DBRS Rates Hipocat 18 Fondo de Titulización de Activos

DBRS Ratings Limited (DBRS) has today assigned a “AA” rating to the Series A notes issued by Hipocat 18 Fondo de Titulización de Activos (Hipocat 18 F.T.A.). The DBRS rating is a second rating on an existing transaction issued in March 2009. Hipocat 18 F.T.A. issued three classes of mortgage-backed floating rate notes (Series A, Series B and Series C). DBRS rates Series A notes only. The Series A notes, approximately €737.7 million at issuance, are backed by variable rate, first lien flexible mortgage loans mainly originated in the regions of Catalonia, Andalucia, Madrid, and Castilla la Mancha. The mortgages were originated and serviced by Caixa d’Estalvis de Catalunya (“Caixa Catalunya”).

The assets securitised are the first and subsequent provisions of the flexible mortgages. The first provision can only be used for the purpose of acquiring a residential property. The potential subsequent provisions are generally for consumer credit purposes.

The final ratings are based upon DBRS review of the following analytical considerations:
• Transaction structure, the form and sufficiency of available credit enhancement.
-- Credit enhancement is in the form of subordination, an amortising reserve funded through a subordinated loan and excess spread. A current credit enhancement level of 16.4% is sufficient to support a “AA” rating of the Series A notes. The cash reserve is allowed to step down after three years of the establishment of the fund, unless certain triggers are breached.
-- The transaction benefits from a liquidity facility if the outstanding balance of the loans subject to a grace period exceeds 14.00%. CECA (Confederación Española de Cajas de Ahorros) is currently the liquidity facility provider in the transaction.
-- Priority of payment is sequential with the possibility of pro rata redemption if certain conditions apply. Payment of interest on the Series B and Series C notes might be deferred as described in more detail in the prospectus.

• The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms in which they have invested. For this transaction, the rating addresses the payment of timely interest on a quarterly basis and the payment of principal by the legal final maturity date. Interest and principal payments on the notes will be made quarterly, generally on the 20th day of January, April, July and October in each year, with the first payment date occurred in July 2009.

• The transaction parties’ financial strength and capabilities to perform their respective duties, and the quality of origination, underwriting and servicing practices.

• Soundness of the legal structure and presence of legal opinions which address the true sale of the assets to the trust and the non-consolidation of the special purpose vehicle, as well as the consistency with the DBRS Legal Criteria for European Structured Finance Transactions.

DBRS credit analysis is performed on a loan-level basis and includes a probability of default and loss given default assessment, an originator- and servicer-specific historical performance review, a Spanish housing market and property price trend evaluation, and finally a cash flow simulation based on various stresses to prepayments, timing of defaults and recoveries and interest rates.

DBRS made appropriate adjustments to our model parameters based on the analysis of market value declines in Spain and the historical performance data provided by the originator and servicer.

The full report providing additional analytical details is available by clicking on the link below or by contacting us at info@dbrs.com.

Note:
All figures are in Euro unless otherwise noted.

The applicable methodologies are Master European RMBS Rating Methodology, which can be found on our website under Methodologies, with adjustments made for the Spanish mortgages and the originator- and servicer-specific historical performance data.

The sources of information used for this rating include working papers and data on the Spanish economy and housing market provided by: International Monetary Fund, World Bank, OECD, ECB, Ministerio de Vivienda, Spanish central bank, Consejo General del Poder Judicial and Finsolutia. DBRS conducted an operational review on the origination and servicing practices of Caixa Catalunya. Caixa Catalunya provided loan-level data and historical performance of mortgage portfolio dating back to March 2004.

DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality due to our review of this data at the time of its use.

For additional information on DBRS European RMBS ratings, please refer to the linking document located below.