DBRS Assigns ‘A’ Rating to Banco Sabadell Cedulas Hipotecarias

DBRS Ratings Limited (DBRS) has today assigned a rating of ‘A’ to Banco Sabadell mortgage covered bonds. Banco Sabadell has EUR 26.05 bn cedulas hipotecarias (CH) outstanding.

The rating reflects the following analytical considerations:
• The senior unsecured debt rating of Banco Sabadell (the “Issuer”) of ‘A’ (low) with Negative Trend.
• The credit quality of the collateral cover pool and the substantial support of the cover pool in case of the default of Banco Sabadell.
• Banco Sabadell’s capabilities with respect to origination of the cover pool collateral and servicing of the cover pool.

According to DBRS “Rating European Covered Bonds” methodology, the rating of the Covered Bonds, although linked to that of the Issuer, can be one notch above the Issuer’s rating in instances where DBRS Legal and Structuring Framework (LSF) matrices cannot be applied or their application would otherwise result in the covered bonds being rated at the same level as the Issuer. DBRS has formed a view on the availability and sufficiency of the cover pool to satisfy the claims of the CH holders in a post issuer insolvency scenario. As a result, the Covered Bonds can be assigned a rating of A.

A downgrade of the Issuer would lead to a downgrade of the CH by an equal number of notches.

As of 30 June 2013, the cover pool amounts to EUR65.35 bn. The cover pool is formed by residential mortgage loans (48.5%) as well as commercial (23.3%), developers (23.1%) and land loans (5.1%). This is a 60-month seasoned cover pool that is geographically distributed.

The reference rate of the underlying loans is primarily floating (96%), while 66% 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 pool is 10.35 years, while that of the covered bonds is 2.74 years.

For further information on Banco Sabadell 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

This can be found on www.dbrs.com at: http://www.dbrs.com/about/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 data related to the cover pool provided by Banco Sabadell. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

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/260307/linking-document-banco-sabadell-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: 3 September 2013
Rating Committee Chair: Erin Stafford
Lead Surveillance Analyst: Keith Gorman

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