Morningstar DBRS Assigns Provisional Credit Rating to ABANCA RMBS 2025, Fondo de Titulización

DBRS Ratings GmbH (Morningstar DBRS) assigned a provisional credit rating to the residential mortgage-backed securities (RMBS) Notes to be issued by ABANCA RMBS 2025, Fondo de Titulización (the Issuer) as follows:

-- Notes at (P) AAA (sf)

The credit rating on the Notes addresses the timely payment of interest and the ultimate repayment of principal before the legal final maturity date.

CREDIT RATING RATIONALE
The Issuer, a special-purpose vehicle expected to be established as a Fondo de Titulización (FT) governed by Spanish regulations, will use the proceeds of the Notes and the subordinated Acquisition Loan (not rated) to purchase a portfolio of residential mortgage loans from Abanca Corporación Bancaria, S.A. (Abanca; rated A (low) with a Stable trend by Morningstar DBRS); Abanca will service the underlying mortgages in this transaction.

The securitised Notes benefit from the EUR 104 million (10% of the initial portfolio balance) subordination of the Acquisition Loan plus the EUR 13.0 million Liquidity Reserve, which is available to cover senior expenses as well as interest payments on the Notes until they are fully repaid. The Liquidity Reserve target balance will be equivalent to the amount to be paid by the FT in relation to ordinary expenses and Note interest payments for the next two payment dates. The Liquidity Reserve amount will decrease because of the amortisation of the Notes, subject to a floor of EUR 3 million. The amortisation of the Notes will be sequential, but available funds can be used to redeem the Acquisition Loan, which is subordinated to the Notes' amortisation whenever it represents 20% of the outstanding balance of the receivables (at closing, it represents 10%) and if certain performance conditions are met.

Up to their maturity, the Notes will pay a floating coupon rate of three-month Euribor plus a margin of 0.15% on a quarterly basis.

Morningstar DBRS received a provisional portfolio equal to EUR 1.08 billion as of 30 December 2024 (the cut-off date), which consisted of 15,825 loans granted to 15,769 borrowers. All the mortgage loans from the provisional portfolio come from recently early redeemed securitisations: 26.6% of the provisional portfolio are mortgage loans from HT ABANCA RMBS I, FT; 34.4% are from HT ABANCA RMBS II, FT; and the other 39.0% are from IM BCG RMBS 2, FT DE ACTIVOS. As of the cut-off date, the weighted-average (WA) current indexed loan-to-value ratio (LTV) stood at 54.0% with 9.9% of the loans with an LTV higher than 80.0%. The mortgage loan portfolio is distributed among the Spanish regions of Galicia (38.5% by current balance), Catalonia (17.9%), and Madrid (8.9%). The mortgage loans in the asset portfolio are almost all owner occupied, with 4.3% classified as second homes. All the loans in the pool pay their instalments on a monthly basis and follow either a French amortisation or a geometric amortisation. As of the cut-off date, 0.4% of the mortgage loans were no more than 30 days in arrears, the WA coupon of the mortgages was 4.2%, the WA remaining term was 17.6 years, and the WA seasoning was 16.0 years.

Currently, 99.9% of the portfolio are full-term floating-rate loans indexed to 12-month Euribor mostly resetting every 12 months (63.3%) or every six months (36.3%); the remaining 0.1% are fixed-rate loans. On the liability side, the Notes are floating rate and linked to three-month Euribor, leaving the transaction exposed to basis and resetting risk.

The transaction's account bank agreement and replacement trigger require Société Générale, Sucursal en España (SGSE), acting as the treasury account bank, to find (1) a replacement account bank or (2) an account bank guarantor upon loss of an applicable "A" account bank credit rating. Morningstar DBRS' Long-Term Critical Obligations Rating (COR), Long-Term Senior Debt credit rating, Long-Term Issuer Rating, and Long-Term Deposits credit rating on SGSE's parent company, Société Générale, S.A., are AA, A (high), A (high), and A (high), respectively, as of the date of this press release. The applicable account bank credit rating is the higher of one notch below the COR, Long-Term Senior Debt credit rating, and Long-Term Deposits credit rating on Société Générale, S.A. Based on Morningstar DBRS' current reference credit rating (one notch below the COR) of AA (low) on SGSE, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, Morningstar DBRS considers the risk arising from the exposure to the account bank to be consistent with the credit rating assigned to the Notes, as described in Morningstar DBRS' "Legal and Derivative Criteria for European Structured Finance Transactions" methodology.

Morningstar DBRS based its credit rating primarily on the following analytical considerations:
-- The transaction's capital structure, including the form and sufficiency of available credit enhancement and liquidity provisions.
-- Estimated stress-level probability of default (PD), loss given default (LGD), and expected loss levels on the mortgage portfolio, which were used as inputs into the cash flow engine. The mortgage portfolio was analysed in accordance with Morningstar DBRS' "European RMBS Insight Methodology".
--The structural mitigants in place to avoid potential payment disruptions caused by operational risk, such as the existence of an experienced and highly rated servicer and the liquidity provided by the reserve account.
-- The transaction parties' financial strength to fulfil their respective roles.
-- The transaction's ability to withstand stressed cash flow assumptions and repay investors in accordance with the terms and conditions of the Notes.
-- The consistency of the transaction's legal structure with Morningstar DBRS' "Legal and Derivative Criteria for European Structured Finance Transactions" methodology and the expectation of legal opinions addressing the assignment of the assets to the Issuer.

Morningstar DBRS' credit rating on the Notes addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the related Interest Payment Amounts and the related Principal Balances.

Morningstar DBRS' credit rating does not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) 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
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" (13 August 2024) https://dbrs.morningstar.com/research/437781.

Morningstar DBRS analysed the transaction structure in Intex DealMaker, considering the default rates at which the rated Notes did not return all specified cash flows.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the credit rating is: "European RMBS Insight Methodology" (28 February 2025) https://dbrs.morningstar.com/research/449129.

Other methodologies referenced in this transaction 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.

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 this credit rating was provided by Abanca and internally from Morningstar DBRS. The sources include the loan-level data as of 30 December 2024 and historical performance data (delinquencies, defaults, recoveries, and prepayment data) covering the period from January 2014 to December 2024.

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

Morningstar DBRS was 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.

A provisional credit rating is not a final credit rating with respect to the above-mentioned security and may change or be different than the final credit rating assigned or may be discontinued. The assignment of a final credit rating on the above-mentioned security is subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalise the credit rating.

This credit rating concerns an expected-to-be-issued new financial instrument. This is the first Morningstar DBRS credit rating on this financial instrument.

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

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

In respect of the Notes, a PD of 15.4% and an LGD of 41.1% corresponding to the AAA (sf) credit rating scenario was stressed, assuming a 25.0% and 50.0% increase in the PD and LGD.

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)
-- 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, expected credit rating of AA (high) (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)

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: Álvaro Astarloa, Assistant Vice President
Credit Rating Committee Chair: Rehanna Sameja, Senior Vice President
Initial Credit Rating Date: 17 March 2024

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.

-- European RMBS Insight Methodology (28 February 2025) and European RMBS Insight model v 10.1.0.0, https://dbrs.morningstar.com/research/449129
-- Legal and Derivative Criteria for European Structured Finance Transactions (19 November 2024), https://dbrs.morningstar.com/research/443196
-- Operational Risk Assessment for European Structured Finance Originators and Servicers (18 September 2024), https://dbrs.morningstar.com/research/439571
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2024), https://dbrs.morningstar.com/research/439913
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August 2024), https://dbrs.morningstar.com/research/437781

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/439604.

For more information on this credit or on this industry, visit http://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.