DBRS Morningstar Confirms Ratings on Fondo de Titulización del Déficit del Sistema Eléctrico, F.T.A.

DBRS Ratings GmbH (DBRS Morningstar) confirmed its A (sf) ratings on the following series of notes (the Notes) issued by Fondo de Titulización del Déficit del Sistema Eléctrico, F.T.A. (FADE or the Issuer):

-- Series 6
-- Series 7
-- Series 9
-- Series 10
-- Series 11
-- Series 15
-- Series 33
-- Series 34
-- Series 35

The rating confirmations follow an annual review of the transaction and reflect the specific nature and unique structure of this transaction, which is recognised by the Spanish government Royal Decree 437/2010.

DBRS Morningstar also discontinued its A (sf) rating on the Series 32 notes.

FADE is a fund created under the provisions dictated in Royal Decree 437/2010, which regulates the amortisation framework of the tariff deficit in the Kingdom of Spain (Spain). FADE’s purpose is to enable Spanish electricity companies to sell tariff-deficit receivables with different maturities to the Fund and to issue series of Notes to the market.

Spain originally guaranteed the Notes for an amount up to EUR 22.0 billion. On 27 August 2013, Spain approved an additional EUR 4.0 billion extension of the guarantee, resulting in a total guarantee of EUR 26.0 billion to the FADE programme. The total nominal outstanding amount of all Notes issued by FADE is under the guaranteed limit.

DBRS Morningstar’s ratings on the Notes are based on the obligation of the guarantor, Spain, to make payments pursuant to the guarantee of the Notes’ interest and principal, up to EUR 26.0 billion.

Spain’s guarantee complies with all the relevant characteristics of a guarantee to which DBRS Morningstar can give credit according to its “Legal Criteria for European Structured Finance Transactions” methodology.

Spain can exercise its guarantee with regard to any series issued by FADE to cover ordinary interest and principal on the Notes. The guarantee in place cannot assure the timely payment of interest and principal on the Notes.

The ratings on the Notes are fully linked to the sovereign rating on Spain, which DBRS Morningstar confirmed at “A” with a Stable trend on 17 February 2023.

FADE benefits from a EUR 2.0 billion credit line provided by the Instituto de Crédito Oficial (ICO). The credit line covers any interest or principal shortfalls on the Notes.

DBRS Morningstar’s ratings on the Notes address the ultimate distribution of interest and principal on the Notes on or before the legal final maturity date of the Fund.

ICO is the treasury account bank for the transaction. DBRS Morningstar’s private rating on ICO complies with the minimum institution rating given the ratings assigned to the Notes, as described in DBRS Morningstar’s “Legal Criteria for European Structured Finance Transactions” methodology.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS

Social Factors (S)
Human Capital and Human Rights
Spain’s guarantee makes the transaction dependent on the Spanish sovereign’s creditworthiness. DBRS Morningstar considers some of the key drivers behind the latest rating action on Spain, namely Human Capital and Human Rights, to be a significant rating factor. According to the International Monetary Fund, Spain’s per capita GDP was relatively low compared with its European peers at an estimated USD 29,198 in 2022. DBRS Morningstar took this factor into account primarily in the “Economic Structure and Performance” building block of its “Global Methodology for Rating Sovereign Governments”.

Credit rating actions on Spain are likely to have an impact on this credit rating. ESG factors that have a significant or relevant effect on the credit analysis of Spain are discussed separately at https://www.dbrsmorningstar.com/research/410074/dbrs-morningstar-confirms-kingdom-of-spain-at-a-stable-trend.

There were no Environmental/Governance factors that had a significant or relevant impact 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 https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is the “Legal Criteria for European Structured Finance Transactions” (22 July 2022), https://www.dbrsmorningstar.com/research/400166/legal-criteria-for-european-structured-finance-transactions.

Other methodologies referenced in this transaction are listed at the end of this press release.

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 legal 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: https://www.dbrsmorningstar.com/research/401817/global-methodology-for-rating-sovereign-governments.

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: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

The sources of data and information used for these ratings include transaction reports provided by Titulización de Activos S.G.F.T., S.A. and research reports available at Comisión Nacional de los Mercados y Competencia (CNMC) website.

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

At the time 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 27 April 2022, when DBRS Morningstar confirmed its A (sf) ratings on all the rated notes.

The lead analyst responsibilities for this transaction have been transferred to Helvia Meana.

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available at www.dbrsmorningstar.com.

Sensitivity Analysis: To assess the impact of changing the transaction parameters on the ratings, DBRS Morningstar considered the following stress scenarios as compared with the parameters used to determine the ratings (the base case):

DBRS Morningstar concludes the following for the DBRS Morningstar-rated series of notes issued by FADE:
-- A hypothetical downgrade of Spain’s sovereign rating by one notch, ceteris paribus, would lead to a downgrade on the Notes to A (low) (sf).
-- A hypothetical downgrade of Spain’s sovereign rating by two notches, ceteris paribus, would lead to a downgrade on the Notes to BBB (high) (sf).

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. For further information on DBRS Morningstar historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

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

Lead Analyst: Helvia Meana, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 19 September 2013

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: https://www.dbrsmorningstar.com/about/methodologies.

-- Legal Criteria for European Structured Finance Transactions (22 July 2022), https://www.dbrsmorningstar.com/research/400166/legal-criteria-for-european-structured-finance-transactions.
-- Master European Structured Finance Surveillance Methodology (7 February 2023), https://www.dbrsmorningstar.com/research/409485/master-european-structured-finance-surveillance-methodology.
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (17 May 2022), https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2022), https://www.dbrsmorningstar.com/research/402774/operational-risk-assessment-for-european-structured-finance-servicers.

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at https://www.dbrsmorningstar.com/research/278375.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].