DBRS Takes Rating Actions on FT RMBS Prado VI

DBRS Ratings GmbH (DBRS) took the following rating actions on the bonds issued by FT RMBS Prado VI (the Issuer):

-- Class A notes confirmed at AAA (sf)
-- Class B notes upgraded to A (sf) from BBB (high) (sf)

The rating of the Class A notes addresses the timely payment of interest and ultimate payment of principal on or before the final legal maturity date. The rating of the Class B notes addresses the ultimate payment of interest and principal on or before the final legal 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 as of the June 2019 payment date.
-- Portfolio default rate (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables.
-- Current available credit enhancement (CE) to the rated notes to cover the expected losses at their respective rating levels.

The Issuer is a securitisation of Spanish first-lien residential mortgage loans originated and serviced by Unión de Créditos Inmobiliarios S.A., E.F.C. (UCI).

PORTFOLIO PERFORMANCE
As of the June 2019 payment date, loans in arrears by two to three months represented 0.02% of the outstanding portfolio balance, up from 0.0% at deal closing. Loans in arrears more than 90 days represented 0.14%, up from 0.0%, while the cumulative default ratio stood at 0.02%.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis on the portfolio of receivables and updated its base case PD and LGD assumptions to 7.1% and 25.5%, respectively.

CREDIT ENHANCEMENT
The current CE for the Class A notes increased to 19.0% from 18.0% and to 8.5% from 8.0% at closing for the Class B notes.

The reserve fund (RF) provides liquidity support to the rated notes. It can amortise to 2.25% of the outstanding balance of the assets with a floor at 1.00% of the outstanding balance of the assets. The RF is at its target level of EUR 9,102,367 as of June 2019.

Banco Santander S.A. (Santander) acts as the account bank for the transaction. Based on the Santander’s reference rating of A (high), which is one notch below DBRS’s Long-Term Critical Obligations Rating (COR) 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 Class A notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

Santander acts also as the Interest Rate Swap Counterparty for this transaction. DBRS’s COR of AA (low) is above the first rating threshold as described in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology.

The transaction structure was analysed in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is “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 initial 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 investor reports provided by the management company, Santander de Titulización, SGFT, 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 12 July 2018, when DBRS finalised its provisional ratings of AAA (sf) and BBB (high) (sf) assigned to the the Class A and Class B notes, respectively.

The lead analyst responsibilities for this transaction have been transferred to Shalva Beshia.

Information regarding DBRS ratings, including definitions, policies and methodologies, is available on www.dbrs.com.

To assess the impact of changing the transaction parameters on the ratings, 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.
-- The base case PD and LGD of the current pool of loans for the Issuer are 7.1% and 25.5%, 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 on the Class A notes would be expected to fall to AA (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Class A notes would also be expected to fall to AA (sf), assuming no change in the LGD. Furthermore, if both the PD and the LGD increase by 50%, the rating of the Class A notes would be expected to fall to A (high) (sf).

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

Class B Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD, expected rating of BBB (high) (sf)
-- 50% increase in PD, expected rating of BBB (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 (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BB (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: Shalva Beshia, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 12 July 2018

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.

-- Master European Structured Finance Surveillance Methodology
-- Interest Rate Stresses for European Structured Finance Transactions
-- Legal Criteria for European Structured Finance Transactions
-- European RMBS Insight Methodology
-- European RMBS Insight: Spanish Addendum
-- Operational Risk Assessment for European Structured Finance Servicers
-- 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.