Morningstar DBRS Upgrades and Confirms Credit Ratings on FT PYMES Santander 15

DBRS Ratings GmbH (Morningstar DBRS) took the following credit rating actions on the notes issued by FT PYMES Santander 15 (the Issuer), as follows:

-- Series B Notes upgraded to BBB (sf) from BBB (low) (sf)
-- Series C Notes confirmed at C (sf)

The credit ratings on the Series B and Series C Notes address the ultimate payment of interest and principal on or before the legal final maturity date in April 2051.

The credit rating actions follow an annual review of the transaction and are based on the following analytical considerations:
-- The portfolio performance, in terms of delinquencies, defaults, and losses, as of the January 2025 payment date;
-- The one-year base case probability of default (PD), default and recovery rates based on the current portfolio of receivables; and
-- The current available credit enhancement to the Series B Notes to cover the expected losses assumed at their credit rating level.

The Series C Notes were issued to fund a reserve fund and are in a first-loss position supported only by available excess spread. Given the characteristics of the Series C Notes, as defined in the transaction documents, the default would most likely be recognised at maturity or following an early termination of the transaction.

The transaction is a cash flow securitisation collateralised by a portfolio of secured and unsecured term loans and credit lines originated by Banco Santander SA (Santander), Banesto, and Banif (prior to their integration into Santander) to corporates, small and medium-size enterprises (SMEs), and self-employed individuals based in Spain. The transaction included a 24-month revolving period, which ended with the January 2022 payment date and the Series A Notes have been amortising since the April 2022 payment date.

PORTFOLIO PERFORMANCE
As of the January 2025 payment date, loans two to three months in arrears represented 0.6% of the outstanding portfolio balance, up from 0.4% in April 2024. The 90+ days delinquency ratio remained stable at 0.8%, and the cumulative default ratio slightly increased to 0.7%, up from 0.6% in the same period.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
Morningstar DBRS maintained its one-year base case PD assumption of 2.25%. Morningstar DBRS conducted a loan-by-loan analysis of the outstanding portfolio and updated its default and recovery assumptions based on the current pool of receivables.

CREDIT ENHANCEMENT
The Series B Notes benefit from 13.7% of credit enhancement provided by the reserve fund, down from 16.0% last year. The decrease in credit enhancement is driven by the amortisation of the reserve fund to the floor target level at EUR 75.0 million from the initial level of EUR 150.0 million in October 2024 payment date.

The reserve fund was funded through the issuance of the Series C Notes and is available to cover senior fees and interest and principal on the Series B Notes. As of the January 2025 payment date, the reserve fund was at EUR 75.0 million, its target level and floor.

Santander acts as the account bank for the transaction. Based on the account bank's reference rating of A (high), which is one notch below the Morningstar DBRS Long Term Critical Obligations Rating of Santander of AA (low), 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 Santander to be consistent with the credit ratings assigned to the notes, as described in Morningstar DBRS's "Legal and Derivative Criteria for European Structured Finance Transactions" methodology.

Morningstar DBRS' credit ratings on the rated notes addresses 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 transaction's 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, 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 structure in its proprietary Excel-based cashflow engine.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the credit ratings is the "Rating CLOs Backed by Loans to European SMEs" (19 November 2024); https://dbrs.morningstar.com/research/443198.

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 surveillance section of 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 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 investor reports provided by the management company, Santander de Titulización S.G.F.T., S.A., 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 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 transaction took place on 5 February 2025, when Morningstar DBRS discontinued its credit rating on the Series A Notes after full repayment. Prior to that, on 21 June 2024, Morningstar DBRS upgraded its credit rating on the Series B Notes to BBB (low) (sf) from B (high) (sf) and confirmed its credit rating on the Series C Notes at C (sf).

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 transaction parameters on the credit ratings, Morningstar DBRS considered the following stress scenarios, as compared to the parameters used to determine the credit ratings (the base case):
-- PD Rates Used: one-year base case PD of 2.25%, a 10.0% and 20.0% increase on the base case PD.
-- Recovery Rates Used: base case recovery rates of 58.3%, a 10.0% and 20.0% decrease in the base case recovery rates.

Morningstar DBRS concludes that a hypothetical increase of the base case PD by 20% or a hypothetical decrease of the recovery rate by 20%, ceteris paribus, would lead to a downgrade of the credit rating of the Series B Notes to BB (high) (sf). A scenario combining both an increase in the PD by 10% and a decrease in the recovery rate by 10%, ceteris paribus, would also lead to a downgrade of the credit rating of the Series B Notes to BB (high) (sf).

The credit rating on the Series C Notes would not be affected by a change in either the PD or the LGD.

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: Baran Cetin, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Associate Managing Director
Initial Rating Date: 4 December 2019

DBRS Ratings GmbH
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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.

-- Rating CLOs Backed by Loans to European SMEs (19 November 2024) and SME Diversity Model 2.7.1.5
https://dbrs.morningstar.com/research/443198
-- Global Methodology for Rating CLOs and Corporate CDOs (19 November 2024)
https://dbrs.morningstar.com/research/443207
-- European RMBS Insight Methodology (28 February 2025)
https://dbrs.morningstar.com/research/449129
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2024)
https://dbrs.morningstar.com/research/439913
-- Legal and Derivative Criteria for European Structured Finance Transactions (19 November 2024)
https://dbrs.morningstar.com/research/443196
-- Master European Structured Finance Surveillance Methodology (4 February 2025)
https://dbrs.morningstar.com/research/447080
-- 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.