DBRS Upgrades the Ratings on IM Cajamar 6, FTA

DBRS Ratings Limited (“DBRS”) has reviewed IM Cajamar 6, FTA (the “Issuer”) and upgraded the ratings on the Class A Notes to A (low) (sf) from BBB (sf).

The upgrade of the ratings for the Class A Notes is based upon the following analytical considerations, as described more fully below:

• Portfolio performance, in terms of delinquencies and defaults, as of the March 2014 payment date.
• Updated portfolio default rate, loss given default and expected loss assumptions for the remaining collateral pool.
• Incorporation of a sovereign related stress component in the rating analysis to address the impact of macroeconomic variables on collateral performance given the long-term foreign and local currency rating of ‘A’ (low) for the Kingdom of Spain.
• Current available credit enhancement to the Class A Notes to cover the expected losses at the A (low) (sf) rating level.

Additionally, in November 2013 the Issuer terminated the swap agreement entered into with Cajas Rurales Unidas (“Cajamar”) as the swap provider. At the initial rating of the Class A Notes, DBRS assigned a private rating to Cajamar which was below the threshold for an eligible counterparty posting collateral based on the DBRS rating criteria. The termination of the swap consequently eliminates the heightened jump to default risk of the swap counterparty and the potential need to replace a defaulted swap counterparty on similar terms.

IM Cajamar 6, FTA is a securitisation of a portfolio of first lien mortgage loans originated and serviced by Cajamar.

The portfolio is well-seasoned (7.25 years), approximately 93.57% of the current pool pays monthly and 93.57% of the loans have been originated in 2006 and 2007. The portfolio is geographically concentrated in the regions of Andalusia (40.27%) and Murcia (30.66%), mitigated in part by the fact that these are Cajamars’ traditional markets where it has a great expertise.
The 90+ delinquency ratio began to decrease in March 2013 and it is currently at 1.13%. The current cumulative default ratio (as a percentage of the original balance) has been increasing since transaction close in February 2008, but has started to level off on the last payment dates. As of March 2014, the cumulative default ratio was 3.12%.

The Class A Notes are supported by subordination of the Class B, C and D Notes and an amortising reserve fund set up at transaction close with the proceeds of the Class E Notes. Credit enhancement for the Class A Notes (as a percentage of the performing portfolio) increased steadily to 12.04% from 8.40% at closing in February 2008. The reserve fund is available to protect the Class A, B, C and D Notes against both interest and principal shortfall on an on-going basis. Additionally, it is allowed to amortise over the life of the transaction, but subject to the absolute floor of EUR 23.35 million. The current balance of the reserve fund is EUR 26.52 million (equal to 2.27% of the aggregate balance of the Class A, B, C and D Notes) and it is below the current target level of EUR 50.70 million.

Banco Santander S.A. and Bank of Spain are the treasury and reinvestment account bank for this transaction, respectively. The DBRS private ratings of Banco Santander S.A. is at least equal to the Minimum Institution Rating given the rating assigned to the Class A Notes, as described in the DBRS Legal Criteria for European Structured Finance. DBRS does not currently maintain a rating on the Bank of Spain; however, DBRS has determined that its financial strength is commensurate with its role as reinvestment account bank provider for this transaction.

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 payment reports provided by InterMoney Titulización, 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 6 September 2013, when DBRS assigned a rating of BBB (sf) to the Class A Notes.

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 11.94% and 25.76%, respectively. At the A (low) (sf) rating level, the corresponding PD is 27.99% and the LGD is 37.74%.
• 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 the Class A Notes would be expected to fall to BBB (low) (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A Notes would be expected to fall to BB (high) (sf), assuming no change in the LGD. Furthermore, if both PD and LGD increase by 50%, the rating of the Class A Notes would be expected to fall to BB (sf).

Class A Notes Risk Sensitivity:
• 25% increase in LGD, expected rating of BBB (sf)
• 50% increase in LGD, expected rating of BBB (low) (sf)
• 25% increase in PD, expected rating of BBB (sf)
• 50% increase in PD, expected rating of BB (high) (sf)
• 25% increase in PD and 25% increase in LGD, expected rating of BBB (low) (sf)
• 25% increase in PD and 50% increase in LGD, expected rating of BB (high) (sf)
• 50% increase in PD and 25% increase in LGD, expected rating of BB (sf)
• 50% increase in PD and 50% increase in LGD, expected rating of BB (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: Alastair Bigley
Initial Rating Date: 6 September 2013
Initial Rating Committee Chair: Claire Mezzanotte

Lead Surveillance Analyst: Elisa Scalco
Rating Committee Chair: Diana Turner

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

Legal 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