DBRS Maintains Under Review with Positive Implications the Ratings of the Notes in Three IM Cajamar Transactions

DBRS Ratings Limited (DBRS) maintained the Under Review with Positive Implications (UR-Pos.) status on the rated notes of IM BCC Cajamar 1 (Cajamar 1), IM Cajamar 5 F.T.A. (Cajamar 5) and IM Cajamar 6 F.T.A. (Cajamar 6). All three transactions are Spanish residential mortgage-backed securities (RMBS) transactions originated and serviced by Cajamar Caja Rural, Sociedad Cooperativa de Credito (Cajamar).

The notes were placed Under Review with Positive Implications (UR-Pos.) on 30 April 2018, following the upgrade of the Kingdom of Spain’s Long-Term Foreign and Local Currency – Issuer Rating to ‘A’ from A (low) and DBRS’s ongoing analysis of the Spanish real estate market. (https://www.dbrs.com/research/326766/dbrs-takes-rating-actions-on-21-eu-structured-finance-transactions-following-spain-sovereign-rating-upgrade). The maintenance of the UR-Pos. status on the rated notes follows an annual review of each of the transactions incorporating the Spanish sovereign rating upgrade and the following analytical considerations:

-- Portfolio performance, in terms of delinquencies, defaults and losses.
-- Portfolio default rate (PD), loss given default (LGD) and expected loss assumptions for the remaining receivables.
-- Current available credit enhancement (CE) available to the notes to cover the expected losses at their respective rating levels.

All three transactions are securitisations of residential mortgage loans originated by Cajamar that closed in January 2016, September 2007 and February 2008, respectively. The Management Company for all three transactions is Intermoney Titulización, SGFT, S.A. (Intermoney).

PORTFOLIO PERFORMANCE AND ASSUMPTIONS

• For Cajamar 1, the current cumulative default ratio is 0.1% and cumulative loss ratio is 0.0%. As of 30 April 2018, the 30+ and 90+ delinquency ratios were 2.1% and 0.3%, respectively.
• For Cajamar 5, the current cumulative default ratio is 5.6% and cumulative loss ratio is 1.6%. As of 28 February 2018, the 30+ and 90+ delinquency ratios were 2.8% and 0.3%, respectively.
• For Cajamar 6, the current cumulative default ratio is 8.0% and cumulative loss ratio is 2.1%. As of 28 February 2018, the 30+ and 90+ delinquency ratios were 3.3% and 0.5%, respectively.

The performance of each transaction is within DBRS’s expectations.

DBRS conducted a loan-by-loan analysis of the remaining pool of the receivables in each transaction and has updated its base case PD and LGD assumptions as follows:

• For Cajamar 1, DBRS has updated its base case PD and LGD assumptions to 8.0% and 38.2%, respectively.
• For Cajamar 5, DBRS has updated its base case PD and LGD assumptions to 3.7% and 13.2%, respectively.
• For Cajamar 6, DBRS has updated its base case PD and LGD assumptions for the collateral pool to 4.4% and 24.0%, respectively.

The improvement of the PD and LGD assumptions, which is credit positive, reflects the Spanish sovereign rating upgrade and the decrease of the portfolio loan-to-value ratios as the portfolios continue to deleverage. As DBRS continues to analyse the possible effect of recent developments in the Spanish real estate market, all the rated notes remain UR-Pos.

CREDIT ENHANCEMENT AND RESERVE FUND

For each transaction, credit enhancement (CE) to the rated notes is provided by the subordination of junior classes and a Cash Reserve.

• For Cajamar 1, Series A CE was 25.4% and Series C CE was 0.0%, as of the May 2018 payment date.
• For Cajamar 5, Class A Notes CE remained at 10.7%, as of the March 2018 payment date.
• For Cajamar 6, Class A Notes CE remained at 16.9%, as of the March 2018 payment date.

Banco Santander SA acts as the Account Bank for all three transactions. The Account Bank’s reference rating of A (high) - being one notch below its DBRS public Long-Term Critical Obligations Rating of AA (low) - is consistent with the Minimum Institution Rating given the rating assigned to the most senior class of rated notes in each transaction, 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 transactions in accordance with the principal methodology.

A review of the transactions’ legal documents was not conducted as the legal documents have remained unchanged since the most recent rating action.

Other methodologies referenced in these transactions 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 reports provided by Intermoney 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 ratings, DBRS was not supplied with third-party assessments except for IM BCC Cajamar 1. 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 all three transactions took place on 24 May 2017, when DBRS confirmed the ratings of all the rated notes of Cajamar 1 and Cajamar 5, and upgraded the Class A Notes of Cajamar 6 to A (high) (sf) from A (sf).

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”):

-- 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.

-- For Cajamar 1, the base case PD and LGD assumptions for the collateral pool are 8.0% and 38.2%, respectively. At the AA (sf) rating level, the PD and LGD are 26.5% and 53.9%, respectively.

-- For Cajamar 5, the base case PD and LGD assumptions for the collateral pool are 3.7% and 13.2%, respectively. At the A (sf) rating level, the PD and LGD are 16.4% and 38.3%, respectively.

-- For Cajamar 6, the base case PD and LGD assumptions for the collateral pool are 4.4% and 24.0%, respectively. At the A (high) (sf) rating level, the PD and LGD are 14.5% and 27.8%, respectively.

-- The Risk Sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base case assumptions. For example, if the LGD increases by 50%, the rating on the Series A notes of Cajamar 1 would be expected to remain at AA (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Series A notes of Cajamar 1 would be expected to be at AA (low) (sf), assuming no change in the LGD. Furthermore, if both the PD and the LGD increase by 50%, the rating on the Series A notes of Cajamar 1 would be expected to be at A (low) (sf).

Cajamar 1 Series A Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (sf).
-- 50% increase in LGD, expected rating of AA (sf).
-- 25% increase in PD, expected rating of AA (sf).
-- 50% increase in PD, expected rating of AA (low) (sf).
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (low) (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).

Cajamar 1 Series B Risk Sensitivity:
-- 25% increase in LGD, expected rating below B (sf).
-- 50% increase in LGD, expected rating below B (sf).
-- 25% increase in PD, expected rating below B (sf).
-- 50% increase in PD, expected rating below B (sf).
-- 25% increase in PD and 25% increase in LGD, expected rating below B (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating below B (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating below B (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating below B (sf).

Cajamar 5 Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (sf).
-- 50% increase in LGD, expected rating of A (low) (sf).
-- 25% increase in PD, expected rating of A (sf).
-- 50% increase in PD, expected rating of A (low) (sf).
-- 25% increase in PD and 25% increase in LGD, expected rating of A (low) (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf).

Cajamar 6 Class A Notes 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 (sf).
-- 25% increase in PD and 25% increase in LGD, expected rating of A (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating of A (low) (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf).

These ratings are UR-Pos. Generally, the conditions that lead to the assignment of reviews are resolved within a 90-day period.

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: Kevin Ma, Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date of Cajamar 1: 15 January 2016
Initial Rating Date of Cajamar 5: 23 May 2013
Initial Rating Date of Cajamar 6: 6 September 2013

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The rating methodologies used in the analysis of these transactions 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
-- 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 info@dbrs.com.

The press release was amended 30 May 2018 to add the following disclosure: "These ratings are UR-Pos. Generally, the conditions that lead to the assignment of reviews are resolved within a 90-day period."