DBRS Upgrades and Confirms Ratings on Notes Issued by Empresas Banesto 6, FTA

DBRS Ratings Limited (DBRS) has today upgraded and confirmed its ratings on the notes issued by Empresas Banesto 6, FTA (the Issuer) as follows:

-- €106,114,817 Series B notes: upgraded to AA (sf) from A (high) (sf)
-- €264,000,000 Series C notes: confirmed at C (sf)

The transaction is a cash flow securitisation collateralised primarily by a portfolio of bank loans originated by Banco Español de Crédito, S.A. (Banesto), which no longer exists as an entity (fully integrated in Banco Santander, S.A. in May 2013), to large corporations and small and medium-sized enterprises (SMEs) based in Spain. The rating of the Series B notes addresses the timely payment of interest and the ultimate payment of principal on or before the Legal Final Maturity Date on 17 September 2033, as defined in the transaction documents. The Series C notes are in the first loss position and, as such, are highly likely to default. As of the last payment date in March 2015, the current balance of the reserve fund is €259,285,360, while the outstanding balance of the Series C notes is €264,000,000. Given the characteristics of the Series C notes as defined in the transaction documents, the default most likely would only be recognised at the maturity or early termination of the transaction.

The rating actions reflect an annual review of the transaction. The rating on the Series A notes was discontinued-repaid on 6 January 2015 following the payment in full. The Series B notes have been amortising since then and are now at 64.31% of their initial balance. Given this deleveraging, the current credit enhancement available has increased considerably, while the transaction performance is in line with DBRS’s expectations. As of the 17 March 2015 payment date, the cumulative outstanding balance of defaulted claims as per the transaction definition was 0.99% in terms of the initial outstanding balance of the portfolio.

The portfolio annualised probability of default (PD) used has not changed (1.92%).

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’s “The Effect of Sovereign Risk on Securitisations in the Euro Area” commentary at 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 with the parameters used to determine the ratings (the Base Case):
-- Probability of Default Rates Used: Base Case PD of 1.92%, 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, a 10% and 20% decrease in the Base Case Recovery Rates.

DBRS concludes that either a hypothetical increase of the base PD by 20%, ceteris paribus, or a hypothetical decrease of the Recovery Rate by 20% would produce model results suggesting a confirmation of the Series B Notes at AA (sf). 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 Series B Notes at AA (sf).

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.

The previous rating action on this transaction took place on 6 January 2015, when the rating of the Series A Notes was discontinued-repaid. Prior to that, on 17 April 2014, the ratings of the Notes were confirmed and removed from Under Review with Developing Implications.

Information regarding DBRS ratings, including definitions, policies and methodologies are available at 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.

Notes:
All figures are in euros unless otherwise noted.

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

Initial Lead Analyst: Carlos Silva
Initial Rating Date: 25 October 2011
Initial Rating Committee Chair: Jerry van Koolbergen
Last Rating Date: 6 January 2015

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 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