DBRS Confirms and Upgrades Ratings on Foncaixa Leasings 2 F.T.A.

DBRS Ratings Limited (DBRS) took the following rating actions on the bonds issued by Foncaixa Leasings 2 F.T.A. (the Issuer):

-- Series A confirmed at A (high) (sf)
-- Series B upgraded to BBB (sf) from BBB (low) (sf)

The ratings address the timely payment of interest and ultimate repayment of principal on or before the legal final maturity date.

The rating actions follow an annual review of the transaction and are based on the following analytical considerations:
--Portfolio performance, in terms of delinquencies, defaults and losses, as of the March 2018 payment date.
--Probability of default (PD), loss given default (LGD) and expected loss assumptions of the remaining receivables.
--Current available credit enhancement to the notes to cover the expected losses at their respective rating levels.

The Issuer is a securitisation of Spanish finance leases, originated and serviced by CaixaBank S.A. (CaixaBank). The pool consists of leases on real estate, vehicles and equipment.

PORTFOLIO PERFORMANCE
As of March 2018, two- to three-month arrears represented 0.1% of the outstanding portfolio balance, up from 0.0% in March 2017. The 90+ delinquency ratio was 1.3%, up from 0.6% in March 2017. The cumulative default ratio was 3.0%.

PORTFOLIO ASSUMPTIONS
DBRS conducted an analysis of the remaining pool of receivables and increased its expected net loss assumption to 18.0% from 17.7%. The main driver for the increased net loss assumption is the increased proportion of real estate leases in the remaining collateral pool.

CREDIT ENHANCEMENT
As of the March 2018 payment date, credit enhancement to Series A was 98.3%, up from 31.0% at the DBRS initial rating. Credit enhancement to the Series B was 38.7%, up from 16.0% at the DBRS initial rating.

The transaction benefits from a Reserve Fund of EUR 111.9 million. The Reserve Fund covers senior fees and any interest or principal shortfall on Series A and Series B.

CaixaBank, S.A. acts as the account bank for the transaction. The account bank reference rating of A (high), which is one notch below the DBRS public Long-Term Critical Obligations Rating of CaixaBank, S.A. of AA (low), is consistent with the Minimum Institution Rating, given the rating assigned to Series A, 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 to the ratings is the “Master European Structured Finance Surveillance Methodology”. 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 legal documents have remained unchanged since the most recent rating action.

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies.

For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Rating Sovereign Governments” methodology at: http://dbrs.com/research/319564/rating-sovereign-governments.pdf.

The sources of data and information used for these ratings include investor reports provided by CaixaBank Titulización, S.G.F.T., S.A. and loan-level data provided by the European DataWarehouse GmbH.

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

DBRS considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.

DBRS does not audit or independently verify the data or information it receives in connection with the rating process.

The last rating action on this transaction took place on 15 May 2017, when DBRS confirmed its ratings on Series A and Series B at A (high) (sf) and BBB (low) (sf), respectively.

The lead analyst responsibilities for this transaction have been transferred to Clare Wootton.

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 ratings, DBRS considered the following stress scenarios as compared with the parameters used to determine the ratings (the “Base Case”):

-- DBRS expected a lifetime base case PD and LGD for the pool based on a review of the current assets. Adverse changes to asset performance may cause stresses to base case assumptions and therefore have a negative effect on credit ratings.
-- The base case PD and LGD of the current pool of loans for the Issuer are 18.3% and 98.6%, respectively.
-- The Risk Sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base case assumption. For example, if the LGD increases by 50%, the rating of Series A would be expected to remain at A (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating of Series A would be expected to remain at A (high) (sf), assuming no change in the PD. Furthermore, if both the PD and LGD increase by 50%, the rating of Series A would be expected to fall to A (low) (sf).

Series A Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD, expected rating of A (high) (sf)
-- 50% increase in PD, expected rating of A (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (low) (sf)

Series B Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (sf)
-- 50% increase in LGD, expected rating of BBB (low) (sf)
-- 25% increase in PD, expected rating of BBB (sf)
-- 50% increase in PD, expected rating of BBB (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BB (sf)

For further information on DBRS historic default rates published by the European Securities and Markets Authority (“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 and US regulations only.

Lead Analyst: Clare Wootton, Senior Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 22 March 2013

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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
-- Operational Risk Assessment for European Structured Finance Servicers
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Interest Rate Stresses for European Structured Finance Transactions

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.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.