DBRS Assigns BBB (high) Rating to Cajas Rurales Unidas Cedulas Hipotecarias

DBRS Ratings Limited (DBRS) has today assigned a rating of BBB (high) to Cajas Rurales Unidas (CRU) mortgage covered bonds. CRU has EUR 6.35 bn cedulas hipotecarias (CH) outstanding.

The rating reflects the following analytical considerations:
• The credit quality of the cover pool and the substantial support of the cover pool in the event of the default of CRU.
• DBRS Legal and Structuring Framework assessment of “Modest”.
• A Cover Pool Credit Assessment of BBB.
• The issuer’s capabilities with respect to origination of the cover pool assets and servicing of the cover pool.

DBRS Legal and Structuring Framework (LSF) matrix were fully applicable as CRU has provided a complete set of data. Based on the data provided by the issuer, the “Modest” LSF matrix and the available overcollateralization of 188% (as of May 2013), DBRS assigns a rating of BBB (high) to CRU mortgage covered bonds.

A one-notch downgrade of the Issuer would lead to up to two notches of downgrade of the covered bonds.

As of 31 March 2013, the cover pool amounts to EUR 18.31 bn. The cover pool is formed by residential mortgage loans (57.1%) as well as commercial (24.5%), developer (11.9%) and land loans (6.5%). This is a 58-month seasoned pool geographically distributed among CRU’s main areas of influence (Andalucia, Valencia and Murcia).

The reference rate of the underlying loans is primarily floating (96%), while 95% of the CH outstanding yields a fixed coupon. As standard in the Spanish market, the CH holders do not receive the benefit of the swaps that are in place to hedge such mismatch.

The weighted average life of the cover pool is 10.9 years, while that of the covered bonds is 3.1 years.

For further information on CRU CH please refer to the ratings report that will shortly be available on www.dbrs.com.

DBRS has assessed the LSF related to the Spanish CH as “Modest” according to its rating methodology. For more information, please refer to “DBRS Commentary on Spanish Cedulas Hipotecarias Legal and Structuring Framework”, available at www.dbrs.com.

Notes:
All figures are in Euros unless otherwise noted.

The principal methodologies applicable are:
• Rating European Covered Bonds
• Global Methodology for Rating Banks & Banking Organisations
• Legal Criteria for European Structured Finance Transactions
• Master European Residential Mortgage-Backed Securities Rating Methodology
• Master European Granular Corporate Securitisations
• Master European Structured Finance Surveillance Methodology
• Operational Risk Assessment for European Structured Finance Servicers
• Unified Interest Rate Model Methodology for European Securitisations

These can be found on www.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 included data related to the cover pool provided by CRU. DBRS considers the information available for the purposes of providing this rating of satisfactory quality.

This is the first DBRS rating on this financial instrument.

For additional information on this rating, please see the related linking document. The individual linking document for this transaction is located at http://www.dbrs.com/research/259288/linking-document-cajas-rurales-unidas-cedulas-hipotecarias.pdf

For further information on DBRS’s historic default rates published by the European Securities and Markets Administration (“ESMA”) in a central repository see http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

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

Initial Lead Analyst: Covadonga Aybar
Initial Rating Date: 19 July 2013
Rating Committee Chair: Quincy Tang
Previous Rating Date: Not applicable as no previous rating date