DBRS Confirms and Upgrades IM CAJAMAR EMPRESAS 5, FTA

DBRS Ratings Limited (DBRS) took rating actions on IM CAJAMAR EMPRESAS 5, FTA (the Issuer) as follows:

-- Series A1 notes confirmed at AAA (sf)
-- Series A2 notes confirmed at AAA (sf)
-- Series B notes upgraded to BBB (high) (sf) from B (sf)

The ratings of the Series A1 and Series A2 notes (Series A Notes) address the timely payment of interest and ultimate payment of principal on or before the final legal maturity date.

The ratings of the Series B notes address the ultimate payment of interest and principal on or before the final legal maturity date.

The rating actions follow an annual review of the transaction and are based on the following analytical considerations:

-- Portfolio performance in terms of delinquencies and defaults as of the June 2018 payment date.
-- Updated portfolio default rate (PD), recovery rate and expected loss assumptions for the remaining collateral pool.
-- The credit enhancement (CE) available to the rated notes to cover the expected losses at their respective rating levels.

The Issuer is a cash flows securitisation collateralised by a portfolio of bank loans originated and serviced by Cajamar to self-employed individuals and SMEs based in Spain.

PORTFOLIO PERFORMANCE
The portfolio is performing within DBRS’s expectations. As of June 2018, the 90+ delinquency ratio was at 0.5%, and the cumulative default ratio was at 5.5%.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis on the remaining pool and updated its portfolio default and recovery assumptions. The base case PD was maintained at 3.8%.

CREDIT ENHANCEMENT
The CE available to the rated notes has continued to increase as the transaction deleverages. The CE available to each of the rated notes was 161.7% for the Series A Notes and 74.3% for the Series B Notes, as of the June 2018 payment date. The increase in the CE prompted today’s confirmations and upgrade.

Banco Santander SA acts as the account bank provider for the transaction. The account bank reference rating of A (high) – being one notch below the DBRS public Long-Term Critical Obligations Rating of Santander 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 ratings is: “Rating CLOs Backed by Loans to European SMEs.”

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

DBRS reviewed a modification in the account bank interest rate undertaken in November 2017. A review of any other transaction legal documents was not conducted as they 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 these ratings include reports provided by the Management Company InterMoney 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 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 transaction took place on 30 June 2017 when DBRS upgraded the Series A1 and A2 notes to AAA (sf) from AA (sf) and confirmed the Series B notes at B (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 the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the “Base Case”):

-- PD Rates Used: Base case PD of 3.8%, a 10% increase of the base case and a 20% increase of the base case PD.
-- Recovery Rates Used: Base case recovery rates of 13.5% at the AAA (sf) stress level and 17.0% at the BBB (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 AAA (sf), and a hypothetical decrease of the recovery rate by 20%, ceteris paribus, would lead to a confirmation of the Series A Notes at AAA (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 AAA (sf).

With regards to the Series B Notes, a hypothetical increase of the base case PD by 20%, ceteris paribus, would lead to a confirmation of the Series B Notes at BBB (high) (sf), and a hypothetical decrease of the recovery rate by 20%, ceteris paribus, would lead to a confirmation of the Series B Notes at BBB (high) (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 B Notes at BBB (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
Initial Rating Date: 26 March 2013

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
-- Interest Rate Stresses for European Structured Finance Transactions
-- Cash Flow Assumptions for Corporate Credit Securitizations

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.