DBRS Assigns Provisional Ratings to FTA PYMES Santander 3

DBRS Ratings Limited (“DBRS”) has today assigned provisional ratings to the Notes issued by FTA PYMES Santander 3 (“the Issuer”), as follows:

• EUR 1,303.1 million Series A Notes: AA (sf)
• EUR 266.9 million Series B Notes: BB (sf)
• EUR 314.0 million Series C Notes: C (sf)

The transaction is a cash flow securitisation collateralised by a portfolio of bank loans originated by Banco Santander, S.A. to self-employed individuals and small- and medium-sized enterprises (“SMEs”) based in Spain. As of 4 June 2012, the transaction’s provisional pool included 43,897 loans, totaling EUR 1,905.5 million. The provisional pool exhibits low obligor concentration with the top obligor and largest 10 obligors representing 0.79% and 4.12% of the outstanding balance, respectively. The provisional pool also exhibits low industry and geographical concentrations. The top three industries by NACE group are ‘Wholesale and retail trade’ (17.2%), ‘Manufacturing’ (13.3%) and ‘Construction’ (12.1%). The top three regions are Andalusia (16.2%), Madrid (15.0%) and Catalonia (13.6%). At closing, the Originator will select the final portfolio of EUR 1,570.0 million from the above mentioned provisional pool.

The above ratings are provisional. Final ratings will be issued upon receipt of executed versions of the governing transaction documents. To the extent that the documents and information provided by FTA PYMES Santander 3, Santander de Titulización, S.G.F.T., S.A. and Banco Santander, S.A. to DBRS as of this date differ from the executed versions of the governing transaction documents, DBRS may assign lower final ratings to the Notes, or may avoid assigning final ratings to the Notes altogether.

These ratings are based upon DBRS’s review of the following analytical considerations:
• Transaction structure, the form and sufficiency of available credit enhancement.
-- Credit enhancement is in the form of subordination, through the Reserve Fund and excess spread. The current credit enhancement level of 37% is sufficient to support the AA (sf) rating for the Series A Notes, and the current credit enhancement level of 20% is sufficient to support the BB (sf) rating for the Series B Notes.
-- The Series C Notes have been issued for the purpose of funding the Cash Reserve Fund. The Reserve Fund has been initially set at 20% of the aggregate balance of the Series A and Series B Notes, or EUR 314.0 million. The Reserve Fund is available to cover shortfalls in the senior expenses, interest and principal throughout the life of the Notes.
-- The Reserve Fund can start to amortise after the first two years if certain conditions – relating to the performance of the portfolio and deleveraging of the transaction – are met. The Reserve Fund cannot amortise below EUR 157 million.

• 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 ability of the transaction to withstand interest risk stresses due to the absence of any interest rate hedging mechanics.

• The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the approved terms. For this transaction, the provisional rating of the Series A Notes addresses the timely payments of interest on each Payment Date and the ultimate payments of principal, as defined in the transaction documents, and, in any case, on or before the Legal Final Maturity on 15 January 2045. The provisional rating of the Series B Notes addresses the ultimate payment of interest and principal, as defined in the transaction documents and, in any case, on or before the Legal Final Maturity. Interest and principal payments on the Notes will be made quarterly, generally on the 15th day of January, April, July and October, with the first payment date on 15 October 2012.

• The rating of the Series C Notes is based upon DBRS’s review of the following considerations:
-- The Series C Notes are in the first loss position and, as such, are highly likely to default.
-- Given the characteristics of the Series C notes as defined in the transaction documents, the default most likely would only be recognised at the maturity or early termination of the transaction.

DBRS determined key inputs used in the analysis based on historical performance data provided on the originator and servicer as well as analysis of the current economic environment. Further information on DBRS’s 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 principal methodology is Master European Granular Corporate Securitisations (SME CLOs), which can be found on our website under Methodologies.

The sources of information used for this rating include FTA PYMES Santander 3, Santander de Titulización, S.G.F.T., S.A. and Banco Santander, S.A. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

This rating concerns a newly issued financial instrument. This is the first DBRS rating on this financial instrument.

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

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Lead Analyst: Carlos Silva
Rating Committee Chair: Jerry van Koolbergen
Initial Rating Date: 5 July 2012

Notes:
All figures are in Euro unless otherwise noted.