DBRS Upgrades, Removes from UR-Pos. and Confirms Ratings on Notes Issued by FTA PYMES SANTANDER 8

DBRS Ratings Limited (DBRS) has today upgraded, confirmed and removed from Under Review with Positive Implications the ratings on the following notes issued by FTA PYMES SANTANDER 8 (the Issuer):

-- €412,732,039.25 Series A Notes: Upgraded to A (high) (sf) from A (low) (sf)
-- €232,500,000.00 Series B Notes: Upgraded to BBB (high) (sf) from BB (high) (sf), removing UR-Positive
-- €310,000,000.00 Series C Notes: Confirmed at C (sf)

The transaction is a cash flow securitisation collateralised by a portfolio of bank loans and credit lines originated by Banco Santander S.A. (Santander or the Originator) to small and medium-sized enterprises (SMEs) and self-employed individuals based in Spain. The rating on the Series A Notes addresses the timely payment of interest and the ultimate payment of principal payable on or before the Legal Maturity Date in April 2050. The ratings on the Series B and Series C Notes address the ultimate payment of interest and the ultimate payment of principal payable on or before the Legal Maturity Date in April 2050.

The rating action reflects an annual review of the transaction. The Series A Notes are amortising and are at 31.3% 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. The rating actions also take into account the counterparty risk of the transaction due to the fact that Santander acts as servicer, account bank provider –also holding the reserve fund–, and paying agent. As of the 16 April 2015 payment date, the amount of the reserve fund was €310,000,000, funded at closing through the issuance of the Series C Notes.

The current rating actions conclude 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).

Notes:
All figures are in euros unless otherwise noted.

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.

DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

A review of the transaction legal documents was not conducted as the documents have remained unchanged since the most recent rating action.

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 this rating include FTA PYMES SANTANDER 8, Santander, Santander de Titulización S.G.F.T., S.A. and other public sources.

DBRS does not rely upon third-party due diligence in order to conduct its analysis; however, Agreed upon Procedures (AUP) are included in the requested documentation.
DBRS was not supplied with AUP documents/audit documents. Data checks were performed and DBRS did not apply additional cash flow stresses in its scenarios.

DBRS considers the information made available to it for the purposes of providing this rating 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.

The previous rating action on this transaction took place on 7 April 2015, when the rating of the Series B Notes was placed Under Review with Positive Implications. Prior to that, on 20 May 2014, DBRS assigned a rating of A (low) (sf) to the Series A Notes, a rating of BB (high) (sf) to the Series B Notes and a rating of C (sf) to the Series C Notes.

To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios as compared with the parameters used to determine the rating (the base case):
-- Probability of default (PD) rates used: base case PD of 5.70%, and a 10% and 20% increase in the base case PD.
-- Recovery rates used: base case recovery rates, corresponding to a recovery rate of 16.91% at the A (high) (sf) stress level and 17.59% at the BBB (high) (sf) stress level for the Series A Notes and Series B Notes respectively, 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 A (high) (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.

Regarding the Series C Notes, the stress analysis is not appropriate.

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.

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.

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

Initial Lead Analyst: Carlos Silva
Initial Rating Date: 20 May 2014
Initial Rating Committee Chair: Simon Ross

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

A description of how DBRS analyses structured finance transactions and how its methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375.