DBRS Upgrades and Confirms Ratings on the Notes Issued by FTA PYMES SANTANDER 7

DBRS Ratings Limited (DBRS) has today upgraded and confirmed the ratings on the Notes issued by FTA PYMES SANTANDER 7 (the Issuer), as follows:

EUR 321.4 million Series A Notes: Upgraded from A (high) (sf) to AA (sf)
EUR 340.0 million Series B Notes: Upgraded from BB (high) (sf) to A (high) (sf)
EUR 340.0 million Series C Notes: Confirmed at C (sf)

The transaction is a cash flow securitisation collateralised by a portfolio of bank loans and credit lines (together, the Credit Rights) originated by Banco Santander S.A. (Santander) to self-employed individuals and small and medium-sized enterprises (SMEs) based in Spain.

The rating on the Series A Notes addresses the timely payment of interest and the ultimate payment of principal payable on or before the Legal Maturity Date in January 2036. The ratings on the Series B and Series C Notes address the ultimate payment of interest and the ultimate payment of principal payable on or before the Legal Maturity Date in January 2036.

The rating action reflects an annual review of the transaction. As of the last payment date (15 October 2014), most of the credit lines have fully amortised (91% of the initial number). This reduces the amount of potential future additional drawings: credit lines could increase by an additional EUR 58 million compared to EUR 430 million at closing if the clients use the credit lines to their maximum limits. Any future drawing on the credit lines would be funded firstly through the Principal Proceeds available on the Reserve Fund’s accounts. If the Principal Proceeds are insufficient, the Reserve Fund can draw on a liquidity line provided by Santander. The repayment of the liquidity line is senior to the payment of the Series A and Series B Notes’ principal in the Priority of Payments. This lower exposure to credit lines has led to a fast decrease of the portfolio balance, speeding up the amortisation of the Series A Notes (current factor 0.24) and massively increasing the credit enhancement available.

The percentage of loans in arrears for more than 90 days over the original balance at the closing date is at 0.51%, while cumulative failed loans are at 0.27% as per the default definition in the transactions documents.

The portfolio annualized probability of default (PD) used has not changed (5.12%).

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is “Rating CLOs Backed by Loans to European Small and Medium Sized Enterprises (SMEs)”, which can be found on the DBRS website under Methodologies 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 these ratings include the parties involved in the ratings, including but not limited to the Originator, the Issuer and their agents.

DBRS considers the information made available to it for the purposes of providing these ratings to have been 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.

To assess the impact of changing the transaction parameters on the ratings, DBRS considered the following stress scenarios, as compared to the parameters used to determine the ratings (the Base Case):
• Probability of Default Rates Used: Base Case PD of 5.12%, a 10% and 20% increase on the Base Case PD.
• Recovery Rates Used: Base Case Recovery Rates, corresponding to a recovery rate of 15.75% at the AA (sf) stress level (and for the Series B Notes a Base Case Recovery Rate of 16.25% at the A (high) (sf) stress level), a 10% and 20% decrease in the Base Case Recovery Rates.

DBRS concludes that either a hypothetical increase of the base PD by 20% or a hypothetical decrease of the Recovery Rate by 20%, ceteris paribus, would produce model results suggesting a confirmation of the Series A and Series B Notes at AA (sf) and A (high) (sf) respectively. A scenario combining both a hypothetical increase in the PD by 10% and a hypothetical decrease in the Recovery Rate by 10% would also lead to model results suggesting a confirmation of the current ratings.

It should be noted that the interest rates and other parameters that would normally vary with the rating level, including the recovery rates, were allowed to change as per the DBRS methodologies and criteria.

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

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

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Initial Lead Analyst: Carlos Silva
Initial Rating Date: 14 November 2013
Initial Rating Committee Chair: Jerry van Koolbergen

Last Rating Date: Not applicable as no last rating date
Lead Surveillance Analyst: Alfonso Candelas
Rating Committee Chair: Jerry van Koolbergen

DBRS Ratings Limited
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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
Master European Structured Finance Surveillance Methodology
Rating CLOs Backed by Loans to European Small and Medium-Sized Enterprises (SMEs)
Rating Methodology for CLOs and CDOs of Large Corporate Credit
Cash Flow Assumptions for Corporate Credit Securitizations
Operational Risk Assessment for European Structured Finance Servicers
Unified Interest Rate Model for U.S. and European Structured Credit
Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda