DBRS Confirms and Upgrades Ratings on Notes Issued by Empresas Banesto 5, FTA

DBRS Ratings Limited (DBRS) has today confirmed and upgraded its ratings on the notes issued by Empresas Banesto 5, FTA (the Issuer) as follows:

-- €69,894,720 Class A notes: confirmed at AAA (sf)
-- €96,000,000 Class B notes: confirmed at AAA (sf)
-- €160,000,000 Class C notes: upgraded to A (sf) from A (low) (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 Spanish enterprises, small and medium-sized enterprises (SMEs) and self-employed individuals. The ratings on the Class A and B notes address the timely payment of interest and ultimate payment of principal on or before the Final Date on 14 December 2052.

The rating on the Class C notes addresses the ultimate payment of interest and ultimate payment of principal on or before the Final Date on 14 December 2052.

The rating actions reflect an annual review of the transaction. Since closing, the Class A notes have been amortising and are now at 5.20% 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 14 March 2015 payment date, the cumulative outstanding balance of defaulted claims as per the transaction definition was 3.51% in terms of the initial outstanding balance of the portfolio.

The portfolio annualised probability of default (PD) used has not changed (1.80%).

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 31.05% at the AAA (sf) stress level and 35.83% at the A (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%, ceteris paribus, or a hypothetical decrease of the Recovery Rate by 20% would produce model results suggesting a confirmation of the Class A and B notes at AAA (sf) and of the Class C notes at A (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 Class A and Class B notes at AAA (sf) and of the Class B notes at A (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 17 April 2014, when 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 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.

Notes:
All figures are in euros unless otherwise noted.

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

Initial Lead Analyst: Simon Ross
Initial Rating Date: 13 September 2010
Initial Rating Committee Chair: Glen Leppert
Last Rating Date: 17 April 2014

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.

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