DBRS Morningstar Upgrades and Confirms Credit Ratings on Miravet 2019-1 and Miravet 2020-1

DBRS Ratings GmbH (DBRS Morningstar) took the following credit rating actions on the notes issued by Miravet S.à r.l. acting on behalf of its Compartment 2019-1 (Miravet 2019) and Compartment 2020-1 (Miravet 2020):

Miravet 2019:
-- Class A notes confirmed at AAA (sf)
-- Class B notes confirmed at A (high) (sf)
-- Class C notes upgraded to A (low) (sf) from BBB (high) (sf)
-- Class D notes confirmed at BBB (sf)
-- Class E notes upgraded to BBB (low) (sf) from BB (high) (sf)

Miravet 2020:
-- Class A notes confirmed at AAA (sf)
-- Class B notes confirmed at A (high) (sf)
-- Class C notes confirmed at BBB (high) (sf)
-- Class D notes confirmed at BB (high) (sf)
-- Class E notes upgraded to B (sf) from B (low) (sf)

The credit ratings on the Class A notes in both transactions address the timely payment of interest and the ultimate payment of principal on or before the legal final maturity dates in May 2065. The credit ratings on the Class B, Class C, Class D, and Class E notes in both transactions address the ultimate payment of interest and principal on or before the legal final maturity dates in May 2065.

The credit rating actions follow an annual review of the transactions and are based on the following analytical considerations:
-- Portfolio performances, in terms of delinquencies, defaults, and losses, as of the May 2023 payment dates;
-- Portfolio default rate (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables; and
-- Current available credit enhancement to the notes to cover the expected losses at their respective credit rating levels.

The transactions are securitisations of residential mortgage loans originated by Catalunya Banc S.A., Caixa d’Estalvis de Catalunya, Caixa d’Estalvis de Tarragona, and Caixa d’Estalvis de Manresa, all entities currently integrated into Banco Bilbao Vizcaya Argentaria, S.A. (BBVA). BBVA acts as collection account bank and master servicer, with servicing operations delegated to Anticipa Real Estate, S.L.U. at closing and then transferred to Pepper Spanish Servicing, S.L.U. (Pepper).

Both portfolios include a high percentage of loans that have been restructured or benefitted from a grace period in the past, or those that have credit line facilities. Additionally, the portfolios are highly concentrated in the autonomous region of Catalonia (72.0% and 73.7% for Miravet 2019 and Miravet 2020, respectively, as of the April 2023 cut-off dates).

Both transactions are static with a first optional redemption date at the November 2024 payment date for Miravet 2019 and at the November 2023 payment date for Miravet 2020. Additionally, the transactions’ step-up coupon dates are the November 2024 payment date for Miravet 2019 and the November 2025 payment date for Miravet 2020.

PORTFOLIO PERFORMANCE
The delinquency levels have been high since the initial credit ratings on both transactions. As of the April 2023 cut-off date, mortgages one to three months in arrears and more than three months in arrears were as follows:
-- Miravet 2019: 4.9% and 12.4%, respectively, compared with 3.7% and 12.5%, respectively, as of the October 2022 cut-off date; and
-- Miravet 2020: 4.5% and 11.5%, respectively, compared with 3.9% and 12.0%, respectively, as of the October 2022 cut-off date.

As of the April 2023 cut-off dates, the gross cumulative default ratios were as follows:
-- Miravet 2019: 8.2%, up from 7.3% as of the October 2022 cut-off date; and
-- Miravet 2020: 8.8%, up from 7.7% as of the October 2022 cut-off date.

Cumulative losses of the initial portfolio balances remain immaterial at 0.2% and 0.1% for Miravet 2019 and Miravet 2020, respectively.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of receivables and updated its base-case PD and LGD assumptions as follows:
-- Miravet 2019: 21.3% and 17.4%, respectively; and
-- Miravet 2020: 20.3% and 17.1%, respectively.
The main driver for the updated assumptions is a corrected mapping between the loans in the portfolio and the assets securing them.

CREDIT ENHANCEMENT
The credit enhancement (CE) to all the notes consists of the subordination of their respective junior notes. As of the May 2023 payment dates, the CE to the notes had increased since the November 2022 payment dates as follows:

Miravet 2019:
-- Class A to 44.4% from 42.7%;
-- Class B to 29.3% from 28.2%;
-- Class C to 23.9% from 23.0%;
-- Class D to 22.1% from 21.2%; and
-- Class E to 20.4% from 19.6%.

Miravet 2020:
-- Class A to 44.6% from 42.9%;
-- Class B to 29.5% from 28.3%;
-- Class C to 23.2% from 22.3%;
-- Class D to 21.1% from 20.2%; and
-- Class E to 18.9% from 18.1%.

Both transactions benefit from amortising liquidity reserves, funded via the Class Z notes issuance and available to cover senior fees, Class A interest, and Class X interest. As of the November 2022 payment dates, the liquidity reserves for Miravet 2019 and Miravet 2020 were at their target levels of approximately EUR 5.4 million and EUR 12.3 million, respectively.

Elavon Financial Services DAC (Elavon) acts as the account bank for both transactions. Based on DBRS Morningstar’s private rating on Elavon, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent to the transactions’ structures, DBRS Morningstar considers the risk arising from the exposure to the account bank to be consistent with the credit ratings assigned to the notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

BNP Paribas SA (BNP Paribas) acts as the interest cap provider for both transactions. DBRS Morningstar's Long Term Critical Obligations Rating of AA (high) on BNP Paribas is above the first rating threshold as described in DBRS Morningstar's "Derivative Criteria for European Structured Finance Transactions" methodology.

DBRS Morningstar’s credit ratings on the notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents.

DBRS Morningstar’s credit ratings on the notes also address the credit risk associated with the increased rate of interest applicable to the notes if the notes are not redeemed on the Optional Redemption Date (as defined in and in accordance with the applicable transactions’ document(s)).

DBRS Morningstar’s credit ratings do not address non-payment risk associated with contractual payment obligations contemplated in the applicable transactions’ document(s) that are not financial obligations.

DBRS Morningstar’s long-term credit ratings provide opinions on risk of default. DBRS Morningstar considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.

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/416784/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 credit ratings is: “Master European Structured Finance Surveillance Methodology” (7 February 2023) https://www.dbrsmorningstar.com/research/409485/master-european-structured-finance-surveillance-methodology.

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

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

A review of the transactions’ legal documents was not conducted as the legal documents have remained unchanged since the most recent credit rating action.

For a more detailed discussion of the sovereign risk impact on Structured Finance credit 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.

The sources of data and information used for these credit ratings include loan-level data and investor reports provided by U.S. Bank Trustees Limited and property-level data and performance data provided by Pepper.

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

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

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

DBRS Morningstar does not audit or independently verify the data or information it receives in connection with the credit rating process.

The last credit rating actions on these transactions took place on:
--Miravet 2019: 2 December 2022, when DBRS Morningstar confirmed its AAA (sf) rating on the Class A notes and upgraded its ratings on the Class B, Class C, Class D, and Class E notes to A (high) (sf), BBB (high) (sf), BBB (sf), and BB (high) (sf), respectively, from A (low) (sf), BBB (low) (sf), BB (high) (sf), and B (high) (sf), respectively.
-- Miravet 2020: 2 December 2022, when DBRS Morningstar confirmed its ratings on the Class A and Class E notes at AAA (sf) and B (low) (sf), respectively, and upgraded its ratings on the Class B, Class C, and Class D notes to A (high) (sf), BBB (high) (sf), and BB (high) (sf), respectively, from A (sf), BBB (low) (sf), and BB (sf), respectively.

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

Sensitivity Analysis: To assess the impact of changing the transactions’ parameters on the credit ratings, DBRS Morningstar considered the following stress scenarios as compared with the parameters used to determine the credit ratings (the base case):
-- DBRS Morningstar expected a lifetime base-case PD and LGD for the pools 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.
The base-case PD and LGD of the current pool of loans are as follows:
-- Miravet 2019: 21.3% and 17.4%, respectively;
-- Miravet 2020: 20.3% and 17.1%, respectively.
-- The risk sensitivity overview below illustrates the credit ratings expected if the PD and LGD increase by a certain percentage over the base-case assumption. For example, in Miravet 2019, if the LGD increases by 50%, the credit rating on the Class A notes would be expected to remain at AAA (sf), ceteris paribus. If the PD increases by 50%, the credit rating on the Class A notes would be expected to be downgraded to A (sf), ceteris paribus. Furthermore, if both the PD and LGD increase by 50%, the credit rating on the Class A notes would be expected to be downgraded to A (sf).

Miravet 2019:
Class A Risk Sensitivity
-- 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD, expected credit rating of AA (high) (sf)
-- 50% increase in PD, expected credit rating of A (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AA (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of AA (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of A (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of A (sf)

Class B Risk Sensitivity
-- 25% increase in LGD, expected credit rating of A (high) (sf)
-- 50% increase in LGD, expected credit rating of A (high) (sf)
-- 25% increase in PD, expected credit rating of A (high) (sf)
-- 50% increase in PD, expected credit rating of BBB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of A (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of BBB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of BBB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of BBB (high) (sf)

Class C Risk Sensitivity
-- 25% increase in LGD, expected credit rating of A (low) (sf)
-- 50% increase in LGD, expected credit rating of BBB (high) (sf)
-- 25% increase in PD, expected credit rating of BBB (high) (sf)
-- 50% increase in PD, expected credit rating of BBB (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of BBB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of BBB (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of BB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of BB (high) (sf)

Class D Risk Sensitivity
-- 25% increase in LGD, expected credit rating of BBB (sf)
-- 50% increase in LGD, expected credit rating of BBB (sf)
-- 25% increase in PD, expected credit rating of BBB (sf)
-- 50% increase in PD, expected credit rating of BB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of BB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of BB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of BB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of BB (low) (sf)

Class E Risk Sensitivity
-- 25% increase in LGD, expected credit rating of BBB (low) (sf)
-- 50% increase in LGD, expected credit rating of BB (high) (sf)
-- 25% increase in PD, expected credit rating of BB (high) (sf)
-- 50% increase in PD, expected credit rating of BB (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of BB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of BB (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of B (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of B (high) (sf)

Miravet 2020:
Class A Risk Sensitivity
-- 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD, expected credit rating of AAA (sf)
-- 50% increase in PD, expected credit rating of AA (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of AA (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of AA (low) (sf)

Class B Risk Sensitivity
-- 25% increase in LGD, expected credit rating of A (high) (sf)
-- 50% increase in LGD, expected credit rating of A (high) (sf)
-- 25% increase in PD, expected credit rating of A (high) (sf)
-- 50% increase in PD, expected credit rating of BBB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of A (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of BBB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of BBB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of BBB (high) (sf)

Class C Risk Sensitivity
-- 25% increase in LGD, expected credit rating of BBB (high) (sf)
-- 50% increase in LGD, expected credit rating of BBB (high) (sf)
-- 25% increase in PD, expected credit rating of BBB (high) (sf)
-- 50% increase in PD, expected credit rating of BB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of BBB (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of BB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of BB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of BB (high) (sf)

Class D Risk Sensitivity
-- 25% increase in LGD, expected credit rating of BB (high) (sf)
-- 50% increase in LGD, expected credit rating of BB (high) (sf)
-- 25% increase in PD, expected credit rating of BB (high) (sf)
-- 50% increase in PD, expected credit rating of BB (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of BB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of BB (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of BB (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of B (high) (sf)

Class E Risk Sensitivity
-- 25% increase in LGD, expected credit rating of B (sf)
-- 50% increase in LGD, expected credit rating of B (sf)
-- 25% increase in PD, expected credit rating of B (sf)
-- 50% increase in PD, expected credit rating below B (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating below B (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating below B (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating below B (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating below B (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://registers.esma.europa.eu/cerep-publication/. 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 credit ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Shalva Beshia, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Dates:
-- Miravet 2019: 14 November 2019
-- Miravet 2020: 10 November 2020

DBRS Ratings GmbH
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Geschäftsführer: Detlef Scholz
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The credit rating methodologies used in the analysis of these transactions can be found at: https://www.dbrsmorningstar.com/about/methodologies.

-- Master European Structured Finance Surveillance Methodology (7 February 2023), https://www.dbrsmorningstar.com/research/409485/master-european-structured-finance-surveillance-methodology
-- European RMBS Insight Methodology (27 March 2023) and the European RMBS Insight Model v.6.0.0.0, https://www.dbrsmorningstar.com/research/411634/european-rmbs-insight-methodology
-- European RMBS Insight: Spanish Addendum (1 March 2023), https://www.dbrsmorningstar.com/research/410420/european-rmbs-insight-spanish-addendum
-- Interest Rate Stresses for European Structured Finance Transactions (22 September 2022), https://www.dbrsmorningstar.com/research/402943/interest-rate-stresses-for-european-structured-finance-transactions
-- Derivative Criteria for European Structured Finance Transactions (16 June 2023), https://www.dbrsmorningstar.com/research/415976/derivative-criteria-for-european-structured-finance-transactions
-- Legal Criteria for European Structured Finance Transactions (30 June 2023), https://www.dbrsmorningstar.com/research/416730/legal-criteria-for-european-structured-finance-transactions
-- 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
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (4 July 2023), https://www.dbrsmorningstar.com/research/416784/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-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].