DBRS Confirms Ratings on the Notes Issued by FTA PYMES SANTANDER 9

DBRS Ratings Limited (DBRS) has today confirmed its ratings on the following notes issued by FTA PYMES SANTANDER 9 (the Issuer):

-- EUR 155,188,664.45 Series A Notes: Confirmed at AA (sf).
-- EUR 168,300,000.00 Series B Notes: Confirmed at CCC (high) (sf).

The transaction is a cash flow securitisation collateralised by a portfolio of bank loans 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 January 2041. The rating on the Series B Notes addresses the ultimate payment of interest and the ultimate payment of principal payable on or before the Legal Maturity Date in January 2041.

The rating action reflects an annual review of the transaction and is based on the following analytical considerations as described more fully below:
-- Portfolio performance, in terms of delinquencies and defaults, as of the April 2016 payment date.
-- Updated Weighted-Average Life and Recovery Rates assumptions. Recovery Rates incorporate the updated Market Value Declines introduced by the recently published “European RMBS Insight Methodology” and “European RMBS Insight: Spanish Addendum” (17 May 2016).
-- 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 the expected losses assumed in line with the AA (sf) and CCC (high) (sf) rating levels for the Series A Notes and Series B Notes, respectively.

The Series A Notes are currently at 46.79% of their initial balance after two years since closing. Given this deleveraging, the current available credit enhancement for the Series A and B Notes has increased considerably, while the transaction performance is in line with DBRS’s expectations.

As of the April 2016 payment date, the cumulative balance of written-off loans was 1.921% of the original collateral balance, as per the transaction definition, and delinquencies greater than 90 days were 1.135% of the current collateral balance.

The portfolio annualised probability of default (PD) used has not changed (10.63%).

Banco Santander S.A. is the Account Bank for the transaction. The Account bank reference rating of “A” – being one notch below the DBRS Long Term Critical Obligations Rating of Banco Santander S.A. at A (high) – complies with the Minimum Institution Rating, given the rating 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’s 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 these ratings include information provided by Santander de Titulización SGFT, 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 20 May 2015, when DBRS confirmed the rating on the Series A and Series B Notes at AA (sf) and CCC (high) (sf), respectively, and the Under Review with Positive Implications status was removed from the Series B Notes.

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 10.63%, and a 10% and 20% increase in the base case PD.
-- Recovery rates used: base case recovery rates, corresponding to a recovery rate of 32.44% at the AA (sf) stress level for the Series A Notes and a recovery rate of 41.89% at the CCC (high) (sf) stress level for the Series B Notes, a 10% and 20% decrease in the base case recovery rates.

DBRS concludes that a hypothetical increase of the base PD by 20%, ceteris paribus, would produce model results suggesting a downgrade of the Series A and Series B Notes to A (high) (sf) and to CCC (sf), respectively. A hypothetical decrease of the Recovery Rate by 20%, ceteris paribus, would produce model results suggesting a confirmation of the Series A Notes at AA (sf) and a downgrade of the Series B Notes to 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 downgrade to A (high) (sf) for the Series A Notes and a downgrade to CCC (sf) for 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: 14 May 2014
Initial Rating Committee Chair: Simon Ross

Lead Surveillance Analyst: Alfonso Candelas, Vice President
Rating Committee Chair: Jerry van Koolbergen, Managing Director

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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
-- European RMBS Insight Methodology
-- European RMBS Insight: Spanish Addendum

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.