DBRS Assigns Ratings to Banco Sabadell Cedulas Hipotecarias New Issuance

DBRS Rating Limited (DBRS) has today assigned a rating of ‘A’ to a new covered bond issuance (ES0413860356) by Banco Sabadell. The new issuance is a EUR200mln maturing in December 2021 and pays floating coupon linked to three-month Euribor plus a 160bps margin on a quarterly basis. At the same time, DBRS has confirmed the ‘A’ rating on all outstanding singular Cedulas Hipotecarias (CH).

The ratings are based on the following analytical considerations:
• The senior unsecured long debt and deposit rating of Banco Sabadell (the “Issuer”) of ‘A’ (low) with Negative Trend.
• The credit quality of the cover pool and the substantial support of the cover pool in the event of the default of the Issuer.
• Banco Sabadell’s capabilities with respect to origination of the cover pool assets 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’.

Following the issuance, the total outstanding amount of CH is EUR24.15bln while the aggregate balance of mortgages in the cover pool is EUR64.27bln (as of 30-September-2013, including BMN-Penedès network data as of June-2013) resulting in a nominal over-collateralisation (OC) of 166%.

Notes:
All figures are in Euros unless otherwise noted.

The principal methodology applicable is: “Rating European Covered Bonds”. This can be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies Other methodologies and criteria referenced in this transaction are listed at the end of this press release.

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” on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.

The sources of information used for this rating include historical default performance data and cover pool stratification tables that allowed DBRS to further assess the portfolio. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

This is the first rating action since the Initial Rating Date.

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com

All else equal, a downgrade of the Issuer rating by one notch would lead to a downgrade of the covered bonds by an equal number of notches.

For further information on DBRS 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
Initial Rating Committee Chair: Erin Stafford

Last Rating Date: 10 December 2013
Lead Analyst: Covadonga Aybar
Rating Committee Chair: Quincy Tang

DBRS Ratings Limited
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The rating methodologies and criteria used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies

• 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 Structured Finance Surveillance Methodology
• Operational Risk Assessment for European Structured Finance Servicers
• Unified Interest Rate Model Methodology for European Securitisations