DBRS Assigns AAA (sf) Provisional Rating to Series A Notes issued by PYME Valencia 2, F.T.A.

DBRS Ratings Limited (“DBRS”) has today assigned the provisional rating of AAA (sf) to the €186,741,072.25 Series A Notes issued by PYME Valencia 2, F.T.A. (the “Issuer”). The transaction is a cash flow securitisation collateralised primarily by a portfolio of bank loans originated by Banco de Valencia S.A. (“Banco de Valencia”) to Spanish enterprises, small and medium-sized enterprises (“SMEs”) and self-employed individuals. As of 30 April 2011, the transaction had a performing notional amount of €233,666,919 and included 1,521 loans with a weighted average time to maturity of 10.1 years.

The transaction is an existing transaction that had its Constitution Date on 13 March 2009.

The above rating is provisional. Final rating will be issued upon receipt of executed versions of the amended governing transaction documents. To the extent that the documents and information provided by PYME Valencia 2, F.T.A., Europea de Titulización S.A., S.G.F.T., Banco de Valencia and/or their agents to DBRS as of this date differ from the executed versions of the governing transaction documents, DBRS may assign lower final rating to the Notes, or may avoid assigning final rating to the Notes altogether.

This rating is 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, a reserve funded through a subordinated loan and excess spread. For the purpose of analysing this transaction, DBRS considers the credit enhancement to be the difference between: i) the non-defaulted portfolio that is current in all payments of principal and interest plus the current balance in the Principal Reserve Fund and ii) the total of the outstanding balance of the particular debt series in question and all series senior to it. The Series A Notes’ current credit enhancement level is equal to € 133.93 million and is sufficient to support AAA (sf) rating.
-- Funded at the beginning of the transaction through the issuance of a subordinated loan granted by Banco de Valencia, the Principal Reserve Fund was initially set at €87.00 million and the Interest Reserve Fund was initially set at €10.00 million. The reserve funds are available to cover shortfalls in the senior expenses and interest on the Series A, Series B and Series C Notes. On the last payment date or in case of early amortization date, the reserve funds can also be used to cover principal shortfalls.
---- The reserve funds do not cover the interest of the Series B Notes if: i) the cumulative balance of the defaulted loans is greater than 41.10% of the initial balance of the portfolio, and ii) the Series A Notes have not been fully amortised;
---- The reserve funds do not cover the interest of the Series C Notes if: i) the cumulative balance of the defaulted loans is greater than 23.70% of the initial balance of the portfolio, and ii) the Series A and the Series B Notes have not been fully amortised;
-- The Principal Reserve Fund cannot be reduced, except for required payments to cover interest, principal and expense shortfalls, unless:
---- The transaction is at least three years old;
---- The Principal Reserve Fund is at least 34.80% of the outstanding aggregate balance of the Series A, Series B and Series C Notes. This percentage is twice the percentage that the Principal Reserve Fund was of the initial aggregate balance of the Series A, Series B and Series C Notes; and,
---- The Principal Reserve Fund balance is greater than €43.50 million, which is 3.85% of the initial aggregate balance of the Series A, Series B and Series C Notes.
-- In addition, the Principal Reserve Fund will not be eligible for further payments, unless:
---- The balance of the Principal Reserve Fund was not at the minimum required level on the relevant Payment Date; or,
---- The outstanding balance of the non-failed assets, which are more than 90 days in arrears, is greater than 1% of the outstanding balance of the total non-failed assets.
-- The Interest Reserve Fund balance is set as the lower of €10.0 million or twice the amounts payable, set under the first to fourth points inclusive of the Priority of Payments.

• The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the approved terms. For this transaction, the rating of the Series A Notes addresses the timely payment of interest and the ultimate payment of principal on or before the Final Date, in accordance with the transaction documents. Interest and principal payments on the Notes will be made quarterly, generally on the 25th day of each March, June, September and December. The next payment date will be 27 June 2011.

• 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.

The principal methodology is Master European Granular Corporate Securitisations (SME CLOs), which can be found on our website under Methodologies.

DBRS determined key inputs used in our analysis based on historical performance data provided for the originator and servicer as well as analysis of the current economic environment. Further information on DBRS’ analysis of this transaction will be available in a rating report on http://www.dbrs.com, or by contacting us at info@dbrs.com.

The sources of information used for this rating include parties involved in the rating, including but not limited to PYME Valencia 2, F.T.A., Europea de Titulización S.A., S.G.F.T. and Banco de Valencia S.A. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

This is the first DBRS rating on this financial instrument.

For additional information on DBRS European SME CLOs, please see European Disclosure Requirements, located at http://www.dbrs.com/research/235269.

Lead Analyst: Simon Ross
Rating Committee Chair: Jerry van Koolbergen
Provisional Rating Date: 25 May 2011

Note:
All figures are in Euro unless otherwise noted.