DBRS Takes Rating Actions on the Notes Issued by Three IM Cajamar Transactions

DBRS Ratings Limited (DBRS) took rating actions on the notes issued by IM BCC Cajamar 1 FT (Cajamar 1), IM Cajamar 5 F.T.A. (Cajamar 5) and IM Cajamar 6 F.T.A. (Cajamar 6) as follows:

Cajamar 1
-- Series A notes upgraded to AAA (sf) from AA (sf)
-- Series B notes confirmed at C (sf)

Cajamar 5
-- Class A Notes confirmed at A (sf)

Cajamar 6
-- Class A Notes upgraded to AA (low) (sf) from A (high) (sf)

The ratings on all the Series A and Class A notes address the timely payment of interest and the ultimate payment of principal payable on or before the Final Maturity Date. The rating on the Series B notes of Cajamar 1 addresses the ultimate payment of interest and principal payable on or before the Final Maturity Date.

Additionally, DBRS removed all the rated notes (all together, the Notes) from their Under Review with Positive Implications (UR-Pos.) status.

The rating actions are the result of an annual review of the transaction following the publication of an update to the “European RMBS Insight: Spanish Addendum” methodology on 2 October 2018, where DBRS updated its house price indexation (HPI) and market value decline (MVD) rates to reflect data through the third quarter of 2017.

The Notes were originally placed 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). For additional information on the upgrade, please see DBRS’s press release entitled “DBRS Upgrades the Kingdom of Spain to A, Stable Trend”, published on 6 April 2018. The UR-Pos. status of the notes was extended following the publication of the “European RMBS Insight: Spanish Addendum - Request for Comment” on 24 July 2018.

The rating actions are based on the following analytical considerations:
-- The portfolio performance, in terms of delinquencies, defaults and losses.
-- Updated portfolio default rate (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables.
-- Current available credit enhancement (CE) to the Notes to cover the expected losses at their respective rating levels.

All three transactions are Spanish residential mortgage-backed securities transactions originated and serviced by Cajamar Caja Rural, Sociedad Cooperativa de Credito (Cajamar).

PORTFOLIO PERFORMANCE AND ASSUMPTIONS
For Cajamar 1, the current cumulative default ratio is 0.1%. As of June 2018, the 30+ and 90+ delinquency ratios were 2.0% and 0.2%, respectively.
For Cajamar 5, the current cumulative default ratio is 5.7%. As of June 2018, the 30+ and 90+ delinquency ratios were 2.6% and 0.4%, respectively.
For Cajamar 6, the current cumulative default ratio is 8.1%. As of June 2018, the 30+ and 90+ delinquency ratios were 3.2% and 0.4%, 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 7.7% and 34.7%, respectively.
For Cajamar 5, DBRS has updated its base case PD and LGD assumptions to 3.6% and 9.5%, respectively.
For Cajamar 6, DBRS has updated its base case PD and LGD assumptions to 4.2% and 18.7%, respectively.

The updated assumptions incorporate the Spanish sovereign rating which was upgraded to “A” from A (low) on 6 April 2018, as well as the updated MVDs and HPIs, as per the “European RMBS Insight: Spanish Addendum” published on 2 October 2018.

CREDIT ENHANCEMENT
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 25.6% and Series B CE was 0.0%, as of the June 2018 payment date.
For Cajamar 5, Class A Notes CE remained at 10.7%, as of the June 2018 payment date.
For Cajamar 6, Class A Notes CE remained at 16.9%, as of the June 2018 payment date.

Santander acts as the Account Bank for the three transactions. On the basis of Santander’s reference rating of A (high), being one notch below its DBRS public Long-Term Critical Obligations Rating of AA (low), and the mitigants outlined in the transaction’s documents, DBRS considers the risk arising from the exposure to Santander to be consistent with the rating of the Notes.

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 Titulización, S.G.F.T., S.A. 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 rating, DBRS was supplied with third-party assessments for the three transactions. However, this did not impact the rating analyses.

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 27 July 2018 when DBRS extended the UR-Pos. status on the Notes.

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 7.7% and 34.7%, respectively. At the AAA (sf) rating level, the PD and LGD are 29.2% and 56.1%, respectively.
-- For Cajamar 5, the base case PD and LGD assumptions for the collateral pool are 3.6% and 9.5%, respectively. At the A (sf) rating level, the PD and LGD are 14.2% and 24.7%, respectively.
-- For Cajamar 6, the base case PD and LGD assumptions for the collateral pool are 4.2% and 18.7%, respectively. At the AA (low) (sf) rating level, the PD and LGD are 17.7% and 37.0%, 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 of the Series A notes of Cajamar 1 would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Series A notes of Cajamar 1 would be expected to remain at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and the LGD increase by 50%, the rating of the Series A notes of Cajamar 1 would be expected to remain at AAA (sf).

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

Cajamar 1’s Class B notes rating would not be affected by any hypothetical change to either PD or LGD.

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 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).

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

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: Gareth Levington, 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.