Rating Action Commentary
ֳ Takes Multiple Rating Actions on 3 Spanish RMBS
Tue 15 Mar, 2022 - 9:38 AM ET
ֳ - Madrid - 15 Mar 2022: ֳ has upgraded three tranches of three Spanish RMBS transactions and affirmed the rest. ֳ has also revised the Outlook on TDA 19 - MIXTO, FTA's and TDA Cajamar 2, FTA's class D notes to Stable from Negative. The rating actions are listed below.
Transaction Summary
The transactions comprise residential mortgages serviced by Banco Sabadell, S.A. (BBB-/Stable/F3) and Caixabank S.A (BBB+/Stable/F2) for Caixa Penedes 1 TDA, FTA (Penedes 1), Banco Bilbao Vizcaya Argentaria, S.A. (BBB+/Stable/F2) and Grupo Cooperativo Cajamar for TDA 19 - MIXTO, FTA (TDA 19), and Cajamar Caja Rural, Sociedad Cooperativa de Crédito, for TDA Cajamar 2, FTA (Cajamar 2).
KEY RATING DRIVERS
Increasing Credit Enhancement (CE): The upgrades of Penedes 1's notes reflect increased CE for all classes. The affirmations on TDA 19's and Cajamar 2's notes reflect ֳ's view that the notes are sufficiently protected by CE to absorb the projected losses commensurate with current ratings.
The transactions benefit from non-amortising reserve funds, either due to the breach of performance triggers or because they have already reached their floor. ֳ expects CE ratios to slightly increase for Penedes 1 and Cajamar 2, driven by non-amortising reserve funds, despite prevailing pro-rata amortisation. We expect pro-rata note amortisation will continue until the portfolio factor - defined as current portfolio balance over the initial portfolio balance - falls below the 10% threshold (currently 14% and 11% for Penedes 1 and Cajamar 2, respectively). For TDA 19, the current portfolio factor is 7.2%. The transaction amortises sequentially and CE ratios will continue to increase.
Counterparty Risks Cap Ratings: TDA 19's and Cajamar 2's class D notes' ratings are capped at the transaction account bank's (TAB) Issuer Default Rating (BNP Securities Services Europe Plc, A+/Stable/F1) as the transactions' cash reserves held at this entity represent more than 50% of structural CE for these tranches. The rating cap reflects excessive counterparty dependence on the TAB holding the cash reserves, as the sudden loss of these amounts could imply a downgrade of 10 or more notches of the notes in accordance with ֳ's Structured Finance and Covered Bonds Counterparty Rating Criteria.
The Outlook revision to Stable for TDA 19's and Cajamar 2's class D notes mirrors a similar rating revision of the TAB of both transactions.
Geographic Concentration: The portfolios are exposed to geographic concentration risk, mainly to the regions of Catalonia (Penedes 1 and TDA 19) and Murcia (Cajamar 2 and TDA 19). ֳ has applied a higher set of rating multiples to its base-case foreclosure frequency (FF) assumption to the portion of the portfolios that exceed 2.5x the population within these regions.
Portfolio Loss Floor: All transactions have more than 17 years of seasoning, a weighted-average (WA) loan to indexed current loan-to-value below 50% and the portfolios have withstood a period of significant economic stress. Where these conditions are met ֳ may apply a reduced performance adjustment factor (PAF) floor of 50% in its analysis, as set out in its European RMBS Rating Criteria. In previous analysis, for TDA 19 and Cajamar 2, ֳ reduced the PAF floor to 50%, due to the low default rate in the transactions to date. This produces an expected loss at the loss floor for a Spanish portfolio of 5% at 'AAAsf'.
ESG - Governance: Penedes 1 has an ESG Relevance Score of '4' for transaction & collateral structure, due to loan modifications after transaction closing that introduced-interest rate risk.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
For TDA 19's and Cajamar 2's class D notes, a downgrade of the TAB's Long-Term Issuer Default Rating could trigger a corresponding downgrade of the notes. This is because the notes' ratings are capped at the TAB's Long-Term Issuer Default Rating given the excessive counterparty risk exposure.
The transactions' performance may be affected by changes in market conditions and economic environment. Weakening economic performance is strongly correlated to increasing levels of delinquencies and defaults that could reduce CE available to the notes. Unanticipated declines in recoveries could also result in lower net proceeds, which may make certain notes susceptible to negative rating action, depending on the extent of the decline in recoveries.
ֳ conducts sensitivity analyses by stressing both a transaction's base-case FF and recovery rate (RR) assumptions, and examining the rating implications on all classes of issued notes. A 15% increase in WA FF and a 15% decrease in WARR indicate downgrades of up to two notches on the notes.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
TDA 19's and Cajamar 2's class A to C notes are rated at 'AAAsf' - the highest level on ֳ's scale - and therefore cannot be upgraded.
For TDA 19's and Cajamar 2's class D notes, an upgrade of TAB's Long-Term Issuer Default Rating could trigger a corresponding upgrade of the notes.
Stable to improved asset performance driven by stable delinquencies and defaults would lead to increasing CE levels and, potentially, upgrades. A decrease in WAFF of 15% and an increase in WARR of 15% indicate upgrades of no more than one notch on the notes.
Best/Worst Case Rating Scenario
International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit /site/re/10111579.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by, ֳ in relation to this rating action.
DATA ADEQUACY
ֳ has checked the consistency and plausibility of the information it has received about the performance of the asset pools and the transactions. There were no findings that affected the rating analysis. ֳ has not reviewed the results of any third-party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.
ֳ did not undertake a review of the information provided about the underlying asset pools ahead of the transactions' initial closing. The subsequent performance of the transactions over the years is consistent with the agency's expectations given the operating environment and ֳ is therefore satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable.
Overall, ֳ's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
TDA 19's and Cajamar 2's class D notes' ratings are capped at the TAB's rating, due to excessive counterparty dependency risk.
ESG Considerations
Penedes 1 has an ESG Relevance Score of '4' for transaction & collateral structure, due to loan modifications that introduced interest-rate risk, which has a negative impact on the credit profile, and is relevant to the rating in combination with other factors.
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on ֳ's ESG Relevance Scores, visit
Additional information is available on
PARTICIPATION STATUS
The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer’s available public disclosure.
APPLICABLE CRITERIA
APPLICABLE MODELS
Numbers in parentheses accompanying applicable model(s) contain hyperlinks to criteria providing description of model(s).
ADDITIONAL DISCLOSURES
ENDORSEMENT STATUS
| Caixa Penedes 1 TDA, FTA | EU Issued, UK Endorsed |
| TDA 19 - MIXTO, FTA | EU Issued, UK Endorsed |
| TDA Cajamar 2, FTA | EU Issued, UK Endorsed |