DBRS Assigns Provisional Ratings to FTA PYMES SANTANDER 5

DBRS Ratings Limited (“DBRS”) has today assigned provisional ratings to the notes issued by FTA PYMES SANTANDER 5 (“the Issuer”), as follows:

• EUR 1,368 million Series A Notes: A (high) (sf)
• EUR 342 million Series B Notes: BB (high) (sf)
• EUR 342 million Series C Notes: C (sf)

The transaction is a cash flow securitisation collateralised primarily by a portfolio of bank loans and credit lines (together, the “Credit Rights”) originated by Banco Santander, S.A. to self-employed individuals and small-and medium-sized enterprises (“SMEs”) based in Spain. As of 15 April 2013, the transaction’s provisional portfolio included 23,219 Credit Rights to 21,785 obligors, totaling EUR 1,829.5 million. At closing, the Originator will select the final portfolio of EUR 1,710 million from the above mentioned provisional pool.

The provisional portfolio exhibits low obligor concentration. The top obligor and the largest 10 obligor groups represent 0.93% and 5.59% of the outstanding balance, respectively. The provisional pool exhibits a high industry concentration in the Construction and Real Estate sectors, which together represent 22.7% of the portfolio balance. The top three industries by NACE group are “Wholesale and retail trade” (18.7%), “Manufacturing” (17.5%) and “Construction” (11.5%). The combined exposure to the “Construction” and “Real Estate” sectors is higher than recent transactions that we have seen. The top three regions are Catalonia, Madrid, and Andalusia, representing approximately 20.3%, 19.0%, and 13.1%, of the portfolio balance, respectively.

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 5, 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.

As of 15 April 2013, credit lines represented 28.4% of the portfolio’s outstanding balance. This exposure to the credit lines could increase by an additional EUR 380 million if the clients use the credit lines to their maximum limits. Any future drawing on the credit lines would be funded firstly through the Principal Proceeds available on the Reserve Fund’s accounts. If the Principal Proceeds are insufficient, the Reserve Fund (the “Fund”) can draw on a liquidity line provided by Banco Santander, S.A. The repayment of the liquidity line is senior to the payment of the Series A and Series B Notes’ principal in the Priority of Payments. Future drawings on the credit lines may lead to an increase of the portfolio balance and result in the dilution of the credit enhancement available. This risk is partly mitigated by the short weighted average life of the credit lines and was taken into consideration in the DBRS analysis.

These ratings are based upon DBRS’s review of the following analytical considerations:
• Transaction structure, the form and sufficiency of available credit enhancement.
-- At closing, the Series A Notes benefit from a total credit enhancement of 40%, which DBRS considers to be sufficient to support the A (high) (sf) rating. The Series B Notes benefit from a credit enhancement of 20%, which DBRS considers to be sufficient to support the BB (high) (sf) rating. Credit enhancement is provided by subordination and the Reserve Fund. In addition, the notes also benefit from available excess spread.
-- The Series C Notes have been issued for the purpose of funding the Cash Reserve Fund.
-- 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 171 million.

• 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, as defined in the transaction documents, and the timely payments of principal on each Payment Date during the transaction, and, in any case, at their Legal Final Maturities on 18 November 2045. The provisional rating of the Series B Notes addresses the ultimate payment of interest, as defined in the transaction documents, and the ultimate payment of principal on each Payment Date during the transaction, and, in any case, at their Legal Final Maturity on 18 November 2045. Interest and principal payments on the notes will be made quarterly, generally on the 18th day of February, May, August and November, with the First Payment Date on 19 August 2013.

• 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 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 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’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 www.dbrs.com.

The sources of information used for this rating include FTA PYMES SANTANDER 5, 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: Simon Ross
Initial Rating Date: 13 May 2013

Notes:
All figures are in Euro unless otherwise noted.