Press Release

DBRS Morningstar Upgrades and Confirms Credit Ratings on Caixabank Leasings 3, FT

Consumer/Commercial Leases

September 07, 2023

DBRS Ratings GmbH (DBRS Morningstar) took the following credit rating actions on the notes issued by Caixabank Leasings 3, FT (the Issuer):

-- Series A Notes upgraded to AAA (sf) from AA (high) (sf)
-- Series B Notes confirmed at BB (low) (sf)

The credit rating on the Series A Notes addresses the timely payment of interest and the ultimate payment of principal on or before the legal final maturity date in December 2039. The credit rating on the Series B Notes addresses the ultimate payment of interest and principal on or before the legal final maturity date in December 2039.

The credit rating actions follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults, and losses, as of the June 2023 payment date;
-- Probability of default (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 transaction is a static securitisation of Spanish lease contracts granted by CaixaBank, S.A. (CaixaBank) to enterprises and self-employed individuals based in Spain. CaixaBank also acts as the servicer of the portfolio. At closing, the EUR 1,830.0 million portfolio consisted of equipment leases (38.9%), vehicle leases (36.5%), and real estate leases (24.6%). The transaction closed in June 2019.

PORTFOLIO PERFORMANCE
As of 31 May 2023, loans that were 0 to 30 days and 30 to 60 days delinquent represented 0.2% and 0.1% of the outstanding collateral balance, respectively, with no loans 60 to 90 days delinquent. Loans more than 90 days delinquent amounted to 1.4%. Gross cumulative defaults, defined as receivables in 12 or more months of arrears, amounted to 0.6% of the original portfolio balance, with cumulative recoveries of 26.3% to date.

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 to 6.3% and 55.5%, respectively.

CREDIT ENHANCEMENT
The subordination of the Series B Notes and the cash reserve provide credit enhancement to the Series A Notes, while the Series B Notes receive credit enhancement from the cash reserve only once the Series A Notes have been repaid in full. As of the June 2023 payment date, credit enhancement to the Series A Notes increased to 82.5% from 52.3% at the time of last credit rating action 12 months ago, while credit enhancement to the Series B Notes remained stable at 5.5% over the last 12 months.

The transaction benefits from an amortising cash reserve available to cover senior expenses and all payments due on the senior-most class of notes outstanding at the time. The reserve was funded to EUR 89.7 million at closing through a subordinated loan granted by CaixaBank, and, starting from the September 2020 payment date, has been amortising to its target level of 4.9% of the outstanding principal balance of the notes. As of the June 2023 payment date, the reserve was at its target balance of EUR 18.4 million.

CaixaBank acts as the account bank for the transaction. Based on the account bank reference credit rating of A (high) on CaixaBank (which is one notch below the DBRS Morningstar public Long Term Critical Obligations Rating of AA (low)), the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, 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.

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

DBRS Morningstar’s credit ratings do not address non-payment risk associated with contractual payment obligations contemplated in the applicable transaction documents 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 term 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” (4 July 2023) 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 the “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 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 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/baseline-macroeconomic-scenarios-application-to-credit-ratings.

The sources of data and information used for these credit ratings include investor reports and information provided by CaixaBank Titulización, S.G.F.T., S.A.U. (the Management Company), and loan-level data provided by the European DataWarehouse GmbH.

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 action on this transaction took place on 8 September 2022, when DBRS Morningstar confirmed its credit rating on the Series A Notes at AA (high) (sf) and upgraded its credit rating on the Series B Notes to BB (low) (sf) from B (low) (sf).

Information regarding DBRS Morningstar credit 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 credit rating, 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 pool 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 for the Issuer are 6.3% and 55.5%, 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, if the LGD increases by 50%, the credit rating of the Series A Notes would be expected to remain at AAA (sf), ceteris paribus. If the PD increases by 50%, the credit rating of the Series A Notes would be expected to remain at AAA (sf), ceteris paribus. Furthermore, if both the PD and LGD increase by 50%, the credit rating of the Series A Notes would be expected to remain at AAA (sf).

Series A Notes 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 AAA (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 AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of AAA (sf)

Series B Notes Risk Sensitivity:
-- 25% increase in LGD, expected credit rating B (low) (sf)
-- 50% increase in LGD, expected credit rating CCC (sf)
-- 25% increase in PD, expected credit rating B (low) (sf)
-- 50% increase in PD, expected credit rating B (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating CCC (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating CCC (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating CCC sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating CCC (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: Daniel Rakhamimov, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 18 June 2019

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 credit rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

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].

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.

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