DBRS Takes Ratings Actions on AyT Goya Hipotecario IV and V, Fondo de Titulización de Activos

DBRS Ratings Limited (DBRS) took the following rating actions on two AyT Goya transactions:
AyT Goya Hipotecario IV (Goya IV):

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

AyT Goya Hipotecario V (Goya V):

-- Series A notes confirmed at AA (sf)
-- Series B notes confirmed at BBB (high) (sf)

The ratings address the timely payment of interest and the ultimate payment of principal on or before their respective legal final maturity dates.

The rating actions follow an annual review of the transactions and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies and defaults, as of the latest payment date for each transaction;
-- Portfolio default rate (PD), loss given default (LGD) and expected loss assumptions for the outstanding collateral pools; and
-- The current credit enhancement (CE) available to the rated notes to cover the expected losses at their respective rating levels.

The two transactions are securitisations of Spanish prime residential mortgage loans originated and serviced by CaixaBank, S.A. (CaixaBank) (previously Barclays Bank S.A./Spain).

PORTFOLIO PERFORMANCE AND ASSUMPTIONS
The portfolios are performing within DBRS’s expectations. For Goya IV, as of the March 2018 payment date, the loans in arrears over 90 days represented 0.2% of outstanding balance of the collateral portfolio, while the current cumulative default ratio was at 1.6% of the original portfolio balance, an increase from one year ago at 1.49%. For Goya V, as of the March 2018 payment date, the 90+ delinquency ratio represented 0.3% of the collateral portfolio, while the current cumulative default ratio increased to 1.1% from 0.99%.
DBRS conducted a loan-by-loan analysis on the remaining collateral pools of receivables and updated its PD and LGD assumptions. For Goya IV, the base-case PD and LGD are 2.4% and 19.8%, respectively. For Goya V, the base-case PD and LGD are 2.2% and 18.5%, respectively.

CREDIT ENHANCEMENT AND RESERVE FUND
The CEs available to all rated notes have continued to increase as the transactions deleverage. The Series A notes for both transactions are supported by the subordination of the Series B notes and the Reserve Fund (RF), which is available to cover senior fees, interest and principal of the Series A and Series B notes. The Series B notes are solely supported by the RF. For Goya IV, as of March 2018, the CE to the Series A notes and Series B notes was 43.0% and 9.9%, respectively, increasing from 36.7% and 8.4% as of March 2017. For Goya V, as of March 2018, the CE to the Series A notes and Series B notes was 44.8% and 9.6%, respectively, increasing from 38.7% and 8.4% as of March 2017.

Both RFs may amortise over the life of the transactions, subject to a floor and certain amortisation triggers. For Goya IV, the RF is currently at EUR 59.7 million, below its target of EUR 65.0 million. The RF for Goya V is currently at its target level of EUR 75.0 million.

CaixaBank acts as the Account Bank provider for both transactions. The Account Bank reference rating of A (high), which is one notch below the DBRS Long-Term Critical Obligations Rating (COR) of CaixaBank at 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.

The management company on behalf of the issuer entered into an interest rate swap with Banco Santander SA and CaixaBank SA for Goya IV and Goya V, respectively. For Goya IV, the issuer pays Banco Santander S.A. 12-month Euribor on the performing collateral balance, and in exchange the Issuer receives six-month Euribor on the notional balance. For Goya V, the issuer pays CaixaBank SA the interest collected and receives an amount equal to six-month Euribor on the notional balance. DBRS factored the different swap structures into its rating analysis.
The DBRS CORs of Banco Santander SA and CaixaBank SA are above the First Rating Threshold as described in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology, given the AA (sf) ratings of the Series A notes.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is: “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 transaction legal documents was not conducted as the documents have remained unchanged since the most recent rating actions.

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 reports and information received from HAYA Titulización, S.G.F.T., S.A.U. 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 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 these transactions took place on 25 May 2017, when DBRS confirmed its ratings on the Series A notes and Series B notes at AA (sf) and BBB (high) (sf), respectively, for Goya IV and Goya V.

The lead analyst responsibilities for these transactions have been transferred to Francesco Amato.

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 to 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 Goya IV, the base case PD and LGD assumptions for the remaining collateral pool are 2.4% and 19.8%, respectively. At the AA (sf) rating level, the corresponding PD and LGD are 14.9% and 36.9%, respectively. At the A (sf) rating level, the corresponding PD and LGD are 11.5% and 32.4%, respectively.

-- For Goya V, the base case PD and LGD assumptions for the remaining collateral pool are 2.2% and 18.5%, respectively. At the AA (sf) rating level, the corresponding PD and LGD are 14.3% and 35.7%, respectively. At the BBB (high) (sf) rating level, the corresponding PD and LGD are 7.8% and 23.5%, 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 on Goya IV Series A notes would be expected to be at AA (sf), assuming no change in the PD. If the PD increases by 50%, the rating on Goya IV Series A notes would be expected to be at AA (sf), assuming no change in the LGD. Furthermore, if both the PD and the LGD increase by 50%, the rating on Goya Series A notes would be expected to be at AA (sf).

Goya IV Series A notes 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 (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (sf)

Goya IV Series B 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 BBB (high) (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)

Goya V Series A notes 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 (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (sf)

Goya V Series B notes risk sensitivity:
-- 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD, expected rating of BBB (high) (sf)
-- 50% increase in PD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BB (high) (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: Francesco Amato, Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Goya IV Initial Rating Date: 4 May 2011
Goya V Initial Rating Date: 29 December 2011

DBRS Ratings Limited
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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
-- European RMBS Insight Methodology
-- European RMBS Insight: Spanish Addendum
-- Legal Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
-- Derivative Criteria for European Structured Finance Transactions
-- 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.