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

DBRS Ratings GmbH (DBRS Morningstar) 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
-- Class A Notes confirmed at AAA (sf)
-- Class B Notes upgraded to B (high) (sf) from C (sf)

Cajamar 5
-- Class A Notes upgraded to A (high) (sf) from A (sf)
Cajamar 6
-- Class A Notes upgraded to AA (sf) from AA (low) (sf)

The ratings on all the 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 Class B Notes notes of Cajamar 1 addresses the ultimate payment of interest and principal payable on or before the final maturity date.

The rating actions are the result of an annual review of the transactions and 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 to the Notes to cover the expected losses at their respective rating levels.

Cajamar 1 closed in January 2016, while Cajamar 5 and 6 closed in September 2007 and February 2018, respectively. All three transactions are Spanish residential mortgage-backed securities transactions originated and serviced by Cajamar Caja Rural, Sociedad Cooperativa de Crédito (Cajamar).

PORTFOLIO PERFORMANCE AND ASSUMPTIONS
For Cajamar 1, the current cumulative default ratio is 0.16%. As of August 2019, the 90+ delinquency ratio stood at 0.24%.
For Cajamar 5, the current cumulative default ratio is 5.8%. As of August 2019, the 90+ delinquency ratio stood at 0.25%.
For Cajamar 6, the current cumulative default ratio is 8.2%. As of August 2019, the 90+ delinquency ratio stood at 0.29%.

The performance of each transaction is above DBRS Morningstar’s expectations. DBRS Morningstar 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 Morningstar has updated its base case PD and LGD assumptions to 6.9% and 31.7%, respectively.
For Cajamar 5, DBRS Morningstar has updated its base case PD and LGD assumptions to 3.1% and 7.5%, respectively.
For Cajamar 6, DBRS Morningstar has updated its base case PD and LGD assumptions to 4.2% and 18.7%, respectively.
The rating actions are a result of the sustainable performance above DBRS Morningstar’s initial expectations and updated default assumptions.

CREDIT ENHANCEMENT
For each transaction, credit enhancement to the rated notes is provided by the subordination of junior classes and a cash reserve.

For Cajamar 1, the Class A Notes credit enhancement stood at 27.9% as of the June 2019 payment date, up from 25.6% at the time at the last rating action one year ago. The Class B Notes credit enhancement was 0.0%. When the Class A Notes are paid in full, the cash reserve will also provide credit support to the Class B Notes.

For Cajamar 5, the Class A Notes credit enhancement remained at 10.7%, as of the June 2019 payment date. For Cajamar 6, the Class A Notes credit enhancement remained at 16.9%, as of the June 2019 payment date. Both are stable given the current pro rata amortisation of the Class A, B, C and D notes on both transactions.

Banco Santander SA (Santander) acts as the Account Bank for the three transactions. On the basis of Santander’s reference rating of A (high), one notch below its DBRS Morningstar 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 structures, DBRS Morningstar considers the risk arising from the exposure to Santander to be consistent with the ratings of the Notes, as described in DBRS Morningstar’s "Legal Criteria for European Structured Finance Transactions" methodology.

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 Morningstar 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 actions.

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 “Global Methodology for Rating Sovereign Governments” at: https://www.dbrs.com/research/350410/global-methodology-for-rating-sovereign-governments.

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 Morningstar did not rely upon third-party due diligence in order to conduct its analysis.

At the time of the initial rating, DBRS Morningstar was supplied with third-party assessments for the three transactions. However, this did not impact the rating analyses.

DBRS Morningstar considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.

DBRS Morningstar 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 5 October 2018 when DBRS Morningstar confirmed the ratings on the Class B Notes of Cajamar 1 and Class A Notes of Cajamar 5 at C (sf) and A (sf), respectively, and upgraded the ratings on the Class A Notes of Cajamar 1 and Class A Notes of Cajamar 6 to AAA (sf) and AA (low) (sf) from AA (sf) and A (high) (sf), respectively.

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

Information regarding DBRS Morningstar 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 Morningstar considered the following stress scenarios as compared with the parameters used to determine the rating (the Base Case):
-- DBRS Morningstar 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 6.9% and 31.7%, respectively. At the AAA (sf) rating level, the PD and LGD are 27.6% and 53.8%, respectively. At the B (high) (sf) rating level, the PD and LGD are 7.8% and 32.9%, respectively.
-- For Cajamar 5, the base case PD and LGD assumptions for the collateral pool are 3.1% and 7.5%, respectively. At the A (high) (sf) rating level, the PD and LGD are 13.8% and 23.5%, respectively.
-- For Cajamar 6, the base case PD and LGD assumptions for the collateral pool are 3.7% and 15.9%, respectively. At the AA (sf) rating level, the PD and LGD are 18.0% and 35.8%, 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 Class 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 Class A Notes of Cajamar 1 would be expected to be at AAA (low) (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 of Cajamar 1 would be expected to be downgraded to AA (low) (sf).

Cajamar 1 Class A Notes 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 (low) (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 AA (high) (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (low) (sf).

Cajamar 1 Class B Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of B (high) (sf).
-- 50% increase in LGD, expected rating of B (high) (sf).
-- 25% increase in PD, expected rating of B (high) (sf).
-- 50% increase in PD, expected rating of B (high) (low) (sf).
-- 25% increase in PD and 25% increase in LGD, expected rating of B (high) (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating of B (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of B (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of B (low) (sf).

Cajamar 5 Class A Notes 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 (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 (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).

Cajamar 6 Class 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 A (high) (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of A (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of A (sf).

For further information on DBRS Morningstar 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: Christian Aufsatz, 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

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

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 Morningstar 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 [email protected].