the ratings on the Class A and Class B Notes at AA (low) (sf) and BB (high) (sf), respectively.
Information regarding DBRS Morningstar 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 Morningstar considered the following stress scenarios as compared with the parameters used to determine the rating (the base case):
-- DBRS Morningstar 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 loans for the Issuer are 6.5% and 64.9%, 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 of the Class A Notes would be expected to remain at AA (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A Notes would be expected to fall to AA (low) (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected to fall to A (low) (sf).
Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD, expected rating of AA (sf)
-- 50% increase in PD, expected rating of AA (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (low) (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 (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (low) (sf)
Class B Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of BB (low) (sf)
-- 50% increase in LGD, expected rating of B (sf)
-- 25% increase in PD, expected rating of BB (low) (sf)
-- 50% increase in PD, expected rating of B (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of B (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating below B (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating below B (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating below 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: 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: Daniel Rakhamimov, Senior Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 25 May 2018
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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
-- Legal Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Interest Rate Stresses for European Structured Finance Transactions
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.