DBRS Assigns Provisional Ratings to BBVA Consumo 7, FT

DBRS Ratings Limited (DBRS) has today assigned provisional ratings to the following bonds issued by BBVA Consumo 7, FT:

-- EUR 1,239.7 million Series A Notes: A (sf) (the Series A Notes)
-- EUR 210.3 million Series B Notes: BB (high) (sf) (the Series B Notes, together, The Notes)

BBVA Consumo 7, FT (the Issuer) is a securitisation of a portfolio of consumer loan receivables issued in Spain and originated by Banco Bilbao Vizcaya Argentaria, S.A. (BBVA, also the Seller or the Originator). At closing, the transaction will use the proceeds of Series A and Series B to purchase the €1,450 million portfolio of consumer loan receivables. The Portfolio will be serviced by BBVA (also the Servicer).

The ratings are based upon review by DBRS of the following analytical considerations:

-- Transaction capital structure and form and sufficiency of available credit enhancement. The Series A Notes benefit from 19% credit enhancement in the form of €210.3 million (14.5%) Series B and €65.25 million reserve fund (4.5%) which will be funded through a subordinated loan granted by the Seller to the Issuer. The reserve fund is available to meet payments on the senior fees and interest and principal on the Series A and Series B. The transaction is revolving for a period of one year starting on the first interest payment date until the payment date as of 19 December 2016 (including). Through the revolving period the Seller may sell new receivables to the Issuer according to specific purchase criteria detailed within the transaction documents. Following the end of the revolving period (or upon an early amortisation event), principal will be paid to the series of bonds. Principal will be used to amortise Series A first and after payment in full of Series A, Series B will start to amortise.
-- The preliminary portfolio as of 24 June 2015 consists of 93.0% fixed loan receivables and 7.0% floating loans, the floating loans could rise up to 10.0% of the portfolio balance. The fixed payment on the series of bonds and the most fixed payment of the loan receivables is unhedged. DBRS deems basis risk in this transaction to be limited.
-- The preliminary portfolio main characteristics include: (1) 213,974 loan receivables, (2) €7,270 average loan amount, (3) 3.86 years weighted-average remaining term, (4) 2.63 years seasoning, (5) 9.43% weighted-average fixed interest rate, (6) 4.51% weighted-average floating coupon, (7) top geographical concentrations are Andalusia (19.05%), Catalonia (14.54%) and Madrid (11.96%).
-- Relevant credit enhancement in the form of a cash reserve and subordination. Credit enhancement levels are sufficient to support DBRS projected expected cumulative net loss (CNL) assumption under various stress scenarios at A (sf) and BB (high) (sf) standard respectively for the Series A Notes and the Series B Notes.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms in which they have invested.
-- The transaction parties’ capabilities with respect to originations, underwriting, servicing and financial strength.
-- The credit quality of the collateral and ability of BBVA to manage collections activities on the collateral.
-- The legal structure and presence of legal opinions addressing the assignment of the assets to the issuer and the consistency with DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is “Rating European Consumer and Commercial Asset-Backed Securitisations”.

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

Other methodologies and criteria referenced in this transaction are listed at the end of this press release.

This can be found on www.dbrs.com at:
http://www.dbrs.com/about/methodologies

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 Europea de Titulización S.G.F.T. and BBVA. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

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 supplied with an AUP report. Data checks were performed and DBRS did not apply additional analysis stresses in its scenarios.

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.

This rating concerns a newly issued financial instrument. This is the first DBRS rating on this financial instrument.

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

To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the Base Case):

-- Base Case Probability of Default (PD) of 13.21%, a 25% and 50% increase on the base case PD.
-- Base case Recovery Rate of 43.17% (or a Loss Given Default (LGD) of 56.83%), a 25% and 50% increase on the base case LGD.

DBRS concludes that for the Series A bonds:

-- A hypothetical increase of the base case PD by 25% or a hypothetical increase of the LGD by 25%, ceteris paribus, would not have an impact on the rating of the Notes.
-- A hypothetical increase of the base case PD by 50% or a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to downgrade the rating of the Series A bonds to BBB (high) (sf).
-- A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to downgrade the rating of the Series A bonds to BBB (high) (sf).
-- A hypothetical increase of the base case PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to downgrade the rating of the Series A bonds to BBB (low) (sf).
-- A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 50%, ceteris paribus, would to downgrade the rating of the Series A bonds to BBB (low) (sf).
-- A hypothetical increase of the base case PD by 50% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to downgrade the rating the Series A bonds to BB (sf).

DBRS concludes that for the Series B bonds:

-- A hypothetical increase of the base case PD by 25% or a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to maintain the rating of the Series B bonds to B (high) (sf).
-- A hypothetical increase of the base case PD by 50% or a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to downgrade the rating of the Series B bonds to C (sf).
-- A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to downgrade the rating of the Series B bonds to C (sf).
-- A hypothetical increase of the base case PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to downgrade the rating of the Series B bonds to C (sf).
-- A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 50%, ceteris paribus, would to downgrade the rating of the Series B bonds to C (sf).
-- A hypothetical increase of the base case PD by 50% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to downgrade the rating the Series B bonds to C (sf).

For further information on DBRS 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.

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

Initial Lead Analyst: María López
Initial Final Rating Date: 23 July 2015
Initial Final Rating Committee Chair: Chuck Weilamann
Last Rating Date: Not applicable; no last rating date.

Lead Surveillance Analyst: Vito Natale
Rating Committee Chair: Chuck Weilamann

DBRS Ratings Limited
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The rating methodologies and criteria used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies

--“Rating European Consumer and Commercial Asset-Backed Securitisations.”
-- “Legal Criteria for European Structured Finance Transactions.”
-- “Operational Risk Assessment for European Structured Finance Servicers.”
-- “Unified Interest Rate Model Methodology for European Securitisations.”

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