DBRS Takes Rating Actions on CaixaBank PYMES 9, FT

DBRS Ratings Limited (DBRS) took the following rating actions on the bonds issued by CaixaBank PYMES 9, FT (the Issuer):

-- Series A Notes upgraded to A (high) (sf) from A (low) (sf)
-- Series B Notes confirmed at CCC (sf)

The rating of the Series A Notes addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date. The rating of the Series B Notes addresses the ultimate payment of interest and principal on or before the legal final 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, defaults and losses.
-- Updated probability of default (PD) rate, recovery rate and expected loss assumptions on the remaining receivables.
-- Current available credit enhancement to the notes to cover the expected losses at their respective rating levels.

CaixaBank PYMES 9, FT is a cash flow securitisation collateralised by a portfolio of loans and current drawdowns of revolving mortgage credit lines originated by CaixaBank, S.A. (the Originator) to small- and medium-sized enterprises and self-employed individuals based in Spain.

PORTFOLIO PERFORMANCE
As of September 2018, almost one year since closing, two- to three-month arrears represented 0.01% of the outstanding portfolio balance, the 90+ delinquency ratio was 1.0% and the cumulative default ratio was 0.1%.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis on the remaining pool and updated its PD and recovery assumptions on the outstanding portfolio to 23.5% and 23.6%, respectively, at the A (high) (sf) rating level, and to 6.7% and 29.6%, respectively, at the CCC (sf) rating level.

CREDIT ENHANCEMENT
As of September 2018, the credit enhancement to the Series A and Series B Notes was 20.3% and 5.6% up from 16.6% and 4.6%, respectively, since the DBRS initial rating. The credit enhancement of the Series A Notes considers the subordination of Series B Notes and the reserve fund (RF). The RF is available to cover missed interest and principal payments on the Series A Notes and Series B Notes once the Series A Notes have paid in full. The reserve fund is currently at its target level of EUR 84.2 million.

CaixaBank, S.A acts as the Transaction Account Bank for the transaction. On the basis of DBRS’s AA (low) public Long-Term Critical Obligations Rating of CaixaBank and the mitigants outlined in the transaction documents, DBRS considers the risk arising from the exposure to the Account Bank to be consistent with the rating assigned to the Series A 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 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 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 investor and servicer reports provided by CaixaBank 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. 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 24 November 2017, when DBRS finalised its provisional ratings on the notes.

The lead analyst responsibilities for this transaction have been transferred to Francesco Amato.

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”):

-- PD Rates Used: base case PD of 9.9%, a 10% increase of the base case and a 20% increase of the base case PD.
-- Recovery Rates Used: base case recovery rate of 23.6% at the A (high) (sf) stress level for the Series A Notes and a base case recovery rate of 29.6% at the CCC (sf) stress level for the Series B Notes. There is a 10% and 20% decrease in the base case recovery rates for the Series A and Series B Notes, respectively. Note that the percentage decreases in the recovery rates are assumed for the other stress recovery rate levels.

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 (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 A Notes at A (high) (sf).

Regarding 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 confirmation of the Series B Notes at CCC (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 CCC (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: Francesco Amato, Financial Analyst
Rating Committee Chair: Gareth Levington, Managing Director
Initial Rating Date: 21 November 2017

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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
-- Rating CLOs Backed by Loans to European SMEs
-- Rating CLOs and CDOs of Large Corporate Credit
-- 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.