DBRS Upgrades Rating on Series B Notes Issued by IM GRUPO BANCO POPULAR EMPRESAS V

DBRS Ratings Limited (DBRS) has today upgraded the rating on the EUR 444,024,725.00 Series B notes issued by IM GRUPO BANCO POPULAR EMPRESAS V, FTA (the Issuer) to A (high) (sf) from BB (high) (sf).

The transaction is a cash flow securitisation collateralised primarily by a portfolio of bank loans originated by Banco Popular Español, S.A. (Banco Popular) to self-employed individuals and small and medium-sized enterprises based in Spain.

The rating on the Series B notes addresses the ultimate payment of interest as defined in the transaction documents and the ultimate payment of principal on each Payment Date during the transaction and, in any case, at their Legal Final Maturity on 22 October 2043.

The rating action reflects an annual review of the transaction. The Series B notes started to amortise following the repayment in full of the Series A notes on 7 August 2015. The Series B notes are at 67.02% of their initial balance as of the January 2016 payment date. Given this deleveraging, the current credit enhancement available, which is provided solely by a non-amortising Reserve Fund held by Banco Santander, S.A. (Banco Santander) that is currently at its initial and target level of EUR 265 million, has increased considerably while the transaction’s performance is in line with DBRS’s expectations.

As of the January 2016 payment date, the cumulative gross default ratio was 2.79% of the original collateral balance as per the transaction definition and delinquencies greater than 90 days were 1.70% of the outstanding collateral balance. The portfolio’s annualised probability of default of 3.27% has not changed.

Banco Santander is the Account Bank provider and Banco Popular is the Paying Agent for the transaction. The DBRS Long-Term Critical Obligation Rating of Banco Santander at A (high) and the DBRS Long-Term Critical Obligation Rating of Banco Popular at “A” comply with the Minimum Institution Rating, given the rating assigned to the Series B 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 7 August 2015, when DBRS discontinued the rating of the Series A notes, following its payment in full. Prior to that, on 23 April 2015, DBRS upgraded the rating of the Series B notes to BB (high) (sf) from B (high) (sf) and removed the Under Review with Positive Implications designation.

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 3.27%, 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 B notes, 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 B notes at their current rating. 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 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: 26 February 2013
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.