DBRS Finalises Provisional Rating on Series 33 Notes Issued by FADE

DBRS Ratings Limited (DBRS) finalised its provisional rating of A (sf) on the EUR 1,000.0 million Series 33 Notes (the Notes) issued by Fondo de Titulización del Déficit del Sistema Eléctrico, F.T.A. (FADE or the Fund).

The Notes were issued on 18 October 2018. The final maturity date for the Notes is 17 December 2023.

FADE is a fund created pursuant to the Royal Decree 437/2010 that regulates the amortisation framework of the tariff deficit in Spain. FADE’s purpose is to enable Spanish electricity companies to sell tariff deficit receivables with different maturities to the Fund and to issue series of Notes to the market.

The Notes issued by FADE were originally guaranteed by the Kingdom of Spain for an amount up to EUR 22 billion. On 27 August 2013, the Kingdom of Spain approved an additional EUR 4 billion extension of the guarantee, resulting in a total guarantee of EUR 26 billion to the FADE programme. Following the issuance of the Series 33 Notes, the total nominal outstanding amount of all the Notes issued by FADE will be EUR 15.7 billion, which is still under the guaranteed limit.

DBRS’s ratings of the Notes issued by the FADE programme are based on the obligation of the guarantor, the Kingdom of Spain, to make payments pursuant to the guarantee of the Notes’ interest and principal up to EUR 26 billion.

The guarantee issued by the Kingdom of Spain complies with all the relevant characteristics of a guarantee to which DBRS can give credit according to its “Legal Criteria for European Structured Finance Transactions” methodology.

The guarantee can be exercised with regard to any of the series issued by FADE to cover ordinary interest and principal on the Notes. The guarantee in place cannot assure the timely payment of interest and principal on the Notes.

The rating of the Notes is fully linked to the sovereign rating of the Kingdom of Spain. On 28 September 2018, DBRS’s Sovereign Group confirmed the Kingdom of Spain’s Long-Term Issuer Ratings at “A” with a Stable trend. The trend on the ratings of the Kingdom of Spain can be assumed to be an indicator of the potential future movement of the ratings of the Notes.

FADE benefits from a EUR 2 billion credit line provided by the Instituto de Crédito Oficial (ICO). The credit line covers for any interest or principal shortfalls on the Notes.

DBRS’s rating of the Notes addresses the ultimate distribution of interest and the ultimate distribution of principal on the Notes on or before the Final Maturity date of the Fund.

ICO is the Treasury Account Bank for the transaction. Based on the DBRS private rating of ICO, DBRS considers the risk arising from the exposure to ICO to be consistent with the rating assigned to the 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 rating is: “Legal Criteria for European Structured Finance Transactions”.

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

DBRS has conducted a review of the transaction’s legal documents related to these new issuances. A review of any other transaction’s 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 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 this rating include reports and legal documents provided by Titulización de Activos S.G.F.T., S.A.

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.

A provisional rating on these Notes was assigned on 18 October 2018. The last rating action on this transaction took place on 27 September 2018, when DBRS discontinued its ratings on the Series 4 Notes. Prior to that, on 30 April 2018, DBRS upgraded its ratings on all the outstanding Notes to A (sf) from A (low) (sf), following the upgrade of its rating of the Kingdom of Spain on 6 April 2018.

Information regarding DBRS ratings, including definitions, policies and methodologies are 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 with the parameters used to determine the rating (the “Base Case”):

DBRS concludes the following for the DBRS-rated series of notes issued by FADE (the Rated Notes):

-- A hypothetical downgrade of the sovereign rating of the Kingdom of Spain by one notch, ceteris paribus, would lead to a downgrade of the Rated Notes to A (low) (sf).
-- A hypothetical downgrade of the sovereign rating of the Kingdom of Spain by two notches, ceteris paribus, would lead to a downgrade of the Rated Notes to 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: Alfonso Candelas, Senior Vice President
Rating Committee Chair: Gareth Levington, Managing Director
Initial Rating Date: 19 September 2013

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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
-- Spanish 2005 Electricity Tariff
-- Operational Risk Assessment for European Structured Finance Servicers

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.