DBRS Assigns Final Ratings to Rural Hipotecario XI, Fondo de Titulización de Activos Notes

DBRS Ratings Limited (“DBRS”) has today assigned a ‘A’ (low) (sf) rating to the Series A notes issued by Rural Hipotecario XI, Fondo de Titulización de Activos (“RH XI”).

The existing notes under Series B and Series C are not rated by DBRS.

RH XI, originally closed in February 2009, is the securitisation of first-ranking mortgage loans originated by 30 Spanish rural savings banks. The mortgage portfolio is seasoned 6 years and is serviced by the respective originators.

The credit enhancement to the Series A notes is provided by the subordination of Series B and Series C and an amortising reserve fund. As of the last payment date in December 2012, the credit enhancement to Series A notes stood at 9.56%, built-up since close of the transaction by amortisation of notes. More than half the mortgage portfolio currently comprises of loans originated in the 2006 and 2007 (57.79% of the mortgage portfolio). The performance of the loans (with 90 days+ arrears at 3.65%) is relatively worse as compared to the mortgage portfolios under other Rural Hipotecario transactions where the origination vintages are older or more recent. However, the performance of mortgage loans in this transaction and under the Rural Hipotecario series generally, compare favourably to that of some other bigger lenders in Spain.

The ratings are based upon DBRS review of the following analytical considerations:
• The transaction’s capital structure and the form and sufficiency of available credit enhancement. Relevant credit enhancement is in the form of subordination, a reserve fund, and excess spread.
• The credit quality of the mortgages backing the notes and the ability of the servicer to perform collection activities on the collateral.
• The transaction parties’ capabilities with respect to originations, underwriting, servicing and financial strength.
• The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms of the transaction documents.
• The legal structure and presence of legal opinions addressing the assignment of the assets to the issuer and the consistency with the DBRS Legal Criteria for European Structured Finance Transactions.

Notes:
All figures are in Euro unless otherwise noted.

The principal methodologies applicable are:
• Master European Residential Mortgage-Backed Securities Rating Methodology
• Legal Criteria for European Structured Finance Transactions
• Swap Criteria for European Structured Finance Transactions
• Operational Risk Assessment for European Structured Finance Servicers
• Unified Interest Rate Model Methodology for European Securitisations

These can be found on dbrs.com under Methodologies. For a more detailed discussion of sovereign risk impact on Structured Finance ratings, please refer to DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area”.

The sources of information used for this rating include a loan level data file for the receivables, performance of loans since closing of the transaction and foreclosure data provided by the issuer. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

The final ratings concern existing financial instruments issued in the past.

This is the first DBRS rating on these financial instruments.

For additional information on this rating, please see the linking document.

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

Lead Analyst: Kali Sirugudi
Rating Committee Chair: Quincy Tang
Initial Rating Date: 8 February 2013