DBRS Morningstar Finalises Provisional Ratings on Caixabank Consumo 6 F.T.

DBRS Ratings GmbH (DBRS Morningstar) finalised its provisional ratings on the notes issued by Caixabank Consumo 6 F.T. (the Issuer) as follows:

-- Series A Notes at AA (low) (sf)
-- Series B Notes at BB (low) (sf)

RATING RATIONALE
The rating on the Series A Notes addresses the timely payment of interest and the ultimate repayment of principal by the legal final maturity date in September 2036. The rating on the Series B Notes addresses the ultimate payment of interest and the ultimate repayment of principal by the legal final maturity date.

This transaction represents the issuance of the Series A and Series B Notes (the Notes), backed by a portfolio of approximately EUR 2.0 billion of fixed-rate receivables related to general consumer loan contracts originated by Caixabank, S.A. (Caixabank; the originator and servicer), granted to individuals residing in Spain (at the moment of origination) for the purchase of consumer goods or services in general terms. The originator will also service the portfolio.

The transaction includes a 12-month revolving period scheduled to end in June 2024. During the revolving period, the originator may offer additional receivables that the Issuer will purchase provided that the eligibility criteria and concentration limits set out in the transaction documents are satisfied. The revolving period may end earlier than scheduled if certain events occur, such as the breach of performance triggers, insolvency of the originator, or replacement of the servicer.

DBRS Morningstar based its ratings on a review of the following analytical considerations:
-- The transaction’s capital structure, including form and sufficiency of available credit enhancement;
-- Relevant credit enhancement in the form of subordination, excess spread, and the availability of the cash reserve;
-- Credit enhancement levels that are sufficient to support DBRS Morningstar’s projected cumulative net losses under various stressed cash flow assumptions;
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms of the rated notes;
-- Caixabank´s financial strength and its capabilities with regard to originations, underwriting, and servicing;
-- The transaction parties’ financial strength with regard to their respective roles;
-- DBRS Morningstar’s operational risk review of Caixabank, which it deemed to be an acceptable servicer;
-- The credit quality, diversification of the collateral, and historical and projected performance of the seller’s portfolio; and
-- The consistency of the transaction’s legal structure with DBRS Morningstar’s “Legal Criteria for European Structured Finance Transactions” methodology and the presence of legal opinions that are expected to address the true sale of the assets to the Issuer.

TRANSACTION STRUCTURE
The transaction allocates payments on a combined interest and principal priority of payments basis and benefits from an amortising EUR 100.0 million cash reserve funded through a subordinated loan. The cash reserve can be used to cover senior costs, interest, and principal on the Series A Notes. Once the Series A Notes have fully amortised, the cash reserve will cover interest and principal payments on the Series B Notes.
The repayment of the notes will be sequential: Series B Notes will start to amortise once the Series A Notes have amortised in full. Note repayment will start on the first payment date after the scheduled end of the revolving period in September 2024, or before if a Revolving Period Early Termination Event occurs.
Interest and principal payments on the Notes will be made quarterly on the 21st of March, June, September, and December. The Series A Notes pay a fixed interest rate of 4.125% and the Series B Notes pay a fixed interest rate of 5.000%.

COUNTERPARTIES
Caixabank acts as the account bank for the transaction. Based on the DBRS Morningstar Long-Term Issuer Rating of “A” (Critical Obligations Rating at AA (low)) on Caixabank, the downgrade provisions outlined in the transaction documents, and structural mitigants inherent in the transaction structure, DBRS Morningstar considers the risk arising from the exposure to Caixabank to be consistent with the rating assigned to the Series A Notes, as described in DBRS Morningstar’s “Legal Criteria for European Structured Finance Transactions” methodology.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
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 https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

DBRS Morningstar analysed the transaction structure in Intex Dealmaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is:
“Rating European Consumer and Commercial Asset-Backed Securitisations” (19 October 2022);
https://www.dbrsmorningstar.com/research/404212/rating-european-consumer-and-commercial-asset-backed-securitisations.

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.

An asset and a cash flow analysis were both conducted. Due to the inclusion of a revolving period in the transaction, the analysis considers potential portfolio migration based on replenishment criteria set forth in the transaction legal documents.

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
-- Quarterly default vintage analysis from Q1 2015 to Q4 2022; split by total pool, pre-approved and regular loans;
-- Quarterly recovery vintage analysis from Q1 2015 to Q4 2022, split by total pool, pre-approved and regular loans;
-- Dynamic quarterly prepayment data from Q1 2015 to Q4 2022; split by total pool, pre-approved and regular loans;
-- Dynamic quarterly delinquency data from Q1 2015 to Q4 2022 and
-- Loan by loan data as of 8 May 2023 and its related amortisation profile.

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

DBRS Morningstar was supplied with one or more 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.

These ratings concern a newly issued financial instruments. These are the first DBRS Morningstar ratings on these financial instruments.

This is the first rating action since the Initial Rating Date.

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

-- Expected default rate: 4.73%.
-- Expected recovery rate: 9.79%.
-- Loss given default (LGD): 92.49% for the AA (low) (sf) scenario; 90.95% for the BB (low) (sf) scenario.

Scenario 1: A 25% increase in the expected PD
Scenario 2: A 50% increase in the expected PD
Scenario 3: A 25% increase in the expected LGD
Scenario 4: A 25% increase in the expected PD and 25% increase in the expected LGD
Scenario 5: A 50% increase in the expected PD and 25% increase in the expected LGD
Scenario 6: A 50% increase in the expected LGD
Scenario 7: A 25% increase in the expected PD and 50% increase in the expected LGD
Scenario 8: A 50% increase in the expected PD and 50% increase in the expected LGD

DBRS Morningstar concludes that the expected ratings under the eight stress scenarios will be:
-- Series A Notes: AA (low) (sf), A (sf), AA (low) (sf), A (high) (sf), A (low) (sf), AA (low) (sf), A (high) (sf), and A (low) (sf).
-- Series B Notes: B (low) (sf) for scenario 1, B (high) (sf) for scenario 3, and B (high) (sf) for scenario 6, no quantitative rating is achieved for any other scenarios.

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: Maria Lopez, Senior Vice President
Rating Committee Chair: Gareth Levington Managing Director
Initial Rating Date: 6 June 2023

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

-- Rating European Consumer and Commercial Asset-Backed Securitisations (19 October 2022),
https://www.dbrsmorningstar.com/research/404212/rating-european-consumer-and-commercial-asset-backed-securitisations.
-- Legal Criteria for European Structured Finance Transactions (22 July 2022), https://www.dbrsmorningstar.com/research/400166/legal-criteria-for-european-structured-finance-transactions.
-- Rating European Structured Finance Transactions Methodology (15 July 2022), https://www.dbrsmorningstar.com/research/399899/rating-european-structured-finance-transactions-methodology.
-- 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.
-- Operational Risk Assessment for European Structured Finance Originators (15 September 2022), https://www.dbrsmorningstar.com/research/402773/operational-risk-assessment-for-european-structured-finance-Originators.
-- 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-andgovernance-risk-factors-in-credit-ratings.

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].