DBRS Confirms Ratings to Hipocat 17, FTA

DBRS Ratings Limited (“DBRS”) has reviewed Hipocat 17, FTA (the “Issuer”) and confirmed the ratings of the Series A Notes to ‘A’ (sf). Hipocat 17, FTA is a securitisation of residential mortgage loans secured by a first-lien mortgage on residential properties in Spain. The underlying portfolio was originated and is serviced by Catalunya Banc S.A. The transaction follows the standard structure under Spanish Securitisation Law and closed in December 2008.

Confirmation of the ratings for the Series A Notes is based upon the following analytical considerations, as described more fully below:

• Portfolio performance, in terms of defaults and level of delinquencies, as of the December 2013 payment date.
• Updated Portfolio Default Rate, Loss Given Default and Expected Loss for the remaining collateral pool.
• Current Available Credit Enhancement to the rated notes to cover the expected losses at the ‘A’ (sf) rating level.

As of the December 2013 payment date, the current 90+ delinquency ratio (excluding defaulted loans) as a percentage of the performing balance of the portfolio was 4.63%, and has increased from 0.47% since the initial DBRS rating on 9 February 2011. Similarly, the cumulative default ratio has been increasing since the initial rating, the most recent ratio was 3.69%.

Credit enhancement for the Series A Notes is provided by the subordination of the Series B Notes, Loan B, the Series C Notes and an amortising Reserve Fund (currently equal to 2.48% of the aggregate outstanding balance of the issued notes plus Loan B) funded at transaction close. The current Credit Enhancement for the Series A Notes is 21.62%. The balance of the Reserve Fund is EUR 17.99 million and it currently below the target level of EUR 25.85 million.

Banco Santander S.A. is the Treasury Account Bank and Paying Agent for this transaction. The DBRS public rating of Banco Santander S.A. is above the Minimum Institution Rating given the rating assigned to the Series A Notes, as described in the DBRS Legal Criteria for European Structured Finance Transactions. Additionally, JPMorgan Chase Bank N.A. (London Branch) is the Swap Counterparty for the transaction. The DBRS public rating of JPMorgan Chase Bank N.A. (London Branch) complies with the DBRS Derivative Criteria for European Structured Finance Transactions.

Notes:
All figures are in euro unless otherwise noted.

The principal methodology applicable is the Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda. Other methodologies and criteria referenced in this transaction are listed at the end of this press release.

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

The sources of information used for this rating include investor reports provided by Gestión de Activos Titulizados S.G.F.T., S.A. and data from the European DataWarehouse. 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.

The last rating action on this transaction took place on 25 February 2013, when DBRS confirmed the rating of Series A Notes at ‘A’ (sf).

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

To assess the impact of the changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the “Base Case”):
• DBRS expected a lifetime base case Probability of Default (PD) and Loss Given Default (LGD) for the pool based on a review of the current assets. Adverse changes to asset performance may cause stresses to base case assumptions and therefore have a negative effect on credit ratings.
• The base case PD and LGD of the current pool of mortgages for the Issuer are 13.29% and 25.50%, respectively. At the ‘A’ (sf) rating level, the corresponding PD is 31.87% and the LGD is 39.64%.
• The Risk Sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base case assumption. For example, if the LGD increases by 50%, the rating of Series A Notes would be expected to remain at ‘A’ (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Series A Notes would be expected to remain at ‘A’ (sf), assuming no change in the LGD. Furthermore, if both PD and LGD increase by 50%, the rating would be expected to decrease to BBB (sf).

Series A Notes Risk Sensitivity:
• 25% increase in LGD, expected rating of ‘A’ (sf)
• 50% increase in LGD, expected rating of ‘A’ (sf)
• 25% increase in PD, expected rating of ‘A’ (sf)
• 50% increase in PD, expected rating of ‘A’ (sf)
• 25% increase in PD and 25% increase in LGD, expected rating of ‘A’ (sf)
• 25% increase in PD and 50% increase in LGD, expected rating of ‘A’ (low) (sf)
• 50% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf)
• 50% increase in PD and 50% increase in LGD, expected rating of BBB (sf)

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: 9 February 2011
Initial Rating Committee Chair: Claire Mezzanotte

Last Rating Date: 25 February 2013

Lead Surveillance Analyst: Elisa Scalco
Rating Committee Chair: Claire Mezzanotte

DBRS Ratings Limited
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London
EC3R 7AA
United Kingdom

Registered in England and Wales: No. 7139960

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

Legal Criteria for European Structured Finance Transactions
Derivative Criteria for European Structured Finance Transactions
Master European Structured Finance Surveillance Methodology
Operational Risk Assessment for European Structured Finance Servicers
Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
Unified Interest Rate Model for European Securitisations