Morningstar DBRS Confirms Credit Ratings on Four Rural Hipotecario RMBS Transactions

DBRS Ratings GmbH (Morningstar DBRS) confirmed its credit ratings on the bonds issued by four Spanish residential mortgage-backed security (RMBS) transactions, originated and serviced by Spanish rural savings banks, as follows:

Rural Hipotecario XV, Fondo de Titulización de Activos (RH XV):
-- Series A notes at AAA (sf)
-- Series B notes at AA (sf)

Rural Hipotecario XVI, Fondo de Titulización de Activos (RH XVI):
-- Series A Notes at AAA (sf)
-- Series B Notes at AA (sf)

Rural Hipotecario XVII, Fondo de Titulización de Activos (RH XVII):
-- Bonds at AAA (sf)

Rural Hipotecario XVIII, Fondo de Titulización de Activos (RH XVIII):
-- Series A notes at AAA (sf)

The credit ratings on the most senior notes in each transaction address the timely payment of interest and the ultimate payment of principal on or before the respective legal final maturity dates. The credit ratings on the subordinated notes address the ultimate payment of interest and principal on or before the respective legal final maturity dates, and the timely payment of interest while the senior-most class outstanding.

The confirmations 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 respective latest payment dates;
-- Portfolio default rate (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables; and
-- Current available credit enhancements to the notes to cover the expected losses at their respective credit rating levels.

PORTFOLIO PERFORMANCE
The four portfolios are currently performing within Morningstar DBRS' expectations. The 90+-day arrears and gross cumulative default ratios were as follows:
-- RH XV: 0.7% and 0.6%, respectively, as of the August 2024 payment date;
-- RH XVI: 0.1% and 1.2%, respectively, as of the July 2024 payment date;
-- RH XVII: 0.6% and 0.0%, respectively, as of the July 2024 payment date; and
-- RH XVIII: 0.7% and 0.2%, respectively, as of the June 2024 payment date.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
Morningstar DBRS conducted a loan-by-loan analysis of the remaining pools of receivables and updated its base case PD and LGD assumptions as follows:
-- RH XV: 1.1% and 6.6%, respectively;
-- RH XVI: 1.1% and 9.3%, respectively;
-- RH XVII: 1.4% and 8.8%, respectively; and
-- RH XVIII: 1.7% and 9.2%, respectively.

CREDIT ENHANCEMENTS
In each transaction, the credit enhancement to each class of notes is provided by subordination of junior classes and the reserve funds.
-- For RH XV, the credit enhancement levels of the Series A and B notes were 49.0% and 16.3%, respectively, as of the August 2024 payment date, up from 41.1% and 13.5%, respectively, as of the August 2023 payment date.
-- For RH XVI, the credit enhancement levels of the Series A and B Notes were 63.4% and 19.8%, respectively, as of the July 2024 payment date, up from 51.8% and 16.1%, respectively, as of the July 2023 payment date.
-- For RH XVII, the credit enhancement level of the Bonds was 84.3% as of the July 2024 payment date, up from 68.8% as of the July 2023 payment date.
-- For RH XVIII, the credit enhancement level of the Series A was 25.9% as of the June 2024 payment date, up from 22.5% as of the September 2023 payment date.

RESERVE FUNDS
The reserve funds for all the four transactions are at their respective target levels.
-- RH XV, RH XVI and RH XVIII each benefit from a nonamortising reserve fund, and a liquidity reserve fund.
The reserve fund is available to meet payments on the senior fees, interest, and principal on the rated notes. The reserve funds are at their target levels of EUR 26.5 million, EUR 7.5 million and EUR 9.6 million, respectively.
The liquidity reserve fund provides liquidity support to cover for senior fees and interest shortfall on the senior notes. The liquidity reserve funds are at their target levels of EUR 0.6 million, EUR 0.2 million and EUR 4.7 million, respectively.
-- RH XVIII benefits from an amortising reserve fund, currently at EUR 11.5 million, and it is available to cover interest and principal payments on the Series B notes once the Series A notes are fully amortised. The reserve fund will not amortise if certain performance triggers are breached. The Series A notes' principal is senior to the Series B notes' interest payments in the priority of payments.

Societe Generale S.A., Sucursal en España (SG Spain) acts as the account bank for the transaction. Based on Morningstar DBRS' private credit rating on the account bank, the downgrade provisions outlined in the transaction documents, and structural mitigants inherent in each transaction's structure, Morningstar DBRS considers the risk arising from the exposure to the account bank to be consistent with the credit ratings on the notes, as described in Morningstar DBRS' "Legal Criteria for European Structured Finance Transactions" methodology.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

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
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 Factors in Credit Ratings at: https://dbrs.morningstar.com/research/437781.

Morningstar DBRS analysed the transaction structures 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" (6 August 2024). https://dbrs.morningstar.com/research/437540.

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 transactions in accordance with 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 actions.

For a more detailed discussion of the sovereign risk impact on Structured Finance credit ratings, please refer to "Appendix C: The Impact of Sovereign Credit Ratings on Other Morningstar DBRS Credit Ratings" of the "Global Methodology for Rating Sovereign Governments" at: https://dbrs.morningstar.com/research/436000.

The sources of data and information used for these credit ratings include transaction reports and information provided by Europea de Titulización S.A., S.G.F.T. 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.

For RH XV, RH XVI, and RH XVII, 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.

For RH XVIII, at the time of the initial credit ratings, Morningstar DBRS was 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 RH XV, RH XVI, and RH XVII took place on 9 September 2023, when Morningstar DBRS upgraded the credit ratings on the Series B notes in RH XV and RH XVI to AA (sf) from AA (low) (sf), and confirmed the credit ratings on the Series A notes in RH XV and RH XVI as well as the Bonds in RH XVII at AAA (sf).

The last credit rating action on RHXVIII took place on 7 December 2023, when Morningstar DBRS confirmed the credit rating on the Series A notes at AAA (sf).

The lead analyst responsibilities for these transactions have been transferred to Baran Cetin.

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

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

-- Morningstar DBRS 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.
-- RH XV: 1.1% and 6.6%, respectively
-- RH XVI: 1.1% and 9.3%, respectively
-- RH XVII: 1.4% and 8.8%, respectively
-- RH XVIII: 1.7% and 9.2%, 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.

RH XV
Series 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 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 Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of AA (sf)
-- 50% increase in LGD, expected credit rating of AA (sf)
-- 25% increase in PD, expected credit rating of AA (sf)
-- 50% increase in PD, expected credit rating of AA (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of AA (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 (sf)

RH XVI
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 of AA (sf)
-- 50% increase in LGD, expected credit rating of AA (sf)
-- 25% increase in PD, expected credit rating of AA (sf)
-- 50% increase in PD, expected credit rating of AA (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of AA (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 (sf)

RH XVII
Bonds 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)

RH XVIII
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)

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 ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Baran Cetin, Senior Analyst
Rating Committee Chair: Alfonso Candelas, Associate Managing Director
Initial Rating Dates:
RH XV - 19 July 2013
RH XVI - 26 July 2013
RH XVII - 27 June 2014
RH XVIII - 7 December 2018

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.

-- Legal Criteria for European Structured Finance Transactions (28 June 2024), https://dbrs.morningstar.com/research/435165
-- Master European Structured Finance Surveillance Methodology (6 August 2024), https://dbrs.morningstar.com/research/437540
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August 2024), https://dbrs.morningstar.com/research/437781
-- European RMBS Insight Methodology (25 March 2024) and European RMBS Insight Model v 9.0.0.0, https://dbrs.morningstar.com/research/430103
-- European RMBS Insight: Spanish Addendum (8 March 2024),
https://dbrs.morningstar.com/research/429109
-- Operational Risk Assessment for European Structured Finance Servicers (6 August 2024), https://dbrs.morningstar.com/research/437543
-- Interest Rate Stresses for European Structured Finance Transactions (28 June 2024), https://dbrs.morningstar.com/research/435278

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 https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.