Morningstar DBRS Assigns AA (high) Credit Rating to Cajamar Caja Rural S.C.C. Covered Bonds (Cédulas Hipotecarias – Mortgages) New Issuance

DBRS Ratings GmbH (Morningstar DBRS) assigned a AA (high) credit rating to a new series of covered bonds issued by Cajamar Caja Rural Sociedad Cooperativa de Crédito (Cajamar or the Issuer) under the Cajamar Covered Bonds (Cédulas Hipotecarias or CH) programme (the Programme). The new CH (Cedulas Hipotecarias – XS2783787992) comprises the issuance of EUR 750 million of floating-rate securities, indexed to six-month Euribor and with a 0.75% spread, maturing on 12 March 2031.

Following the issuance of the new series, there are seven series of covered bonds (CBs) outstanding under the programme, totalling a nominal amount of EUR 5.6 billion. All CBs issued under the programme rank pari passu with each other, and Morningstar DBRS currently rates them AA (high).

The credit rating reflects the following analytical considerations:
-- A Covered Bonds Attachment Point (CBAP) of BBB, which is one notch above Cajamar’s Long-Term Senior Debt Rating. Cajamar is the Issuer 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 AA, which is the lowest CPCA in line with the LSF-Implied Likelihood (LSF-L).
-- An LSF-L of AA (low).
-- A two-notch uplift for high recovery prospects.
-- A level of overcollateralisation (OC) of 28.1% to which Morningstar DBRS gives credit, which is the minimum level observed in the last 12 months adjusted by a scaling factor of 0.85.
-- The sovereign rating on the Kingdom of Spain, rated “A” with a Stable trend by Morningstar DBRS, as of the date of this press release.

Morningstar DBRS analysed the transaction using 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 cover pool (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 CH ratings would be downgraded if any of the following occurred: (1) the CPCA was downgraded below AA; (2) the sovereign rating on the Kingdom of Spain was downgraded below A (low); (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 CH and CP moved adversely; or (6) volatility in the financial markets caused the currently estimated market value spreads to increase.

There are currently EUR 5.6 billion of CH outstanding under the programme, of which Morningstar DBRS publicly rates EUR 2.75 billion. As of 31 December 2023, the aggregate balance of mortgages in the CP was EUR 7.45 billion, which results in a total estimated OC of 33% after the issuance.

For further information on the Programme, please refer to the rating report at https://dbrs.morningstar.com/.

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

Morningstar DBRS has assessed the LSF related to the programme as “Strong” according to its credit rating methodology. For more information, please refer to the commentaries, “Spanish covered Bonds: Legal and Structuring Framework Review”, and “The Updated Law on Spanish Covered Bonds: Well Aligned with the European Directive”, which can be found on https://dbrs.morningstar.com/.

Morningstar DBRS’ credit rating on the new series addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations for the new series are the related Interest Payment Amounts and the related Principal Balance.

Morningstar DBRS’ credit rating does not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction documents that are not financial obligations.

Morningstar DBRS’ long-term credit ratings provide opinions on risk of default. Morningstar DBRS 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, AND GOVERNANCE CONSIDERATIONS
Credit rating actions on the Issuer are likely to have an impact on this credit rating. ESG factors that have a significant or relevant effect on the credit analysis of the Issuer are discussed separately at https://dbrs.morningstar.com/issuers/21611.

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://dbrs.morningstar.com/research/427030/morningstar-dbrs-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 credit rating is: “Global Methodology for Rating and Monitoring Covered Bonds” (8 May 2023), https://dbrs.morningstar.com/research/413651.

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

In Morningstar DBRS’ opinion, the changes under consideration do not require the application of the entire principal methodology. Therefore, Morningstar DBRS focused on the cash flow analysis.

A review of the transaction legal documents was limited to the final terms of the new series.

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 Morningstar DBRS Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://dbrs.morningstar.com/research/421590.

The sources of information used for this credit rating include stratification tables of the CP and historical performance data provided by the Issuer.

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

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

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

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

This credit rating concerns a newly issued financial instrument. This is the first Morningstar DBRS credit rating on this financial instrument.

The last credit rating action on this transaction took place on 6 June 2023, when Morningstar DBRS confirmed the AA (high) credit ratings on the outstanding CH issued under the Programme.

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

For further information on Morningstar DBRS 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 Morningstar DBRS historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

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

Lead Analyst: Tomás Rodríguez-Vigil Junco, Vice President
Rating Committee Chair: Ketan Thaker, Managing Director
Initial Rating Date: 19 July 2013

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 credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.
-- Global Methodology for Rating and Monitoring Covered Bonds (8 May 2023),
https://dbrs.morningstar.com/research/413651/global-methodology-for-rating-and-monitoring-covered-bonds.
-- Global Methodology for Rating and Monitoring Covered Bonds Addendum: Market Value Spreads (8 May 2023),
https://dbrs.morningstar.com/research/413652/global-methodology-for-rating-and-monitoring-covered-bonds-addendum-market-value-spreads.
-- Global Methodology for Rating Banks and Banking Organisations (22 June 2023),
https://dbrs.morningstar.com/research/415978/global-methodology-for-rating-banks-and-banking-organisations.
-- Legal Criteria for European Structured Finance Transactions (30 June 2023),
https://dbrs.morningstar.com/research/416730/legal-criteria-for-european-structured-finance-transactions.
-- Interest Rate Stresses for European Structured Finance Transactions (15 September 2023),
https://dbrs.morningstar.com/research/420602/interest-rate-stresses-for-european-structured-finance-transactions.
-- European RMBS Insight Methodology (27 March 2023) and European RMBS Insight model v.6.0.2.0,
https://dbrs.morningstar.com/research/411634.
-- European RMBS Insight: Spanish Addendum (8 March 2024),
https://dbrs.morningstar.com/research/429109.
-- Global Methodology for Rating CLOs and Corporate CDOs (23 February 2024),
https://dbrs.morningstar.com/research/428544/global-methodology-for-rating-clos-and-corporate-cdos.
-- Rating CLOs Backed by Loans to European SMEs (23 February 2024) and SME Diversity Model v.2.6.1.4,
https://dbrs.morningstar.com/research/428543/rating-clos-backed-by-loans-to-european-smes.
-- Operational Risk Assessment for European Structured Finance Originators (7 March 2024),
https://dbrs.morningstar.com/research/429054.
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2023),
https://dbrs.morningstar.com/research/420572/operational-risk-assessment-for-european-structured-finance-servicers.
-- Global Methodology for Rating Sovereign Governments (6 October 2023),
https://dbrs.morningstar.com/research/421590/global-methodology-for-rating-sovereign-governments.
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (23 January 2024),
https://dbrs.morningstar.com/research/427030/morningstar-dbrs-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

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

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

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

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