DBRS Takes Rating Actions on AyT Goya Hipotecario IV and V, FT

DBRS Ratings GmbH (DBRS) took the following rating actions:

AyT Goya Hipotecario IV, Fondo de Titulización de Activos (Goya IV):
-- Series A Notes confirmed at AA (sf)
-- Series B Notes upgraded to A (high) (sf) from A (sf)

AyT Goya Hipotecario V, Fondo de Titulización de Activos (Goya V):

-- Series A confirmed at AA (sf)
-- Series B upgraded to A (high) (sf) from BBB (high) (sf)

The ratings address the timely payment of interest and the ultimate payment of principal on or before their respective legal final maturity dates.

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.
-- 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.
-- Correction of a misapplication of the methodology made on Goya V at the last rating action date.

The two transactions are securitisations of Spanish prime residential mortgage loans originated and serviced by CaixaBank S.A. (previously Barclays Bank S.A./Spain).

PORTFOLIO PERFORMANCE AND ASSUMPTIONS
For Goya IV, as of March 2019, two- to three-month arrears represented 0.05% of the outstanding portfolio balance, down from 0.11% in March 2018; the 90+ delinquency ratio was 0.31%, up from 0.18% a year earlier. As of March 2019, the cumulative default ratio was 1.60%, and the cumulative loss ratio was 0.8%.

For Goya V, as of March 2019, two- to three-month arrears represented 0.01% of the outstanding portfolio balance, down from 0.04% in March 2018; the 90+ delinquency ratio was 0.43%, up from 0.25% a year earlier. As of March 2019, the cumulative default ratio was 1.14%, and the cumulative loss ratio was 0.4%.

DBRS conducted a loan-by-loan analysis on the remaining collateral pools of receivables and updated its PD and LGD assumptions.

For Goya IV, the PD and LGD for the AA (sf) rating level are 14.12% and 32.41%, respectively. The PD and LGD assumptions for the A (high) (sf) rating level are 11.36% and 28.22%, respectively.

For Goya V, the PD and LGD for the AA (sf) rating level are 13.84% and 32.24%, respectively. The PD and LGD assumptions for the A (high) (sf) rating level are 11.10% and 28.10%, respectively.

CREDIT ENHANCEMENT
The CEs available to all rated notes have continued to increase as the transactions deleverage. The Series A Notes for both transactions are supported by the subordination of the Series B Notes and the Reserve Fund (RF), which is available to cover senior fees, interest and principal of the Series A and Series B Notes. The Series B Notes are solely supported by the RF. For Goya IV, as of the March 2019 payment date, CE to the Series A Notes was 47.7%, up from 23.0% at the DBRS initial rating. CE to the Series B Notes was 11.0%, up from 5.0% at the DBRS initial rating. For Goya V, as of the March 2019 payment date, CE to the Series A Notes was 49.9%, up from 26.0% at the DBRS initial rating. CE to the Series B Notes was 10.7%, up from 6.0% at the DBRS initial rating.

Both RFs may amortise over the life of the transactions, subject to a floor and certain amortisation triggers. For Goya IV, the RF is currently at EUR 60.3 million, below its target of EUR 65.0 million. The RF for Goya V is currently at its target level of EUR 70.0 million.

The management company on behalf of the issuer entered into an interest rate swap with Banco Santander S.A. and CaixaBank S.A. for Goya IV and Goya V, respectively, in order to hedge the basis risk that may arise from the difference between 12 months’ Euribor (assets) and six months’ Euribor (liabilities).

At the time of the previous rating action on 25 May 2018, DBRS’s Goya V Class B Notes were rated at BBB (high) (sf) due to a misinterpretation of the swap structure, which resulted in the rating being too conservative. This conservative interpretation has now been removed from DBRS’s cash flow analysis, contributing to the upgrade.

The DBRS Critical Obligations Ratings of Banco Santander SA and CaixaBank SA are above the First Rating Threshold as described in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology, given the AA (sf) ratings of the Series A Notes.

CaixaBank, S.A. acts as the account bank for the transactions. Based on the account bank reference rating of CaixaBank, S.A. at A (high) being one notch below the DBRS public Long-Term Critical Obligations Rating of AA (low), the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS considers the risk arising from the exposure to the account bank to be consistent with the rating assigned to the Series A Notes as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology.

The transaction structures were analysed in Intex DealMaker.

DBRS notes that the above press release was amended on 27 May 2019 to clarify the previous misapplication of the methodology on Goya V. The amendment was minor and would not impact the understanding of the reader.

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/333487/rating-sovereign-governments.pdf.

The sources of data and information used for these ratings include reports and information received from HAYA Titulización, S.G.F.T., S.A.U. 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 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 these transactions took place on 25 May 2018, when DBRS confirmed the rating of the Goya IV Series A Notes at AA (sf) and upgraded the rating of the Series B Notes to A (sf) from BBB (high) (sf), and confirmed the ratings of the Goya V Series A Notes and Series B Notes at AA (sf) and BBB (high) (sf), respectively.

The lead analyst responsibilities for these transactions have been transferred to Alfonso Candelas.

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 Goya IV, the PD and LGD for the AA (sf) rating level are 14.12% and 32.41%, respectively. The PD and LGD assumptions for A (high) (sf) rating level are 11.36% and 28.22%, respectively.

-- For Goya V, the PD and LGD for the AA (sf) rating level are 13.84% and 32.24%, respectively. The PD and LGD assumptions for A (high) (sf) rating level are 11.10% and 28.10%, respectively.

-- The Risk Sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base case assumption. For example, if the LGD increases by 50%, the rating on the Goya IV Series A Notes would be expected to remain at AA (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Goya IV Series A Notes would be expected to remain at AA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Series A Notes would be expected to remain at AA (sf).

Goya IV, Series A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD, expected rating of AA (sf)
-- 50% increase in PD, expected rating of AA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (sf)

Goya IV, Series B Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (low) (sf)
-- 50% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD, expected rating of A (low) (sf)
-- 50% increase in PD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (high) (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)

Goya V, Series A Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD, expected rating of AA (sf)
-- 50% increase in PD, expected rating of AA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (sf)

Goya V, Series B Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD, expected rating of A (high) (sf)
-- 50% increase in PD, expected rating of A (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (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 BBB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of 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 GmbH 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:
Goya IV: 4 May 2011
Goya V: 29 December 2011

DBRS Ratings GmbH
Neue Mainzer Straße 75
60311 Frankfurt am Main Deutschland
Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

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
-- 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
-- Derivative Criteria 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.