DBRS Assigns ‘A’ (low) Rating to Santander Totta Covered Bonds Programme Series 11

DBRS Ratings Limited (DBRS) has today assigned a rating of ‘A’ (low) to the Series 11 (Tranche 1 and 2) Covered Bonds issued under the Santander Totta S.A. (Totta, or the Issuer) €12,500,000,000 Covered Bonds Programme. Each of the tranches is a €500 million floating rate security maturing in December 2016 for a total of EUR1bn. DBRS confirms the ‘A’ (low) rating on all other outstanding series.

The rating action reflects the following analytical considerations:
• The senior unsecured debt rating of Totta of BBB (high) with Negative Trend confirmed on 29 August 2013.
• DBRS Legal and Structuring Framework (LSF) assessment of “Adequate”.
• The credit quality of the cover pool and the substantial support of the cover pool in case of the default of Totta, along with an Issuer commitment Over-Collateralization (OC) level of 15%.
• The issuer’s capabilities with respect to origination of the cover pool assets and servicing of the cover pool.

At the same time the issuer has early amortised EUR997.7mln outstanding under Series 4. Following issuance of Series 11 and partial early redemption of Series 4 covered bonds, there are EUR7.132bn covered bonds outstanding under the programme.

The cover assets as of September 2013 amount to EUR8.7bn, resulting in a nominal OC of 18%. This is above the current Issuer commitment OC of 15%.

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 LSF matrices are not applicable or their application would result in the covered bonds being rated at the same level as the Issuer. Currently, the application of the “Adequate” LSF matrix would result in a covered bond rating at the same rating level as the Issuer.

The back-up analyst responsibilities for this transaction have been transferred to Valentina Cicerone.

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 loan by loan level information on the cover pool 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 assignment of the ratings on the Series 15 on 18 January 2013.

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

A downgrade of the Issuer 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: Keith Gorman
Initial Rating Date: 24 February 2012
Initial Rating Committee Chair: Claire Mezzanotte

Last Rating Date: 29 July 2013

Lead Analyst: Vito Natale
Rating Committee Chair: Claire Mezzanotte

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