Morningstar DBRS Upgrades and Confirms Credit Ratings on AyT Goya Hipotecario IV and V, Fondo de Titulización de Activos

DBRS Ratings GmbH (Morningstar DBRS) took the following credit rating actions on the notes issued by two Spanish residential mortgage-backed securities (RMBS) transactions:

AyT Goya Hipotecario IV, Fondo de Titulización de Activos (Goya IV):
-- Series A Notes confirmed at AA (high) (sf)
-- Series B Notes upgraded to AA (sf) from AA (low) (sf)

AyT Goya Hipotecario V, Fondo de Titulización de Activos (Goya V):
-- Series A Notes confirmed at AA (high) (sf)
-- Series B Notes upgraded to AA (sf) from AA (low) (sf)

The credit ratings address the timely payment of interest and the ultimate payment of principal on or before the notes' respective legal final maturity dates.

The credit rating actions follow an annual review of the transactions and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies and defaults, as of the March 2024 payment date;
-- Updated portfolio default rate (PD), loss given default (LGD), and expected loss assumptions on the outstanding collateral pools; and
-- The credit enhancement available to the rated notes to cover the expected losses at their respective credit rating levels.

The two transactions are securitisations of Spanish prime residential mortgage loans originated and serviced by CaixaBank, S.A. (CaixaBank; previously, Barclays Bank SA/Spain).

PORTFOLIO PERFORMANCE
The performance of both transactions remains within Morningstar DBRS' expectations.

For Goya IV, as of March 2024, loans that were two to three months in arrears represented 0.15% of the outstanding portfolio balance, up from 0.03% in March 2023; the 90+-day delinquency ratio was 0.38%, down from 0.56% a year earlier; and the cumulative default ratio rose slightly to 1.8%, from 1.7% in March 2023.

For Goya V, as of March 2024, loans that were two to three months in arrears represented 0.12% of the outstanding portfolio balance, down from 0.24% in March 2023; the 90+-day delinquency ratio was 0.59%, unchanged from a year earlier; and the cumulative default ratio rose slightly to 1.4%, from 1.3% in March 2023.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
Morningstar DBRS conducted a loan-by-loan analysis on the remaining receivables and updated its base case PD and LGD assumptions to 0.7% and 3.0%, respectively, for Goya IV and to 0.9% and 2.0%, respectively, for Goya V.

CREDIT ENHANCEMENT
The Series A Notes in both transactions are supported by the subordination of the Series B Notes and the respective reserve funds, which are available to cover senior fees, interest, and principal on the Series A and Series B Notes. The Series B Notes are solely supported by the respective reserve funds. For Goya IV, as of the March 2024 payment date, credit enhancement available to the Series A Notes was 46.5%, up from 46.3% at the last annual review, and credit enhancement available to the Series B Notes was 10.7%, up from 10.5% at the last annual review. For Goya V, as of the March 2024 payment date, credit enhancement available to the Series A Notes was 50.5%, up from 50.3% at the last annual review, and credit enhancement available to the Series B Notes was 10.7%, up from 10.5% at the last annual review.

Both transactions switched to pro rata amortisation at the March 2020 (Goya IV) and September 2019 (Goya V) payment dates. The reserve funds may amortise over the life of the transactions, subject to a floor and certain amortisation triggers. For Goya IV, the reserve fund is currently at EUR 32.5 million and, for Goya V, the reserve fund is currently at EUR 35.0 million. Both reserve funds have reached their respective floors and are at their respective target levels.

CaixaBank acts as the account bank for the transactions. Based on the account bank reference rating of A (high) on CaixaBank (which is one notch below its Morningstar DBRS Long Term Critical Obligations Rating (COR) of AA (low)), the downgrade provisions outlined in the transactions' documents, and other mitigating factors inherent in the transactions' structures, Morningstar DBRS considers the risk arising from the exposure to the account bank to be consistent with the credit ratings assigned to the Series A Notes as described in Morningstar DBRS' "Legal Criteria for European Structured Finance Transactions" methodology.

Banco Santander SA (Santander) and CaixaBank act as the swap providers for Goya IV and Goya V, respectively. The Morningstar DBRS CORs on Santander and CaixaBank are above the first rating threshold as described in Morningstar DBRS' "Derivative Criteria for European Structured Finance Transactions" methodology, given the AA (high) (sf) credit ratings on the Series A Notes in the transactions.

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

Morningstar DBRS' credit ratings do 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, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at: https://dbrs.morningstar.com/research/427030.

Morningstar DBRS 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 March 2024); https://dbrs.morningstar.com/research/429051.

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

Morningstar DBRS 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://dbrs.morningstar.com/research/421590.

The sources of data and information used for these credit ratings include reports and information received from BEKA Titulización, S.G.F.T., S.A.U. and loan-level data provided by the European DataWarehouse GmbH.

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 impact the credit rating analysis.

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

The last credit rating actions on these transactions took place on 5 May 2023, when Morningstar DBRS confirmed its credit ratings on the Series A and Series B Notes in both transactions at AA (high) (sf) and AA (low) (sf), respectively.

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

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

-- Morningstar DBRS 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.
-- For Goya IV, the base case PD and LGD assumptions are 0.7% and 3.0%, respectively.
-- For Goya V, the base case PD and LGD assumptions are 0.9% and 2.0%, 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 assumptions. For example, if the LGD increases by 50%, the credit rating on the Goya IV Series A Notes would be expected to remain at AA (high) (sf), assuming no change in the PD. If the PD increases by 50%, the credit rating on the Goya IV Series A Notes would be expected to remain at AA (high) (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the credit rating on the Goya IV Series A Notes would be expected to remain at AA (high) (sf).

Goya IV
Series A Notes Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of AA (high) (sf)
-- 50% increase in LGD, expected credit rating of AA (high) (sf)
-- 25% increase in PD, expected credit rating of AA (high) (sf)
-- 50% increase in PD, expected credit rating of AA (high) (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 AA (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of AA (high) (sf)

Series B Notes Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of AA (low) (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 A (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of A (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of A (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of A (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of A (low) (sf)

Goya V
Series A Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of AA (high) (sf)
-- 50% increase in LGD, expected credit rating of AA (high) (sf)
-- 25% increase in PD, expected credit rating of AA (high) (sf)
-- 50% increase in PD, expected credit rating of AA (high) (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 AA (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of AA (high) (sf)

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

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.

These credit 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:
Goya IV: 4 May 2011
Goya V: 29 December 2011

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 these transactions can be found at: https://dbrs.morningstar.com/about/methodologies.

-- Legal Criteria for European Structured Finance Transactions (30 June 2023),
https://dbrs.morningstar.com/research/416730
-- Master European Structured Finance Surveillance Methodology (7 March 2024),
https://dbrs.morningstar.com/research/429051
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2023), https://dbrs.morningstar.com/research/420572
-- European RMBS Insight Methodology (25 March 2024) and European Asset RMBS Insight Model version 7.0.1.0,
https://dbrs.morningstar.com/research/430103
-- European RMBS Insight: Spanish Addendum (8 March 2024),
https://dbrs.morningstar.com/research/429109
-- Interest Rate Stresses for European Structured Finance Transactions (15 September 2023), https://dbrs.morningstar.com/research/420602
-- Derivative Criteria for European Structured Finance Transactions (18 September 2023), https://dbrs.morningstar.com/research/420754
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (23 January 2024),
https://dbrs.morningstar.com/research/427030

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].