Press Release

DBRS Morningstar Confirms Ratings on Miravet 2020-1

RMBS

December 03, 2021

DBRS Ratings GmbH (DBRS Morningstar) confirmed its ratings on the bonds issued by Miravet S.à r.l. acting on behalf of its Compartment 2020-1 (Miravet 2020-1) as follows:

-- Class A notes at AAA (sf)
-- Class B notes at A (sf)
-- Class C notes at BBB (low) (sf)
-- Class D notes at BB (sf)
-- Class E notes at B (low) (sf)

The rating on the Class A notes addresses the timely payment of interest and the ultimate payment of principal on or before the legal final maturity date. The ratings on the Class B, Class C, Class D, and Class E notes address the ultimate payment of interest and principal on or before the legal final 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 November 2021 payment date;
-- -- Portfolio default rate (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables;
-- Current available credit enhancement to the rated notes to cover the expected losses at their respective rating levels; and
-- Current economic environment and an assessment of sustainable performance, as a result of the Coronavirus Disease (COVID-19) pandemic.

The transaction is a securitisation of residential mortgage loans originated by Catalunya Banc S.A., Caixa d’Estalvis de Catalunya, Caixa d’Estalvis de Tarragona, and Caixa d’Estalvis de Manresa, all entities currently integrated into Banco Bilbao Vizcaya Argentaria, S.A. (BBVA). BBVA acts as Collection Account Bank and Master Servicer, with servicing operations delegated to Anticipa Real Estate, S.L.U. at closing and then transferred to Pepper Spanish Servicing, S.L.U. (Pepper).

The portfolio exhibits a high percentage of loans that have been restructured or have benefitted from a grace period in the past, credit lines, and a high concentration in the autonomous region of Catalonia (73.5% at the time of the final rating).

The transaction closed in November 2020 and is static with a first optional redemption date at the November 2023 payment date and a step-up coupon date at the November 2025 payment date. The legal final maturity date is at the May 2065 payment date.

PORTFOLIO PERFORMANCE
The delinquency levels have been fairly high since the initial rating. At the November 2021 payment date, the mortgages one to three months in arrears and more than three months in arrears represented 4.2% and 11.9% of the portfolio outstanding balance compared with 8.1% and 9.3%, respectively, at the final rating in December 2020. At the November 2021 payment date, cumulative defaults represented 6.1% of the initial portfolio balance and losses were immaterial at 0.0% (0.02%) of the initial portfolio balance in December 2020.

At the initial rating, 7.5% of the portfolio balance was subject to payment holidays, granted in the context of the coronavirus pandemic; however, the payment holiday period ended and no loans were under a payment holiday as of the November 20201 payment date.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar updated its base case PD and LGD assumptions to 19.1% and 22.9% from 20.3% and 20.3%, respectively, based on the remaining receivables.

CREDIT ENHANCEMENT
The credit enhancement (CE) to the notes consists of subordination of their respective junior notes.

As of the October 2021 payment date, the CE to the notes increased as follows since the initial rating:
-- Class A notes to 39.0% from 35.8%
-- Class B notes to 25.7% from 23.7%
-- Class C notes to 20.3% from 18.7%
-- Class D notes to 18.4% from 16.9%
-- Class E notes to 16.5% from 15.2%

The transaction benefits from an amortising liquidity reserve, funded via the Class Z notes issuance and available to cover senior fees, Class A interest, and Class X interest. As of the November 2021 payment date, the reserve was at its target level of EUR 14.6 million.

Elavon Financial Services DAC (Elavon) acts as the account bank for the transaction. Based on DBRS Morningstar’s private rating on Elavon, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent to 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.

BNP Paribas SA (BNP Paribas) acts as the interest cap provider. DBRS Morningstar's Long Term Critical Obligations Rating of AA (high) on BNP Paribas is above the First Rating Threshold as described in DBRS Morningstar's "Derivative Criteria for European Structured Finance Transactions" methodology.

DBRS Morningstar analysed the transaction structure in Intex DealMaker.

The Coronavirus Disease (COVID-19) and the resulting isolation measures have caused an immediate economic contraction, leading in some cases to 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. The ratings are based on additional analysis to expected performance as a result of the global efforts to contain the spread of the coronavirus.

For this transaction, DBRS Morningstar incorporated an increase in probability of default for certain borrower characteristics and a moderate reduction in residential property values.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. These scenarios were last updated on 8 September 2021. DBRS Morningstar analysis considered impacts consistent with the baseline scenario in the below referenced report. For details, see the following commentaries:
https://www.dbrsmorningstar.com/research/384150/baseline-macroeconomic-scenarios-for-rated-sovereigns and https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

On 14 June 2021, DBRS Morningstar updated its 5 May 2020 commentary outlining the impact of the coronavirus crisis on performance of DBRS Morningstar-rated RMBS transactions in Europe one year on. For more details, please see: https://www.dbrsmorningstar.com/research/380094/the-impact-of-covid-19-on-european-mortgage-performance-one-year-on and https://www.dbrsmorningstar.com/research/360599/european-rmbs-transactions-risk-exposure-to-coronavirus-covid-19-effect.

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).

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found at: http://www.dbrsmorningstar.com/about/methodologies.

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 related to the transfer of the servicing activities to Pepper and the issuance of a REO Loan Facility with Odiel Real Estate Company, S.L.U. was conducted. A review of the other unrelated legal documents was not conducted as they have remained unchanged since the most recent rating action.

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/381451/global-methodology-for-rating-sovereign-governments.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

The sources of data and information used for these ratings include investor reports and loan-level data provided by U.S. Bank Trustees Limited.

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 action on this transaction took place on 3 December 2020, when DBRS Morningstar finalised its provisional ratings on the Class A, Class B, Class C, Class D, and Class E notes at AAA (sf), A (sf), BBB (low) (sf), BB (sf), and B (low) (sf), respectively.

The lead analyst responsibilities for this transaction have been transferred to Shalva Beshia.

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available on 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 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 19.1% and 22.9%, 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 be downgraded to BBB (high) (sf), ceteris paribus. If the PD increases by 50%, the rating of the Class A notes would be expected to be downgraded to AA (sf), ceteris paribus. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A notes would be expected to be downgraded to A (low) (sf).

Class A Risk Sensitivity
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (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)

Class B Risk Sensitivity
-- 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD, expected rating of BBB (high) (sf)
-- 50% increase in PD, expected rating of BBB (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BB (high) (sf)

Class C Risk Sensitivity
-- 25% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in LGD, expected rating of BB (sf)
-- 25% increase in PD, expected rating of BB (high) (sf)
-- 50% increase in PD, expected rating of BB (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BB (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of B (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of B (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of B (low) (sf)

Class D Risk Sensitivity
-- 25% increase in LGD, expected rating of B (high) (sf)
-- 50% increase in LGD, expected rating of B (sf)
-- 25% increase in PD, expected rating of B (high) (sf)
-- 50% increase in PD, expected rating below B (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating below B (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)

Class E Risk Sensitivity
-- 25% increase in LGD, expected rating below B (sf)
-- 50% increase in LGD, expected rating below B (sf)
-- 25% increase in PD, expected rating below B (sf)
-- 50% increase in PD, expected rating below B (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating below B (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. 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: Shalva Beshia, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 10 November 2020

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 this transaction can be found at: http://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: http://www.dbrsmorningstar.com/research/278375.

For more information on this credit 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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