Press Release

DBRS Morningstar Confirms Ratings of AyT Goya Hipotecario IV and V FTA

RMBS

May 07, 2021

DBRS Ratings GmbH (DBRS Morningstar) confirmed the following ratings of two Spanish RMBS transactions:

AyT Goya Hipotecario IV, Fondo de Titulización de Activos (Goya IV):
-- Series A Notes at AA (high) (sf)
-- Series B Notes at A (high) (sf)

AyT Goya Hipotecario V, Fondo de Titulización de Activos (Goya V):
-- Series A Notes at AA (high) (sf)
-- Series B Notes at A (high) (sf)

The ratings address the timely payment of interest and the ultimate payment of principal on or before the notes’ respective legal final maturity dates.

The confirmations follow an annual review of the transactions and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies and defaults, as of the March 2021 payment date.
-- Updated portfolio default rate (PD), loss given default (LGD), and expected loss assumptions on the outstanding collateral pools.
-- The credit enhancement available to the rated notes to cover the expected losses at their respective rating levels.
-- Current economic environment and an assessment of sustainable performance, as a result of the Coronavirus Disease (COVID-19) pandemic.

The two transactions are securitisations of Spanish prime residential mortgage loans originated and serviced by CaixaBank SA (previously, Barclays Bank SA/Spain).

PORTFOLIO PERFORMANCE
The performance of both transactions remains within DBRS Morningstar’s expectations.

For Goya IV, as of March 2021, loans that were two to three months in arrears represented 0.04% of the outstanding portfolio balance, up from 0.03% in March 2020; the 90+ delinquency ratio was 0.35%, up from 0.31% a year earlier; and the cumulative default ratio was 1.71%, up from 1.65% in March 2020.

For Goya V, as of March 2021, loans that were two to three months in arrears represented 0.05% of the outstanding portfolio balance, down from 0.06% in March 2020; the 90+ delinquency ratio was 0.4%, up from 0.3% a year earlier; and the cumulative default ratio was 1.2%, stable from March 2020.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted a loan-by-loan analysis on the remaining receivables and updated its base case PD and LGD assumptions. For Goya IV, the base case PD and LGD assumptions are 1.79% and 5.41%, respectively. For Goya V, the base case PD and LGD assumptions are 1.75% and 5.05%, respectively.

CREDIT ENHANCEMENT
The Series A Notes in both transactions are supported by the subordination of the Series B Notes and the respective reserve funds, which are available to cover senior fees, interest, and principal of the Series A and Series B Notes. The Series B Notes are solely supported by the respective reserve funds. For Goya IV, as of the March 2021 payment date, credit enhancement available to the Series A Notes was 46.0%, up from 23.0% at the DBRS Morningstar initial rating. Credit enhancement available to the Series B Notes was 10.0%, up from 5.0% at the DBRS Morningstar initial rating. For Goya V, as of the March 2021 payment date, credit enhancement available to the Series A Notes was 50.0%, up from 26.0% at the DBRS Morningstar initial rating. Credit enhancement available to the Series B Notes was 10.0%, up from 6.0% at the DBRS Morningstar initial rating.

Both transactions switched to pro rata amortisation at the March 2020 (Goya IV) and September 2019 payment dates (Goya V). The reserve funds may amortise over the life of the transactions, subject to a floor and certain amortisation triggers. For Goya IV, the reserve fund is currently at EUR 50.9 million. The reserve fund for Goya V is currently at EUR 56.2 million. Both reserve funds are at their target levels.

CaixaBank SA (CaixaBank) acts as the account bank for the transactions. Based on the account bank reference rating of CaixaBank at A (high), which is one notch below the DBRS Morningstar Long Term Critical Obligations Rating (COR) of AA (low), the downgrade provisions outlined in the transactions’ documents, and other mitigating factors inherent in the transactions’ structures, DBRS Morningstar considers the risk arising from the exposure to the account bank to be consistent with the ratings assigned to the Series A Notes as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

Banco Santander SA and CaixaBank act as the swap providers for Goya IV and Goya V, respectively. The DBRS Morningstar COR of Banco Santander SA and CaixaBank are above the First Rating Threshold as described in DBRS Morningstar’s “Derivative Criteria for European Structured Finance Transactions” methodology, given the AA (high) (sf) ratings of the Series A Notes.

DBRS Morningstar analysed the transaction structures in Intex DealMaker.

The Coronavirus Disease (COVID-19) and the resulting isolation measures have caused an economic contraction, leading to sharp increases in unemployment rates and income reductions for many borrowers. DBRS Morningstar anticipates that delinquencies may continue to increase in the coming months for many RMBS transactions, some meaningfully. The ratings are based on additional analysis and adjustments to expected performance as a result of the global efforts to contain the spread of the coronavirus.

For these transactions, DBRS Morningstar increased its expected PD for self-employed borrowers, incorporated a moderate reduction in property values, and conducted additional sensitivity analysis to determine that the transactions benefit from sufficient liquidity support to withstand potential high levels of payment holidays in the portfolios. As of March 2021, the loans that benefit from moratorium due to the coronavirus represented 10.2% of the portfolio for Goya IV, and 10.1% of the portfolio for Goya V.

On 16 April 2020, the DBRS Morningstar Sovereign group released a set of macroeconomic scenarios for the 2020–22 period in select economies. These scenarios were last updated on 17 March 2021. For details, see the following commentaries: https://www.dbrsmorningstar.com/research/375376/global-macroeconomic-scenarios-march-2021-update and https://www.dbrsmorningstar.com/research/359903/global-macroeconomic-scenarios-application-to-credit-ratings. The DBRS Morningstar analysis considered impacts consistent with the moderate scenario in the referenced reports.

On 5 May 2020, DBRS Morningstar published a commentary outlining how the coronavirus crisis is likely to affect DBRS Morningstar-rated RMBS transactions in Europe. For more details, please see: https://www.dbrsmorningstar.com/research/360599/european-rmbs-transactions-risk-exposure-to-coronavirus-covid-19-effect and https://www.dbrsmorningstar.com/research/362712/european-structured-finance-covid-19-credit-risk-exposure-roadmap.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at: https://www.dbrsmorningstar.com/research/373262.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is: “Master European Structured Finance Surveillance Methodology” (8 February 2021).

DBRS Morningstar has applied the principal methodology consistently and conducted a review of the transactions 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 these transactions are listed at the end of this press release. These may be found at: https://www.dbrsmorningstar.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 Morningstar Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrsmorningstar.com/research/364527/global-methodology-for-rating-sovereign-governments.

The sources of data and information used for these ratings include reports and information received from HAYA Titulización, S.G.F.T., S.A.U. 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 ratings, 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 actions on these transactions took place on 6 April 2021, when DBRS Morningstar upgraded its ratings on the Series A Notes of both transactions to AA (high) (sf) from AA (sf), and on 18 May 2020 when DBRS Morningstar confirmed its ratings on the Series B Notes of both transactions at A (high) (sf).

The lead analyst responsibilities for these transactions have been transferred to Helvia Meana.

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available at www.dbrsmorningstar.com.

To assess the impact of changing the transaction parameters on the ratings, DBRS Morningstar considered the following stress scenarios, as compared with the parameters used to determine the ratings (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.

For Goya IV, the base case PD and LGD assumptions are 1.79% and 5.41%, respectively.
For Goya V, the base case PD and LGD assumptions are 1.75% and 5.05%, respectively.
-- The Risk Sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base case assumptions. For example, if the LGD increases by 50%, the rating of the Goya IV Series A Notes would be expected to remain at AA (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Goya IV Series A Notes would be expected to remain at AA (high) (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Goya IV Series A Notes would be expected to remain at AA (high) (sf).

Goya IV, Series A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD, expected rating of AA (high) (sf)
-- 50% increase in PD, expected rating of AA (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (high) (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 (high) (sf)

Goya IV, Series B 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 (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 (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf)

Goya V, Series A Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD, expected rating of AA (high) (sf)
-- 50% increase in PD, expected rating of AA (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (high) (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 (high) (sf)

Goya V, Series B 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 (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 (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf)

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see:
https://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage: https://www.fca.org.uk/firms/credit-rating-agencies.

These ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Helvia Meana, Senior Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Dates:
Goya IV: 4 May 2011
Goya V: 29 December 2011

DBRS Ratings GmbH
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60311 Frankfurt am Main – Deutschland
Tel. +49 (69) 8088 3500
Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

The rating methodologies used in the analysis of these transactions can be found at:
https://www.dbrsmorningstar.com/about/methodologies.

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://www.dbrsmorningstar.com/research/278375.

For more information on these credits or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.

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