Morningstar DBRS Takes Credit Rating Actions on Jeronimo Funding DAC

DBRS Ratings GmbH (Morningstar DBRS) took the following credit rating actions on the notes issued by Jeronimo Funding DAC (the Issuer):

-- Class A confirmed at AAA (sf)
-- Class B confirmed at AA (low) (sf)
-- Class C downgraded to A (low) (sf) from A (sf)
-- Class D confirmed at BBB (high) (sf)
-- Class E confirmed at BBB (high) (sf)
-- Class F confirmed at BBB (sf)

The credit rating on the Class A notes addresses the timely payment of interest and the ultimate repayment of principal on or before the legal final maturity date. The credit ratings on the Class B to Class F notes (together with the Class A notes, the Rated Notes) address the ultimate payment of interest and the ultimate repayment of principal on or before the legal final maturity date. Morningstar DBRS does not rate the Class Z notes (together with the Rated Notes, the Notes) also issued in this transaction.

CREDIT RATING RATIONALE
The credit rating actions follow a review of the transaction. Specifically, the downgrade of the credit rating on the Class C notes was prompted by the correction of a cash flow implementation error as described in the press release https://dbrs.morningstar.com/research/450192. The error under-estimated the servicing fees and incorrectly resulted in better cash flow results.

The Issuer is a bankruptcy-remote special-purpose vehicle (SPV) incorporated in Ireland. The Issuer used the proceeds from the issuance of the Notes to purchase all the FT Purchaser Bonds, which are the unitranche pass-through bonds issued by an SPV established in Spain, called Jeronimo Funding, Fondo de Titulización (Jeronimo FT). These bonds are backed by a portfolio of mainly reperforming Spanish residential mortgage loans originated by Unicaja Banco, S.A. (Unicaja) or any original lender merged with it, represented by mortgage certificates. Unicaja acts as the primary servicer for the portfolio, while Pepper Spanish Servicing, S.L.U. acts as the special servicer, managing loans in arrears for more than 120 days. In addition, the Issuer used the proceeds from the issuance of the Notes to (1) pay various costs and expenses, (2) pay any interest rate cap fees due and payable by the Issuer; and (3) fund the reserve fund (RF).

The seller is Medvida Partners de Seguros y Reaseguros, S.A. (Sociedad Unipersonal), a Spanish insurance company, which acquired the mortgage certificates from Unicaja.

Morningstar DBRS calculated initial credit enhancement for the Class A notes at 23.5%, provided by the subordination of the Class B to Class Z notes. Credit enhancement for the Class B notes is initially 19.0%, provided by the subordination of the Class C to Class Z notes. Credit enhancement for the Class C notes is initially 16.5%, provided by the subordination of the Class D to Class Z notes. Credit enhancement for the Class D notes is initially 15.0%, provided by the subordination of the Class E to Class Z notes. Credit enhancement for the Class E notes is initially 14.0%, provided by the subordination of the Class F notes and the Class Z notes. Credit enhancement for the Class F notes is initially 13.5%, provided by the subordination of the Class Z notes.

The transaction benefits from a RF fully funded at closing at 2.0% of the Notes' outstanding balance. It is split into two different reserve funds: (1) a liquidity reserve fund (LRF), which will provide liquidity support to the Class A notes in case of an interest shortfall, and (ii) a general reserve fund (GRF), which will provide liquidity support to the Rated Notes in case of an interest shortfall. While the LRF is set up at 2.0% of the Class A notes' outstanding balance, the GRF is calculated as the difference between the RF and the LRF. Principal amounts can also be used to cover interest shortfalls on the Class A to Class F notes, subject to the relevant class being the senior-most class of notes outstanding.

The Rated Notes will pay interest linked to three-month Euribor on a quarterly basis. Following the payment date in April 2028 (the step-up date), the margin payable on the Rated Notes will increase. Citibank Europe plc (rated AA (low) with a Stable trend by Morningstar DBRS) provides an interest rate cap with a strike rate of 5.5% and a notional that varies over time. Morningstar DBRS concluded that Citibank Europe plc meets its minimum criteria to act in such capacity. The transaction contains downgrade provisions relating to the interest rate cap provider. The downgrade provisions are consistent with Morningstar DBRS' criteria, given the credit ratings assigned to the Rated Notes.

Unicaja is acting as the collection account bank provider for this transaction. Unicaja will transfer the mortgage loan collections to an account in Jeronimo FT's name at Banco Santander, SA on a frequent basis. All borrower payments under the mortgage loans will be held in this account until the FT Purchaser Bonds make payments to the Issuer five days before each interest payment date on the transaction. Morningstar DBRS' credit rating on Banco Santander and the downgrade provisions are consistent with the threshold for the account bank as outlined in Morningstar DBRS' "Legal and Derivative Criteria for European Structured Finance Transactions" methodology, given the credit ratings assigned to the Rated Notes.

Citibank N.A., London Branch (Citibank) is the account bank, custodian, and paying agent for this transaction. Morningstar DBRS' private credit rating on Citibank and the downgrade provisions are consistent with the threshold for the account bank as outlined in Morningstar DBRS' "Legal and Derivative Criteria for European Structured Finance Transactions" methodology, given the credit ratings assigned to the Rated Notes.

Morningstar DBRS was provided with a mortgage portfolio equal to EUR 305.8 million as of 31 October 2024 (the cut-off date), which consisted of 5,496 mortgage loans mainly granted to individuals (95.4%). Of the portfolio balance, 68.0% of the loans were restructured while, as of the cut-off date, 61.7% were performing, 12.0% were no more than one month in arrears, 17.3% were between one and three months in arrears, 7.6% were between three and 12 months in arrears, and 1.3% were more than 12 months in arrears. Loans representing 1.0% of the total amount are currently in their grace period, with deferred principal payments, while 16.3% are loans whose borrowers have adhered to the Spanish code of good practices at some point in time. Morningstar DBRS considered these in its assessment. Morningstar DBRS assessed the historical performance of the mortgage loans and selected a portfolio score of "Low" in its European RMBS Insight Model.

The weighted-average (WA) seasoning of the portfolio as of the cut-off date is 15.5 years whereas the WA remaining term is 15.8 years. The WA original loan-to-value (LTV) ratio stands at 74.7% while the WA indexed current LTV is 56.6%. Morningstar DBRS also considered the latest valuations provided in its analysis. Currently, 96.1% of the portfolio comprises floating-rate loans, mainly linked to 12-month Euribor or other Spanish indices. The remaining 3.9% of the portfolio comprises fixed-rate loans. The issued notes are floating rate linked to three-month Euribor, and any basis risk mismatch will remain unhedged. Morningstar DBRS took basis risk into account in its cash flow analysis.

The seller may repurchase any loan at any time. The repurchase price is (i) for loans that are 180 or more days in arrears, (a) for up to a maximum limit of 15% of the outstanding balance of the loans, 90% of the outstanding balance of the relevant loan at that moment, (b) for any loan in excess of that limit, 100% of the outstanding balance of the loan at that moment, and (ii) for any other mortgage loans, the outstanding balance of the relevant loan at that moment.

The credit rating actions are based on the following analytical considerations:
-- The transaction's capital structure, including the form and sufficiency of available credit enhancement and liquidity provisions.
-- The credit quality of the mortgage portfolio and the ability of the servicer and the special servicer to perform collection and resolution activities. Morningstar DBRS estimated stress-level probability of default (PD), loss given default (LGD), and expected loss (EL) levels on the mortgage portfolio, which were used as inputs into the cash flow engine. Morningstar DBRS analysed the mortgage portfolio in accordance with its European RMBS Insight Methodology.
-- The transaction's ability to withstand stressed cash flow assumptions and repay investors according to the terms of the transaction documents.
-- The structural mitigants in place to avoid potential payment disruptions caused by operational risk, such as a downgrade, and replacement language in the transaction documents.
-- The transaction parties' financial strength to fulfil their respective roles.
-- The expected consistency of the transaction's legal structure with Morningstar DBRS' "Legal and Derivative Criteria for European Structured Finance Transactions" methodology and the presence of legal opinions that address the assignment of the assets to the Issuer; and
-- The sovereign credit rating of A (high) with a Stable trend on the Kingdom of Spain as of the date of this credit rating action.

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" (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 methodologies applicable to the credit ratings are the "Master European Structured Finance Surveillance Methodology" (4 February 2025) https://dbrs.morningstar.com/research/447080 and the "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 methodologies consistently and conducted a review of the transaction in accordance with the principal methodologies.

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 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 the seller and its representatives. Morningstar DBRS received a loan-by-loan data tape as of 31 October 2024 as well as historical monthly data covering principal due, delinquencies, instalments due, and payments made, spanning a period between 2019 and 2024. The data provided included both the full provisional book as of July 2024 and the positive selection perimeter from which the pool was sourced at the cut-off date.

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

At the time of the initial credit rating, 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 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 action on this issuer took place on 31 January 2025, when Morningstar DBRS finalised its provisional credit ratings on Jeronimo Funding DAC.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on 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 ratings (the base case):
-- Morningstar DBRS expected the same lifetime base case PD and LGD for the pool as when the provisional credit ratings were finalised on 31 January 2025. 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 assumptions for the collateral pool are 15.4% and 15.6%, respectively.

Class A notes risk sensitivity:
-- 25% increase of the PD, ceteris paribus, would lead to a downgrade to A (high) (sf).
-- 50% increase of the PD, ceteris paribus, would lead to a downgrade to A (low) (sf).
-- 25% increase of the LGD, ceteris paribus, would lead to a downgrade to AA (high) (sf).
-- 50% increase of the LGD, ceteris paribus, would lead to a downgrade to AA (low) (sf).
-- 25% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to A (high) (sf).
-- 50% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to BBB (high) (sf).
-- 25% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to A (low) (sf).
-- 50% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to BBB (high) (sf).

Class B notes risk sensitivity:
-- 25% increase of the PD, ceteris paribus, would lead to a downgrade to BBB (high) (sf).
-- 50% increase of the PD, ceteris paribus, would lead to a downgrade to BBB (high) (sf).
-- 25% increase of the LGD, ceteris paribus, would lead to a downgrade to A (sf).
-- 50% increase of the LGD, ceteris paribus, would lead to a downgrade to BBB (high) (sf).
-- 25% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to BBB (high) (sf).
-- 50% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to BBB (low) (sf).
-- 25% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to BBB (high) (sf).
-- 50% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to BB (high) (sf).

Class C notes risk sensitivity:
-- 25% increase of the PD, ceteris paribus, would lead to a downgrade to BBB (high) (sf).
-- 50% increase of the PD, ceteris paribus, would lead to a downgrade to BB (high) (sf).
-- 25% increase of the LGD, ceteris paribus, would lead to a downgrade to BBB (high) (sf).
-- 50% increase of the LGD, ceteris paribus, would lead to a downgrade to BBB (high) (sf).
-- 25% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to BBB (low) (sf).
-- 50% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to BB (high) (sf).
-- 25% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to BB (high) (sf).
-- 50% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to BB (high) (sf).

Class D notes risk sensitivity:
-- 25% increase of the PD, ceteris paribus, would lead to a downgrade to BB (high) (sf).
-- 50% increase of the PD, ceteris paribus, would lead to a downgrade to BB (high) (sf).
-- 25% increase of the LGD, ceteris paribus, would lead to a downgrade to BBB (sf).
-- 50% increase of the LGD, ceteris paribus, would lead to a downgrade to BBB (low) (sf).
-- 25% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to BB (high) (sf).
-- 50% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to BB (sf).
-- 25% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to BB (high) (sf).
-- 50% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to BB (low) (sf).

Class E notes risk sensitivity:
-- 25% increase of the PD, ceteris paribus, would lead to a downgrade to BB (high) (sf).
-- 50% increase of the PD, ceteris paribus, would lead to a downgrade to BB (sf).
-- 25% increase of the LGD, ceteris paribus, would lead to a downgrade to BB (high).
-- 50% increase of the LGD, ceteris paribus, would lead to a downgrade to BB (high) (sf).
-- 25% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to BB (high) (sf).
-- 50% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to BB (low) (sf).
-- 25% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to BB (high) (sf).
-- 50% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to B (high) (sf).

Class F notes risk sensitivity:
-- 25% increase of the PD, ceteris paribus, would lead to a downgrade to BB (high) (sf).
-- 50% increase of the PD, ceteris paribus, would lead to a downgrade to BB (low) (sf).
-- 25% increase of the LGD, ceteris paribus, would lead to a downgrade to BB (high).
-- 50% increase of the LGD, ceteris paribus, would lead to a downgrade to BB (high) (sf).
-- 25% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to BB (sf).
-- 50% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to B (high) (sf).
-- 25% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to BB (low) (sf).
-- 50% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to B (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: Tomas Rodriguez-Vigil Junco, Senior Vice President
Rating Committee Chair: Ketan Thaker, Managing Director
Initial Rating Date: 20 December 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.

-- Master European Structured Finance Surveillance Methodology (4 February 2025), https://dbrs.morningstar.com/research/447080
-- European RMBS Insight Methodology (28 February 2025) and European RMBS Insight model v 10.1.0.0, https://dbrs.morningstar.com/research/449129
-- Global Methodology for Rating CLOs and Corporate CDOs (19 November 2024), https://dbrs.morningstar.com/research/443207
-- Rating CLOs Backed by Loans to European SMEs (19 November 2024) and SME Diversity Model version 2.7.1.5, https://dbrs.morningstar.com/research/443198/
-- Legal and Derivative Criteria for European Structured Finance Transactions (19 November 2024), https://dbrs.morningstar.com/research/443196
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2024), https://dbrs.morningstar.com/research/439913
-- Operational Risk Assessment for European Structured Finance Originators and Servicers (18 September 2024), https://dbrs.morningstar.com/research/439571
-- 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 https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.