DBRS Confirms Rating on Hipocat 19, FTA

DBRS Ratings Limited (DBRS) has today confirmed its rating of the Mortgage-Backed Floating Rate Securitisation Notes (the Series A Notes) of Hipocat 19, Fondo de Titulización de Activos (the Issuer) at AAA (sf).

The confirmation of the rating of the Series A Notes is based upon the following analytical considerations:
-- Portfolio performance, in terms of delinquencies and defaults, as of the November 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 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 for the Series A Notes to cover the expected losses at the AAA (sf) rating level.

Hipocat 19, FTA is a securitisation of first-lien flexible mortgage loans granted to purchase residential properties in Spain. The underlying portfolio was originated and is serviced by Catalunya Banc S.A.

The mortgage pool is well-seasoned (over seven years), primarily concentrated in the regions of Catalonia (68.60%), Madrid (9.44%) and the Valencian Community (6.99%). Additionally, approximately 40% of the mortgage portfolio is exposed to loans originated in the 2006 and 2007 vintages.

The portfolio is performing in line with DBRS’s initial expectations. As of the November 2014 payment date, the 90+ delinquency ratio (excluding defaulted loans) as a percentage of the performing balance of the portfolio was 1.65% and has been decreasing from 7.43% in December 2013. The gross cumulative default ratio increased over the year reaching 5.97% in November 2014 but it is still within DBRS’s initial expectations.

The Series A Notes are supported by subordination of Loan B. The credit enhancement for the Series A Notes increased to 60.92% in November 2014, up from 39.22% in December 2013.

The transaction benefits from a non-amortising Reserve Fund of EUR 21.00 million set up on day one. The reserve fund is used to pay senior expenses and interest shortfalls on the Series A Notes during the life of the deal, principal and interest at legal final maturity. The reserve fund is currently at the target level of EUR 21.00 million (i.e. 14.56% of the outstanding balance of the Series A Notes).

Additionally, a liquidity facility is available to cover any possible shortfall in interest due to the loans experiencing a holiday payment. The liquidity facility amortises as the Series A Notes amortise and it currently amounts to EUR 8.90 million.

Banco Santander S.A. is the Treasury Account Bank for the transaction. The DBRS private rating of Banco Santander S.A. is at least equal to 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.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is the Master European Structured Finance Surveillance Methodology. 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 6 February 2014, when DBRS confirmed the ratings of the Series A Notes at AAA (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):

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 receivables. 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 14.30% and 34.31%, respectively. At the AAA (sf) rating level, the corresponding PD is 44.64% and the LGD is 67.15%.
-- 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 Series A Notes would be expected to remain at AAA (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 AAA (sf), assuming no change in the LGD. Furthermore, if both PD and LGD increase by 50%, the rating would be expected to remain at AAA (sf).

Series A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AAA (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: Alessio Pignataro
Initial Rating Date: 21 September 2010
Initial Rating Committee Chair: Claire Mezzanotte

Lead Surveillance Analyst: Elisa Scalco
Rating Committee Chair: Quincy Tang

DBRS Ratings Limited
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Mincing Lane
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
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