Press Release

DBRS Morningstar Upgrades Ratings of Cajamar Caja Rural S.C.C. Covered Bonds to AA (high)

Covered Bonds
July 08, 2022

DBRS Ratings GmbH (DBRS Morningstar) upgraded its ratings of the outstanding Cédulas Hipotecarias (CH, Spanish mortgage covered bonds) issued under the Cajamar Caja Rural S.C.C. Covered Bonds programme (Cajamar CH or the Programme) to AA (high) from A (high). At the same time, DBRS Morningstar discontinued its ratings on CH ES0414601056, which matured on 1 October 2021; CH ES0422714032, which matured on 26 January 2022; and CH ES0422714073, which matured on 30 June 2022.

The rating action follows the completion of a full review of the ratings and the entry into force on 8 July 2022 of the Royal Decree-Law 24/2021 (the Law), which starts governing all existing and new Spanish covered bonds (CB) as of this date. The Law transposes the European Commission’s CB Directive, which outlines the harmonisation of CB frameworks across Europe, into Spanish law, and replaces the previous Spanish CB laws.

The Law includes several positive features for Spanish CBs. However, the high overcollateralisation (OC) level, which was one of the main strengths of Spanish CH, decreases because (i) the statutory OC level has dropped to 5% from 25% and (ii) the issuer shall now register a specific cover pool (CP) for each CB programme, so the entire mortgage book of the issuer is no longer pledged for the benefit of CB holders.

DBRS Morningstar has received and reviewed the provisional CP to be registered, as at 31 May 2022.

The ratings are based on the following analytical considerations:
-- A Covered Bonds Attachment Point (CBAP) of BBB (low), which is one notch above Cajamar’s Long-Term Senior Debt Rating. Cajamar is the Issuer and Reference Entity (RE) for the Programme.
-- A Legal and Structuring Framework (LSF) Assessment of “Strong” associated with the Programme.
-- A Cover Pool Credit Assessment (CPCA) of AA (high), which is the lowest CPCA in line with the LSF-Implied Likelihood (LSF-L).
-- An LSF-L of AA (low).
-- A two-notch uplift for high recovery prospects.
-- A level of overcollateralisation (OC) to which DBRS Morningstar gives credit, which corresponds to the OC level of the provisional portfolio as of 31 May 2022, adjusted by a scaling factor of 0.85.
-- The sovereign rating of the Kingdom of Spain, rated ‘A’ with a Stable trend by DBRS Morningstar, as of the date of this SRC.

DBRS Morningstar analysed the transaction with its European Covered Bonds Cash Flow tool. The main assumptions focused on the timing of defaults and recoveries of the assets, interest rate stresses, and market value spreads to calculate liquidation values on the CP.

Everything else being equal, a one-notch downgrade of the CBAP would lead to a two-notch downgrade of the LSF-L, resulting in a two-notch downgrade of the covered bonds rating. In addition, all else unchanged, the CH ratings would be downgraded if any of the following occurred: (1) the CPCA was downgraded below AA (high); (2) the sovereign rating of the Kingdom of Spain was downgraded below A (low); (3) the LSF assessment associated with the Programme was downgraded; (4) the quality of the CP and the level of OC were no longer sufficient to support a two-notch uplift for high recovery prospects; (5) the relative amortisation profile of the CH and CP moved adversely; or (6) volatility in the financial markets caused the currently estimated market value spreads to increase.

Spanish CBs are backed by a specific portfolio of assets selected by the issuer, unlike before 8 July 2022, when they were backed by the entire mortgage book of the bank, except mortgage loans pledged to securitisations and bonos hipotecarios. There are currently EUR 5.0 billion of CH outstanding under the Programme, of which DBRS Morningstar publicly rates EUR 2.0 billion. As of 31 March 2022, the aggregate balance of mortgages in the total CP was EUR 12.9 billion, which would result in a total estimated OC of 157.5%. The eligible CP stood at EUR 9.8 billion, resulting in an estimated eligible OC of 97.0%.

The portfolio to be registered is smaller, but of a better credit quality than the total CP as of 31 March 2022. The CP as of 31 March 2022 comprised 174,099 mortgage loans, with a weighted-average (WA) current unindexed loan-to-value ratio of 52.5%. That pool was composed of residential loans (78.5%), commercial loans (18.9%), developers (2.1%), and land (0.5%). It was geographically diversified, with higher concentrations in Andalusia (32.9%), Valencia (24.3%), and Murcia (18.0%). That pool was 97-months seasoned, with a WA remaining term of 216 months.

As is mandatory by law, the cover pool also includes a dynamic liquidity buffer that covers the net liquidity outflow of the Programme over the following 180 days.

As is customary in the Spanish market, CH holders do not receive the benefit of any swap contract to hedge the mismatches between the interest yield by the CP (87.6% floating rate linked to different indexes and resets) and the interest due on the CH (100% fixed rate). This risk is mitigated by the available OC and accounted for in DBRS Morningstar’s cash flow analysis.

All CH and assets are issued in euros.

The WA life of the assets as reported by the issuer is approximately 11 years while that of the covered bonds is approximately 3.8 years. This generates an asset-liability mismatch that is mitigated by the available OC.

DBRS Morningstar has assessed the LSF related to the Programme as “Strong” according to its “Rating and Monitoring Covered Bonds” methodology.

The “Strong” LSF Assessment associated with each of the CH programmes reflects DBRS Morningstar’s view of:

(1) The Law giving CB holders a preferential right on the cash flows derived from the mortgage credits and loans in the cover pool, as well as those cash flows deriving from the liquidity buffer, and substitute assets and derivative instruments in the cover pool, if any;

(2) The appointment of a special administrator to manage the CB programme in case of issuer’s insolvency or resolution. This special administrator will be separate from the general insolvency administrator, will ensure that the rights and interests of the CB holders are preserved, and will have wide powers to attempt a refinancing of the cover pool.

(3) The designation of an independent party to monitor the CP (cover pool monitor), whose requirements are very broad and detailed. The cover pool monitor will apprise the regulator (Bank of Spain) on a frequent basis.

(4) The dynamic liquidity buffer to cover temporary liquidity constraints, which the cover pool shall include at all times. This buffer shall cover the net liquidity outflow of the CB programme over the following 180 days.

For more information, please refer to DBRS Morningstar’s “Spanish Mortgage Covered Bonds: Legal and Structuring Framework Review” commentary, available at

For further information on the Programme, please refer to the rating report at

There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at:

All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is: “Rating and Monitoring Covered Bonds” (22 April 2022).

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found at:

DBRS Morningstar 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 documents have remained unchanged since the most recent rating action.

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 Morningstar Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at:

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report:

The sources of data and information used for these ratings include CP stratification tables as at 31 March 2022 and static pool default and recovery data on Cajamar mortgage book provided by the Issuer. Furthermore, the issuer provided with stratification tables of the provisional CP to be registered, as at 31 May 2022.

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

At the time the of the initial ratings, DBRS Morningstar was not supplied with third-party assessments. However, this did not impact the rating analysis.

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 this transaction took place on 18 May 2022, when DBRS Morningstar assigned a A (high) rating to a Cajamar covered bond new issuance.

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available on

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage:

These ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Tomás Rodríguez-Vigil
Rating Committee Chair: Ketan Thaker, Managing Director
Initial Rating Date: 19 July 2013

DBRS Ratings GmbH, Sucursal en España
Paseo de la Castellana 81
Plantas 26 & 27
28046 Madrid, Spain
Tel. +34 (91) 903 6500

DBRS Ratings GmbH
Neue Mainzer Straße 75
60311 Frankfurt am Main Deutschland
Tel. +49 (69) 8088 3500
Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

The rating methodologies used in the analysis of this transaction can be found at:

-- Rating and Monitoring Covered Bonds (22 April 2022),
-- Rating and Monitoring Covered Bonds Addendum: Market Value Spreads (22 April 2022),
-- Global Methodology for Rating Banks and Banking Organisations (23 June 2022),
-- Legal Criteria for European Structured Finance Transactions (29 July 2021),
-- European RMBS Insight Methodology (28 March 2022) and European RMBS Insight Model v.,
-- European RMBS Insight: Spanish Addendum (26 April 2022),
-- Operational Risk Assessment for European Structured Finance Originators (16 September 2021),
-- Operational Risk Assessment for European Structured Finance Servicers (16 September 2021),
-- Rating CLOs and CDOs of Large Corporate Credit (26 January 2022),
-- Rating CLOs Backed by Loans to European SMEs (10 June 2022) and DBRS Diversity Model v.,
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2021),
-- Global Methodology for Rating Sovereign Governments (9 July 2021),
-- Currency Stresses for Global Structured Finance Transactions (4 February 2022),
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (17 May 2022),

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at:

For more information on this credit or on this industry, visit or contact us at