DBRS Confirms and Removes from UR-Pos. Ratings on Notes Issued by IM CAJAMAR EMPRESAS 5, FTA

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

-- €42,242,690 Series A1 Notes confirmed at A (low) (sf)
-- €224,431,164 Series A2 Notes confirmed at A (low) (sf)
-- €135,000,000 Series B Notes confirmed at CCC (sf), removed from Under Review with Positive Implications

The transaction is a cash flow securitisation collateralised primarily by a portfolio of bank loans to self-employed individuals and small-and medium-sized enterprises (SMEs) based in Spain. The ratings of the Series A1 and Series A2 Notes address the timely payment of interest, as defined in the transaction docs, and the ultimate payment of principal on or before the Legal Final Maturity Date in November 2055, as defined in the transaction documents. The final ratings of the Series A2 and Series B Notes address the ultimate payment of interest and the payment of principal on or before the Legal Final Maturity Date on 17 September 2033, as defined in the transaction documents.

The rating actions reflect an annual review of the transaction. Series A1 and Series A2 Notes are amortising pro rata and are at 24.14% and 61.49%, respectively, of their initial balances. Given this deleveraging, the current credit enhancement available has increased moderately, while the transaction performance is in line with DBRS’s expectations. As of the 23 March 2015 payment date, the cumulative outstanding balance of defaulted claims as per the transaction definition was 3.58% 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 (3.80%).

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 on: 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 (PD) rates used: base-case PD of 3.58%, a 10.00% and 20.00% increase on the base-case PD.
-- Recovery rates used: base-case recovery rates, corresponding to a recovery rate of 16.25% at the A (low) (sf) stress level and 21.50% at the CCC (sf) stress level, a 10.00% and 20.00% decrease in the base-case recovery rates.

DBRS concludes that either a hypothetical increase of the base PD by 20%, ceteris paribus, would produce model results, suggesting a confirmation of the Series A1 and A2 Notes at A (low) (sf) and a downgrade of the Series B Notes to CCC (low) (sf). A hypothetical decrease of the recovery rate by 20%, would produce model results, suggesting a confirmation of the Series A1 and A2 Notes at A (low) (sf) and the Series B Notes at CCC (sf). A scenario combining both a hypothetical increase in the PD by 10% and a hypothetical decrease in the recovery rate by 10% would lead to model results, suggesting a confirmation of the Series A1 and A2 Notes at A (low) (sf) and a downgrade of the Series B Notes to CCC (low) (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 the Series A1 and Series A2 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: 3 April 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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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