Press Release

DBRS Confirms Rating on Hipocat 17, FTA

RMBS
February 09, 2015

DBRS Ratings Limited (DBRS) has today confirmed its rating of the Series A Notes of Hipocat 17, Fondo de Titulización de Activos (the Issuer) at A (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 December 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 A (sf) rating level.

Hipocat 17, FTA is a securitisation of residential mortgage loans secured by first-lien mortgages on residential properties located in Spain. The underlying portfolio was originated and is serviced by Catalunya Banc S.A.

The mortgage pool is well-seasoned (over eight years), primarily concentrated in the regions of Catalonia (60.61%), the Valencian Community (15.09%) and Madrid (7.00%). Additionally, approximately 72% 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 December 2014 payment date, the 90+ delinquency ratio (excluding defaulted loans) as a percentage of the performing balance of the portfolio was 0.95% and has been decreasing from 4.64% in December 2013. The gross cumulative default ratio increased over the year but it has recently stabilised around 4.94% and it is still within DBRS’s initial expectations.

The Series A Notes are supported by the Series B Notes, Loan B, Series C Notes and an amortising Reserve Fund (currently equal to 6.28% of the outstanding principal balance of the Series A Notes). The credit enhancement for the Series A Notes increased to 30.59% in December 2014, up from 21.62% in December 2013. The Reserve Fund is currently at the target level of EUR 25.85 million.
Banco Santander S.A. is the Treasury Account Bank for the transaction. The DBRS public 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.

The transaction envisages an interest rate swap agreement. However, as the language of the hedging agreement is not in line with DBRS’s current Derivative Criteria for European Structured Finance Transactions, no benefit was given to such hedging in DBRS’s analysis.

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 10 February 2014, when DBRS confirmed the ratings of the 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 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 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 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 the 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 (high) (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 (high) (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 (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (high) (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

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

DBRS Ratings Limited
1 Minster Court, 10th Floor
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
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

Ratings

  • US = Lead Analyst based in USA
  • CA = Lead Analyst based in Canada
  • EU = Lead Analyst based in EU
  • UK = Lead Analyst based in UK
  • E = EU endorsed
  • U = UK endorsed
  • Unsolicited Participating With Access
  • Unsolicited Participating Without Access
  • Unsolicited Non-participating

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.