Press Release

DBRS Confirms A (high) Ratings on Cajamar Cédulas Hipotecarias

Covered Bonds
July 13, 2018

DBRS Ratings Limited (DBRS) confirmed its A (high) ratings on the Cédulas Hipotecarias (CH; the Spanish Mortgage Covered Bonds) which are outstanding under the Cajamar Caja Rural S.C.C. Covered Bonds (Cédulas Hipotecarias - Mortgages) programme (Cajamar CH or the Programme). The confirmation follows the completion of a full review of the ratings.

There are currently ten series of CH outstanding under the Programme, totalling a nominal amount of EUR 6.0 billion. DBRS currently rates seven of the ten series, totalling EUR 4.25 billion.

The ratings reflect the following analytical considerations:

-- A Covered Bonds Attachment Point (CBAP) reflective of the likelihood that the source of payments will switch from the Reference Entity to the cover pool (CP). Cajamar Caja Rural, Sociedad Cooperativa de Crédito (Cajamar) is the Issuer and Reference Entity for the Programme. There is no Critical Obligations Rating associated with the Reference Entity, and DBRS classifies Spain as a jurisdiction in which covered bonds are a particularly important funding instrument.
-- A Legal and Structuring Framework (LSF) Assessment of “Average” associated with the Programme.
-- A Cover Pool Credit Assessment (CPCA) of “A”, being the lowest CPCA in line with the LSF-Implied Likelihood (LSF-L).
-- An LSF-L of A (low).
-- A two-notch uplift for high recovery prospects.
-- A level of overcollateralisation (OC) of 139.3% to which DBRS gives credit, being the minimum observed OC level during the past 12 months, adjusted by a scaling factor of 0.90.

The transaction was analysed using the DBRS European Covered Bond Cash Flow tool. The main assumptions focused on the timing of defaults and recoveries of the assets, interest rate stresses and market value spreads to calculate liquidation values on the CP.

Everything else being equal, a one-notch downgrade of the CBAP would lead to a three-notch downgrade of the LSF-L, resulting in a three-notch downgrade of the covered bond ratings.

In addition, all else unchanged, the CH ratings would be downgraded if any of the following were to occur: (1) the CPCA were downgraded below “A”; (2) the sovereign rating of the Kingdom of Spain were downgraded below A (low); (3) the LSF Assessment associated with the Programme were downgraded; (4) the quality of the CP and the level of OC were no longer sufficient to support a two-notch uplift for high recovery prospects; (5) the relative amortisation profile of the CH and CP were to move adversely; or (6) volatility in the financial markets were to cause the currently estimated market value spreads to increase.

The total outstanding amount of the CH is currently EUR 6.0 billion, while the aggregate balance of the mortgages in the CP, as of 31 March 2018, was EUR 15.3 billion, resulting in a total OC of 154.8%. The eligible CP stands at EUR 9.8 billion, resulting in an eligible OC of 63.6%.

As of March 2018, the CP comprised 172,310 mortgage loans with a weighted-average current unindexed loan-to-value ratio of 57.9%, split as follows: 65% residential, 28% commercial, 2% land and 5% developer loans. It is geographically distributed among Cajamar’s main areas of business activity, with the highest concentrations in Andalusia (33.8% of the outstanding balance), Community of Valencia (26.2%) and Murcia (17.6%). The pool is 90 months seasoned.

The vast majority of the loans in the CP (approximately 97% of the outstanding balance) are floating rate, while all the liabilities pay a fixed coupon.

As is usual in Spanish CH, swaps are not for the benefit of the CH holders. This has been accounted for in the DBRS cash flow analysis.

The weighted-average life of the assets is about 10.1 years, while that of the covered bonds is about 3.3 years. The resulting asset-liability maturity mismatch is mitigated by the available OC.

All liabilities are denominated in euros, as are all cover pool assets: as such, investors are not currently exposed to any foreign exchange risk.

DBRS has assessed the LSF related to the Programme as “Average” according to its rating methodology. For more information, please refer to the DBRS commentaries “Spanish Mortgage Covered Bonds: Legal and Structuring Framework Review” and “DBRS Assigns Legal and Structuring Framework Assessment to Spanish Mortgage Covered Bonds Programmes,” which are available at

For further information on the Programme, please refer to the rating report that is available on

All figures are in euros unless otherwise noted.

The principal methodology applicable is “Rating European Covered Bonds”.

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 at:

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:

The sources of data and information used for these ratings include historical default performance data and stratification tables on the CP provided by the Issuer.

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 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 this transaction took place on 22 May 2018, when DBRS confirmed its A (high) ratings on the outstanding DBRS-rated Cajamar CH.

Information regarding DBRS ratings, including definitions, policies and methodologies, is available on

For further information on DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see:

Ratings assigned by DBRS Ratings Limited are subject to EU and US regulations only.

Lead Analyst: Antonio Laudani, Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 19 July 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:

-- Rating European Covered Bonds
-- Rating European Covered Bonds Addendum: Market Value Spreads
-- Global Methodology for Rating Banks and Banking Organisations
-- Legal Criteria for European Structured Finance Transactions
-- Interest Rate Stresses for European Structured Finance Transactions
-- European RMBS Insight Methodology
-- European RMBS Insight: Spanish Addendum
-- Operational Risk Assessment for European Structured Finance Originators
-- Operational Risk Assessment for European Structured Finance Servicers
-- Rating CLOs Backed by Loans to European SMEs
-- Rating CLOs and CDOs of Large Corporate Credit
-- Rating Sovereign Governments

A description of how DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at:

For more information on this credit or on this industry, visit or contact us at [email protected].