DBRS Upgrades IM GBP Empresas VI, FTA’s Series A and B Note Ratings and Removes UR-Positive

DBRS Ratings Limited (DBRS) has today upgraded the ratings on the following Notes issued by IM Grupo Banco Popular Empresas VI, FTA (the Issuer) as follows:

-- €1,283,069,970.00 Series A Notes: Upgraded to A (high) (sf) from A (sf)
-- €660,000,000.00 Series B Notes: Upgraded to CCC (high) (sf) from CCC (low) (sf)

DBRS has also removed the Under Review with Positive Implications (UR-Pos.) designation.

The transaction is a cash flow securitisation collateralised by a portfolio of bank term loans originated by Banco Popular Español, S.A. (Banco Popular) and Banco Pastor, S.A.U. (Banco Pastor; together, the Originators) 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 January 2046. The rating on the Series B Notes addresses the ultimate payment of interest and principal payable on or before the Legal Maturity Date in 2046.

The rating action reflects an annual review of the transaction and concludes the UR-Pos. status of the ratings. The Series A and Series B Notes were placed UR-Pos. following a material update to the methodology DBRS applies to monitor the counterparty risks of the transaction (see “Legal Criteria for European Structured Finance Transactions,” published on 19 February 2016).

This methodology incorporates DBRS’s new Critical Obligations Ratings (CORs), which were introduced in the “Critical Obligations Rating Criteria” methodology published on 2 February 2016, and also provides more granular rating levels for account bank institution replacements and eligible investments.

The ratings of the Series A and Series B Notes have been upgraded based upon the following analytical considerations:
-- Portfolio performance, in terms of delinquencies and defaults, as of the January 2016 payment date.
-- Updated and more granular rating levels introduced by the “Legal Criteria for European Structured Finance Transactions” for account bank institution replacement triggers.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms in which they have invested.
-- The current available credit enhancement to the notes to cover expected losses assumed in line with the A (high) (sf) rating level for Series A Notes and the CCC (high) (sf) rating level for Series B Notes.

The transaction is performing in line with DBRS’s expectations. As of the January 2016 payment date, there were no cumulative defaults, and delinquencies greater than 90 days were 0.80% of the original collateral balance.

Credit enhancement has increased considerably as a result of the deleveraging of the Series A Notes, currently at 54.83% of their initial balance. The Series B Notes will start to amortise once the Series A Notes are fully amortised. Credit enhancement for the Series A Notes (38.60%) is provided by the subordination of the Series B Notes and the Cash Reserve.

The portfolio annualised probability of default (PD) used has not changed (2.56%).

Banco Santander SA is the Account Bank of the transaction. The DBRS Long Term Critical Obligations Rating of Banco Santander SA of A (high) complies with the Minimum Institution Rating given the ratings assigned to the Series A Notes as described in 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 CLOs Backed by Loans to European Small and Medium-Sized Enterprises (SMEs). 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.

This may 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 action include information provided by InterMoney Titulización S.G.F.T., S.A and loan-level data from the European DataWarehouse GmbH.

DBRS does not rely upon third-party due diligence in order to conduct its analysis. DBRS was not supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS considers the information available to it for the purposes of providing this rating was 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 last rating action on this transaction took place on 19 February 2016, when the ratings of the Series A and Series B Notes were placed UR-Pos. Prior to that, the ratings of the Series A and B Notes were confirmed at A (sf) and CCC (low) (sf), respectively, on 7 April 2015.

Information regarding DBRS ratings, including definitions, policies and methodologies is available at www.dbrs.com.

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 2.56%, and a 10% and 20% increase in the base case PD.
-- Recovery rates used: base case recovery rates, corresponding to a recovery rate of 16.25% at the A (high) (sf) stress level for the Series A and a recovery rate of 20.75% at the CCC (high) (sf) stress level for the Series B, 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 Notes at their current rating and a downgrade of the Series B Notes to CCC (sf). A scenario combining both a hypothetical increase in the PD by 20% and a hypothetical decrease in the recovery rate by 20% would also lead to model results suggesting a confirmation of the current rating of the Series A Notes and a downgrade to CCC (low) (sf) of the Series B Notes.

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: Maria Lopez
Initial Rating Date: 24 March 2015
Initial Rating Committee Chair: Jerry van Koolbergen

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

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The rating methodologies 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)
-- Operational Risk Assessment for European Structured Finance Servicers
-- Unified Interest Rate Model for European Securitisations
-- Cash Flow Assumptions for Corporate Credit Securitizations
-- Rating CLOs and CDOs of Large Corporate Credit
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda

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.