DBRS Takes Rating Actions on CaixaBank PYMES 8, FT, Foncaixa PYMES 6, FT and Foncaixa PYMES 7, FT

DBRS Ratings Limited (DBRS) took rating actions on three SME transactions originated by CaixaBank, S.A. (CaixaBank) as follows:

CaixaBank PYMES 8, FT (CaixaBank 8):
-- Series A Notes confirmed at A (sf)
-- Series B Notes confirmed at CC (sf)

Foncaixa PYMES 6, FT (Foncaixa 6):
-- Series A Notes confirmed at A (sf)
-- Series B Notes confirmed at CCC (high) (sf)

Foncaixa PYMES 7, FT (Foncaixa 7):
-- Series A Notes confirmed at A (sf)
-- Series B Notes upgraded to BB (high) (sf) from B (sf)

The ratings of the Series A Notes of the three transactions address the timely payment of interest and ultimate payment of principal on or before the legal final maturity date of each transaction.

The ratings of the Series B Notes of the three transactions address the ultimate payment of interest and principal on or before the legal maturity date of each transaction.

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 April 2018 payment date for CaixaBank 8 and Foncaixa 6, and the June 2018 payment date for Foncaixa 7.
-- Updated portfolio default rates, recovery rates and expected losses for the remaining collateral pools.
-- The credit enhancement (CE) available to the rated notes to cover the expected losses at their respective rating levels.

The transactions are cash flow securitisations collateralised by a portfolio of bank loans originated and serviced by CaixaBank to self-employed individuals and SMEs based in Spain.

PORTFOLIO PERFORMANCE
The portfolios of all transactions are performing within DBRS’s expectations. For CaixaBank 8, the 90+ delinquency ratio was at 1.4% as of April 2018, and the cumulative default ratio was 0.2%. For Foncaixa 6, the 90+ delinquency ratio was at 2.0% as of April 2018, and the cumulative default ratio was 0.6%. For Foncaixa 7, the 90+ delinquency ratio was at 1.1% as of June 2018, and the cumulative default ratio was 0.8%.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis on the remaining pools and updated its portfolio default and recovery rate assumptions on the remaining collateral pools for the three transactions. The base case probability of default (PD) was maintained at 2.1% for CaixaBank 8, 2.3% for Foncaixa 6 and 2.2% for Foncaixa 7.

CREDIT ENHANCEMENT
The CE available to all rated notes has continued to increase as the transactions deleverage. The CE available to each of the rated notes was 24.7% and 5.9% for the CaixaBank 8 Series A and B Notes, respectively, as of the April 2018 payment date, 46.1% and 8.4% for the Foncaixa 6 Series A and B Notes, respectively, as of the April 2018 payment date, and 59.4% and 9.1% for the Foncaixa 7 Series A and B Notes, respectively, as of the June 2018 payment date. The increase in CE prompted today’s confirmation and upgrade rating actions.

CaixaBank acts as the Account Bank provider for the three transactions. The account bank reference rating of A (high) – being one notch below the DBRS public Long-Term Critical Obligations Rating of CaixaBank 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: “Rating CLOs Backed by Loans to European SMEs.”

DBRS has applied the principal methodology consistently and conducted a review of the transactions in accordance with the surveillance section of 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 actions.

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 the Management Company, CaixaBank Titulización, S.G.F.T., S.A 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 ratings of CaixaBank 8, Foncaixa 6 and Foncaixa 7, 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 CaixaBank 8 took place on 24 November 2017 when DBRS upgraded the Series A Notes to A (sf) from A (low) (sf) and confirmed the Series B Notes at CC (sf). The last rating action on Foncaixa 6 and Foncaixa 7 took place on 30 June 2017 when DBRS confirmed the Series A notes at A (sf) for both transactions, and upgraded the Series B Notes to CCC (high) (sf) and B (sf) from CCC (low) (sf) and CCC (high) (sf) for Foncaixa 6 and Foncaixa 7, respectively.

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

CaixaBank 8
-- PD Rates Used: Base case PD of 2.1%, a 10% increase of the base case and a 20% increase of the base case PD.
-- Recovery Rates Used: Base case recovery rates of 24.4% at the A (sf) stress level for the Series A Notes, a 10% and 20% decrease in the base case recovery rates. Note that the percentage decreases in the recovery rates are assumed for the other stress recovery rate levels.

For the Series A Notes, DBRS concludes that a hypothetical increase of the base case PD by 20% or a hypothetical decrease of the recovery rate by 20%, ceteris paribus, would lead to a confirmation of the Series A Notes at A (sf). A scenario combining both an increase in the base case PD by 10% and a decrease in the base case recovery rate by 10%, ceteris paribus, would also lead to a confirmation of the Series A Notes at A (sf).

The Series B Notes’ ratings would not be affected by a hypothetical change in either the PD or the recovery rate.

Foncaixa 6
-- PD Rates Used: Base case PD of 2.3%, a 10% increase of the base case and a 20% increase of the base case PD.
-- Recovery Rates Used: Base case recovery rates of 29.7% at the A (sf) stress level and 35.2% at the CCC (high) (sf) stress level for the Series A Notes and Series B Notes, respectively, a 10% and 20% decrease in the base case recovery rates. Note that the percentage decreases in the recovery rates are assumed for the other stress recovery rate levels.

For the Series A Notes, DBRS concludes that a hypothetical increase of the base case PD by 20%, ceteris paribus, would lead to a confirmation of the Series A Notes at A (sf), and a hypothetical decrease of the recovery rate by 20%, ceteris paribus, would lead to a confirmation of the Series A Notes at A (sf). A scenario combining both an increase in the base case PD by 10% and a decrease in the base case recovery rate by 10%, ceteris paribus, would lead to a confirmation of the Series A Notes at A (sf).

With regards to the Series B Notes, a hypothetical increase of the base case PD by 20% or a hypothetical decrease of the base case recovery rate by 20%, ceteris paribus, would lead to a downgrade of the Series B Notes to CCC (low) (sf), and a hypothetical decrease of the recovery rate by 20% would also lead to a downgrade of the Series B Notes to CCC (low) (sf). A scenario combining both an increase in the base case PD by 10% and a decrease in the base case recovery rate by 10% would also lead to a downgrade of the Series B Notes to CCC (low) (sf).

Foncaixa 7
-- PD Rates Used: Base case PD of 2.2%, a 10% increase of the base case and a 20% increase of the base case PD.
-- Recovery Rates Used: Base case recovery rates of 16.5% at the A (sf) stress level and 21.8% at the BB (high) (sf) stress level for the Series A Notes and Series B Notes, respectively, a 10% and 20% decrease in the base case recovery rates. Note that the percentage decreases in the recovery rates are assumed for the other stress recovery rate levels.

For the Series A Notes, DBRS concludes that a hypothetical increase of the base case PD by 20% or a hypothetical decrease of the recovery rate by 20%, ceteris paribus, would lead to a confirmation of the Series A Notes at A (sf). A scenario combining both an increase in the base case PD by 10% and a decrease in the base case recovery rate by 10%, ceteris paribus, would also lead to a confirmation of the Series A Notes at A (sf).

With regards to the Series B Notes, a hypothetical increase of the base case PD by 20% or a hypothetical decrease of the recovery rate by 20%, ceteris paribus, would lead to a downgrade of the Series B Notes to BB (sf). A scenario combining both an increase in the base case PD by 10% and a decrease in the base case recovery rate by 10% would also lead to a downgrade of the Series B Notes to BB (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
Initial Rating Dates: CaixaBank 8: 22 November 2016; Foncaixa 6: 16 October 2015; Foncaixa 7: 24 November 2015

DBRS Ratings Limited
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United Kingdom
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.

-- Legal Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Rating CLOs Backed by Loans to European SMEs
-- Rating CLOs and CDOs of Large Corporate Credit
-- European RMBS Insight Methodology
-- European RMBS Insight: Spanish Addendum
-- Operational Risk Assessment for European Structured Finance Servicers
-- Cash Flow Assumptions for Corporate Credit Securitizations
-- 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.