DBRS Upgrades, Removes from UR-Pos. and Confirms Ratings on Notes Issued by FTA PYMES SANTANDER 5

DBRS Ratings Limited (DBRS) has today upgraded, removed from Under Review with Positive Implications and confirmed its ratings on the notes issued by FTA PYMES SANTANDER 5 (the Issuer) as follows:

-- €314,252,993 Series A notes: upgraded to AA (sf) from A (high) (sf)
-- €342,000,000 Series B notes: upgraded to BBB (high) (sf) from BB (high) (sf) UR-Positive, removing UR-Positive
-- €342,000,000 Series C notes: confirmed at C (sf)

The transaction is a cash flow securitisation collateralised primarily by a portfolio of bank loans and credit lines (together, the Credit Rights) originated by Banco Santander, S.A. to self-employed individuals and small and medium-sized enterprises (SMEs) based in Spain. The rating of the Series A notes addresses the timely payments of interest as defined in the transaction documents, the timely payments of principal on each Payment Date during the transaction and, in any case, payment at their Legal Final Maturities on 18 November 2045. The rating of the Series B notes addresses the ultimate payment of interest as defined in the transaction documents, the ultimate payment of principal on each Payment Date during the transaction and, in any case, payment at their Legal Final Maturity on 18 November 2045. The Series C notes are in the first loss position and, as such, are highly likely to default. The balance of the reserve fund as of February 2015 payment date was €318,794,062, while the outstanding balance of the Series C notes is €342,000,000. 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. Since closing, the Series A notes have been amortising and are now at 22.97% of their initial balance. The Series B notes will start to amortise once the Series A notes have fully paid down. 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 15 January 2015 payment date, the cumulative outstanding balance of defaulted claims as per the transaction definition was 3.48% in terms of the initial outstanding balance of the portfolio.
The current rating actions concludes the review of the Series B notes, placed Under Review with Positive Implications on 7 April 2015 because of material updates to the methodology DBRS uses to rate and monitor CLOs and CDOs backed by debt of larger corporations (see Rating CLOs and CDOs of Large Corporate Credit published 7 April 2015).

The portfolio annualised probability of default (PD) used has not changed (6.48%).

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 6.48%, a 10% and 20% increase on the Base Case PD.
-- Recovery Rates Used: Base Case Recovery Rates, corresponding to a recovery rate of 17.24% at the AA (sf) stress level and 18.77% at the BBB (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 at BBB (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.

The previous rating action on the Series A and Series C notes took place on 17 April 2014, when the ratings of the notes were confirmed and removed from Under Review with Developing Implications. The previous rating action on the Series B notes took place on 7 April 2015, when the rating of the notes was placed Under Review with Positive Implications. Prior to that, the rating of the Series B notes was also confirmed and removed from Under Review with Developing Implications on 17 April 2014.

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: Carlos Silva
Initial Rating Date: 14 November 2013
Initial Rating Committee Chair: Jerry van Koolbergen
Last Rating Date: 7 April 2015

Lead Surveillance Analyst: Alfonso Candelas
Rating Committee Chair: Jerry van Koolbergen

DBRS Ratings Limited
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London, EC3R 7AA
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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