Press Release

DBRS Assigns A (high) Rating to Caja Rural de Granada Covered Bonds New Issuance

Covered Bonds
May 16, 2018

DBRS Ratings Limited (DBRS) assigned a rating of A (high) to the new series issued by Caja Rural de Granada Sociedad Cooperativa de Crédito (CRG or the Issuer) under the Caja Rural de Granada Covered Bonds (Cédulas Hipotecarias - Mortgages) programme (CRG CH or the Programme).

At the same time, DBRS discontinued its rating on Cedulas Hipotecarias ES0415143009, which repaid early on 14 May 2018.

The new rating is based on the following analytical considerations:
-- A Covered Bonds Attachment Point (CBAP) of BBB. CRG is the Issuer and Reference Entity for the programme. DBRS considers CH to be systemic funding instruments in Spain; therefore, the CBAP is set at one notch above the Issuer, Senior Debt and Deposit ratings.
-- A Legal and Structuring Framework (LSF) Assessment of “Average” associated with CRG CH;
-- A Cover Pool Credit Assessment (CPCA) of BBB (low), which is the lowest CPCA in line with the LSF-Implied Likelihood (LSF-L);
-- An LSF-L of A (low);
-- A two-notch uplift for high recovery prospects; and
-- A level of overcollateralisation (OC) of 149% to which DBRS gives credit, being the minimum observed OC level during the past 12 months, adjusted by a scaling factor of 0.90.

The transaction was analysed using the DBRS European Covered Bond Cash Flow Tool. The main assumptions focused on the timing of defaults, recoveries of the assets, interest rate stresses and market value spreads to calculate liquidation values on the cover pool (CP).

Everything else being equal, a one-notch downgrade of the CBAP would lead to a one-notch downgrade of the LSF-L, resulting in a one-notch downgrade of the covered bonds rating. In addition, all else unchanged, the CH rating would be downgraded if any of the following occurred: (1) the CPCA were downgraded below BBB (low); (2) the sovereign rating of the Kingdom of Spain was downgraded below A (low); (3) the LSF Assessment associated with the programme was downgraded; (4) the quality of the CP and the level of OC were no longer sufficient to support a two-notch uplift for high recovery prospects; (5) the relative amortisation profile of the CH and CP moved adversely; or (6) volatility in the financial markets caused the currently estimated market value spreads to increase.

The total outstanding amount of CH is currently EUR 600 million, while as of March 2018 the aggregate balance of the mortgages in the CP was EUR 1.72 billion. This resulted in a total estimated OC of 187%. As of March 2018, the eligible CP stood at EUR 1.24 billion, resulting in an eligible OC of 107%.

Spanish Covered Bonds are backed by the entire mortgage book of the bank, except mortgage loans pledged to securitisations and bonos hipotecarios. As of March 2018, the CP amounted to EUR 1.72 billion of mortgage loans with a 57.8% residential versus 42.3% non-residential split by outstanding amount. Having non-residential assets is a common feature among CH. The CP comprises 21,493 loans with a weighted-average current unindexed loan-to-value ratio of 51.9%. The CP is currently 73-month seasoned and geographically concentrated (95% of the outstanding loan amount) in the Autonomous Community of Andalusia in Spain.

The majority of the loans in the CP (approximately 99% by outstanding balance) are floating rate, while the newly issued bond pays a fixed rate coupon. As is customary in the Spanish market, the CH holders do not receive the benefit of any swap contract to hedge interest rate mismatches, and this risk has been accounted for in DBRS’s cash flow analysis.

The weighted-average life of the assets is roughly ten years, as is the average life of the single standalone CH. All assets and liabilities are denominated in euros.

For further information on Caja Rural de Granada CH, please refer to the rating report available on

DBRS has assessed the LSF related to CRG CH as “Average” according to its rating methodology. For more information, please refer to DBRS’s Commentaries “Spanish Mortgage Covered Bonds: Legal and Structuring Framework Review” and “DBRS Assigns Legal and Structuring Framework Assessment to Spanish Mortgage Covered Bonds Programmes,” available at

All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is “Rating European Covered Bonds”.

In DBRS’s opinion, the change(s) under consideration do not require the application of the entire principal methodology. Therefore, DBRS focused on the cash flow analysis.

A review of the transaction legal documents was limited to the documentation pertaining to the issuance of Cédula Hipotecaria ES0415143025. All the other 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 at:

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:

The sources of data and information used for this rating include historical dynamic performance data, CP stratification tables and loan-level data provided by CRG.

DBRS did not rely upon third-party due diligence in order to conduct its analysis. At the time of 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 this rating 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 programme took place on 15 December 2017, when DBRS confirmed its rating on CRG CH following completion of the annual deal review.

Information regarding DBRS ratings, including definitions, policies and methodologies is available on

For further information on DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see:

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

Lead Analyst: Alessandra Maggiora, Assistant Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 23 December 2013

DBRS Ratings Limited
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Registered in England and Wales: No. 7139960

The rating methodologies and criteria used in the analysis of this transaction can be found at

-- Rating European Covered Bonds
-- Rating European Covered Bonds Addendum: Market Value Spreads
-- Global Methodology for Rating Banks and Banking Organisations
-- DBRS Criteria: Guarantees and Other Forms of Support
-- Legal Criteria for European Structured Finance Transactions
-- Interest Rate Stresses for European Structured Finance Transactions
-- European RMBS Insight Methodology
-- European RMBS Insight: Spanish Addendum
-- Operational Risk Assessment for European Structured Finance Originators
-- Operational Risk Assessment for European Structured Finance Servicers
-- Rating CLOs and CDOs of Large Corporate Credit
-- Rating CLOs Backed by Loans to European SMEs
-- Rating Sovereign Governments

A description of how DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at:

For more information on this credit or on this industry, visit or contact us at [email protected].