Press Release

DBRS Morningstar Assigns Provisional Rating to Cajamar Caja Rural S.C.C. Covered Bonds (Cédulas Territoriales - Public Sector)

Covered Bonds
March 17, 2023

DBRS Ratings GmbH (DBRS Morningstar) assigned a provisional rating of AA (low) to a new series of covered bonds to be issued by Cajamar Caja Rural, Sociedad Cooperativa de Crédito (Cajamar or the Issuer) under the Cajamar Public Sector Covered Bonds (Cédulas Territoriales or CT) programme (the Programme). This series is the only outstanding CT (Cedulas Territoriales - ES0422714180) under the programme, and will be a EUR 750 million fixed-rate bond with a coupon of 3.55%. The bond matures in March 2029 and has an extension period of 12 months.

The provisional rating is based on information provided to DBRS Morningstar by the Issuer as of the date of this press release. This rating will be finalised upon review of the final version of the transaction documents. If the information therein were substantially different, DBRS Morningstar may assign different final ratings to the notes.

The rating is based on the following analytical considerations:
-- A Covered Bonds Attachment Point (CBAP) of BBB (low), which is one notch above Cajamar’s Long Term Issuer Rating. Cajamar is the Issuer of 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 A (low), which is the lowest CPCA in line with the LSF-Implied Likelihood (LSF-L).
-- An LSF-L of “A”.
-- A two-notch uplift for high recovery prospects.
-- A level of overcollateralisation (OC) of 36% to which DBRS Morningstar gives credit, which is the OC level considered to be sustainable based on information from the issuer. The minimum level of OC observed over the past 12 months was 162% in February 2023.
-- The sovereign rating on the Kingdom of Spain, rated “A” with a Stable trend by DBRS Morningstar, as of the date of this press release.

DBRS Morningstar analysed the transaction with its European Covered Bond 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 one-notch downgrade of the LSF-L, resulting in a one-notch downgrade of the covered bonds ratings.

In addition, all else unchanged, the CT ratings would be downgraded if any of the following occurred: (1) the CPCA was downgraded below A (low); (2) the sovereign rating on the Kingdom of Spain was downgraded; (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 CT and the CP moved adversely; or (6) volatility in the financial markets caused the currently estimated market value spreads to increase.

The Strong LSF Assessment associated with this CB programme reflects DBRS Morningstar’s view of the following:
1: DBRS Morningstar understands that the legislation currently in place gives 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 insolvency judge or the FROB (Fund for the Orderly Restructuring of the Banking Sector), in case of the issuer's insolvency or resolution, respectively, will appoint a special administrator to manage the CB programme. This special administrator will be separate from the general insolvency administrator and will ensure that the rights and interests of the CB holders are preserved. Moreover, the special administrator will have wide powers to attempt a refinancing of the cover pool (CP).
3: CB issuers shall designate an independent party to monitor the CP (cover pool monitor), which needs to be approved by the regulator (the Bank of Spain). The cover pool monitor, whose requirements are very broad and detailed, will apprise the Bank of Spain on a frequent basis.
4: The cover pool shall include at all times a dynamic liquidity buffer to cover temporary liquidity constraints. This buffer shall cover the net liquidity outflow of the CB programme over the next 180 days. In DBRS Morningstar's view, this provides the CB holders strong protection.
5: All the outstanding CBs under the programme have an extension period of 12 months (soft-bullet). DBRS Morningstar’s assessment of such structure is credit positive because, if an issuer is unable to meet payments on the CBs, extension periods reduce the stress on the potential liquidation of the cover pool (CP) to meet upcoming maturities on the CBs.

The total outstanding amount of the CT under the programme is expected to be EUR 750 million. The provisional portfolio as of February 2023 amounted to EUR 1,964 million. This results in a provisional OC of 162%. The minimum legal OC level for CT is 5.0%.

As of December 2022, the CP comprised public sector assets amounting to EUR 1,996 million and was concentrated (100% of the CP) in Spain, the domicile sovereign. The RE is also located in Spain, the host sovereign. In DBRS Morningstar’s view, this exposes CB investors to an increased risk that the creditworthiness of the RE and the CP may deteriorate at the same time. According to DBRS Morningstar’s “Rating and Monitoring Covered Bonds” methodology, in these circumstances, DBRS Morningstar considers that the CB rating is unlikely to exceed three notches above the rating of the host sovereign.

As is customary in the Spanish market, Cajamar CT does not benefit from hedging agreements to cover the mismatch between the interest paid by the cover pool (54.1% floating rate linked to different indexes and resets) and the interest paid to the covered bondholders (100% fixed rate). This risk is mitigated by the OC available and has been accounted for in DBRS Morningstar´s cash flow analysis.

There is a maturity mismatch between the principal payments of the CT and the amortisation profile of the cover pool assets. However, unlike in most covered bond programmes, assets’ weighted-average life (3.1 years as per DBRS Morningstar calculation) is shorter than that of the liabilities (6.0 years). This asset-liability mismatch is mitigated by the available OC and accounted for in the "Strong" LSF Assessment associated with the programme.

All CP assets and CB are denominated in euros. As such, investors are not currently exposed to any foreign-exchange risk.

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

Credit rating actions on Cajamar are likely to have an impact on this credit rating.

There were no Environmental/Social/Governance factors 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 rating is: “Rating and Monitoring Covered Bonds” (22 April 2022);

DBRS Morningstar has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

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

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 this rating include loan-by-loan data on the CP as at 31 December 2022, containing, among others, information provided by the issuer on the initial amount of the loan, residual amount, maturity date, amortisation type, underlying debtor, country of the debtor, guarantor, country of the guarantor, and interest rate type.

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

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 this rating 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.

This rating concerns an expected-to-be-issued new financial instrument. This is the first DBRS Morningstar rating on this financial instrument.

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:

This rating is endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Tomas Rodriguez-Vigil Junco, Vice President, Credit Ratings
Rating Committee Chair: Ketan Thaker, Managing Director
Initial Rating Date: 17 March 2023

DBRS Ratings GmbH, Sucursal en España
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28046 Madrid, Spain
Tel. +34 (91) 903 6500

DBRS Ratings GmbH
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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 (22 July 2022),
-- Modelling Assumptions for Portfolios of Public Sector Exposures (26 July 2022) and DBRS Public Sector Model v 0.2.1.,
-- Operational Risk Assessment for European Structured Finance Originators (15 September 2022),
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2022),
-- Interest Rate Stresses for European Structured Finance Transactions (22 September 2022),
-- Global Methodology for Rating Sovereign Governments (29 August 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