Press Release

DBRS Confirms Rating on HT ABANCA RMBS I, Fondo de Titulización

RMBS
May 22, 2018

DBRS Ratings Limited (DBRS) confirmed its rating on the Series A notes issued by HT ABANCA RMBS I, Fondo de Titulización (HT ABANCA RMBS I or the Issuer) at AAA (sf).

The confirmation follows an annual review of the transaction and is based on the following analytical considerations:
-- The overall portfolio performance as of the April 2018 payment date, in particular regarding low levels of cumulative net loss and delinquencies;
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions for the remaining collateral pool; and
-- The current respective levels of credit enhancement (CE) available to the Series A notes to cover expected losses assumed in line with the AAA (sf) rating level.

The rating on the Series A notes addresses timely payment of interest and ultimate repayment of principal by the legal maturity in July 2062.

HT ABANCA RMBS I is a static securitisation of EUR 814.4 million first-lien Spanish residential mortgages originated by Abanca Corporación Bancaria S.A. (Abanca). The transaction closed on 24 May 2016.

PORTFOLIO PERFORMANCE
As of the April 2018 payment date, 30-day to 60-day delinquencies represented 0.04% of the outstanding principal balance and 60-day to 90-day delinquencies represented 0.06%, while delinquencies greater than 90 days represented 0.03%. To date, no defaults – defined as loans with more than 18 monthly instalments overdue – have been realised.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis on the remaining pool and updated its base case PD and LGD assumptions on the outstanding portfolio to 5.1% and 31.3%, respectively.

CREDIT ENHANCEMENT
CE is provided by subordination of the Series B loan and the cash reserve. CE for the Series A notes increased to 24.9% in April 2018, from 22.5% at closing.

The transaction benefits from an amortising reserve fund available to cover senior expenses and missed payments on the Series A notes. This reserve was funded at closing through the proceeds of a subordinated loan granted by Abanca and, from October 2019 onwards, if 90+ days delinquencies do not exceed 1.5% of the portfolio balance and the reserve has been replenished to its target level on the previous payment date, it will amortise to a minimum between EUR 40.5 million and 9.0% of portfolio balance, subject to a EUR 20.3 million floor. Since closing, the reserve has remained at EUR 40.5 million.

Banca Santander SA (Santander) acts as the account bank for the transaction. Santander’s reference rating of A (high) – one notch below its DBRS Long-Term Critical Obligations Rating of AA (low) – is consistent 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 to the rating is: “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 this rating include investor reports provided by HAYA Titulización, S.G.F.T., S.A.U. (the Management Company) and loan-level data from 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 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 transaction took place on 25 May 2017, when DBRS confirmed its rating on the Series A notes at AAA (sf).

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

To assess the impact of changing the transaction parameters on this rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the “Base Case”):

-- DBRS expected a base case probability of default (PD) and loss given default (LGD) for the portfolio 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 receivables are 5.1% and 31.3%, respectively. At the AAA (sf) rating level, the corresponding PD is 24.0% and the LGD 52.8%.

For example, if the LGD increases by 50%, the rating of the Series A notes would be expected to remain at AAA (sf), ceteris paribus. If the PD increases by 50%, the rating of the Series A notes would be expected to remain at AAA (sf), ceteris paribus. Furthermore, if both the PD and LGD increase by 50%, the rating of the Series A notes would be expected to decrease to AA (sf), ceteris paribus.

Series A notes risk sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (sf)

For further information on DBRS historical 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: Joana Seara da Costa, Assistant Vice President
Rating Committee Chair: Vito Natale, Senior Vice President
Initial Rating Date: 19 May 2016

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

The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies.

-- Master European Structured Finance Surveillance Methodology
-- Legal Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
-- European RMBS Insight Methodology
-- European RMBS Insight: Spanish Addendum
-- 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 [email protected].

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.