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���������ֳ� - Madrid - 04 Apr 2025: ���������ֳ� has upgraded six tranches of one Spanish AyT Colaterales Global Hipotecario and two AyT Kutxa Hipotecarios RMBS transactions, while affirming the rest. All Outlooks are Stable. Eight tranches were removed from Under Criteria Observation.

Transaction Summary

The transactions are static securitisations of Spanish residential mortgages originated and serviced by Kutxabank, S.A. (BBB+/Positive/F2).

KEY RATING DRIVERS

European RMBS Criteria Updated: The rating actions reflect the update of ���������ֳ�'s European RMBS Rating Criteria, which adopted a non-indexed current loan-to-value (LTV) approach to derive the base foreclosure frequency (FF) on the portfolio, instead of the original LTV approach applied previously. Another relevant change under ���������ֳ�'s new criteria is the updated loan level recovery rate cap of 85%, down from 100%.

For both BBK II and Kutxa I, the portfolio credit analysis is still driven by the portfolio loss vector (e.g. 5% at the AAAsf rating case). For more information see "���������ֳ� Updates European RMBS Rating Criteria; Sets FF and HPD Assumptions" dated 30 October 2024.

Stable Asset Performance Expectation: The rating actions reflect the transactions' broadly stable asset performance outlook, in line with our neutral asset performance outlook for eurozone RMBS. The transactions have a low share of loans in arrears over 90 days (below 1.2% of outstanding pool balance as of the latest reporting dates) and are protected by substantial seasoning of the portfolios of around 18 years.

The portfolios are highly concentrated in the Basque Country, where 45%- 60% of the properties are located. To address regional concentration risk, ���������ֳ� applied higher rating multiples to the base FF assumption to the portion of the portfolio that exceeds 2.5x the population within this region relative to the national total, in line with its European RMBS Rating Criteria.

Excessive Counterparty Exposure: The upgrade of BBK II's class B notes and Kutxa I's class C notes to 'A+sf' with Stable Outlook reflects the sound credit performance of the transactions. However, following the upgrade, the notes are capped at the transaction account bank (TAB) provider's (Banco Santander, S.A.) 'A+' long-term deposit rating, reflecting their excessive counterparty dependency on the TAB holding the cash reserves.

Sufficient Credit Enhancement (CE): ���������ֳ� views the notes as sufficiently protected by CE at their respective ratings. ���������ֳ� expects CE to continue increasing for BBK I, BBK II and Kutxa II due to the mandatory sequential amortisation of the notes, but expects it to remain broadly stable for Kutxa I, due to its current pro-rata note amortisation. BBK I and BBK II are unhedged, with fixed-rate liabilities and floating-rate portfolios mostly linked to the 12M Euribor index. ���������ֳ� considers their current and projected CE protection for the rated notes as sufficient to mitigate their associated cash flow risks.

Payment Interruption Risk Mitigated: ���������ֳ� views payment interruption risk for all the transactions as mitigated in the event of a servicer disruption. We consider the available structural mitigant of a cash reserve fund, which can be depleted by losses, as sufficient to cover stressed senior fees, net swap payments (if applicable) and senior notes interest due amounts while implementing an alternative servicer arrangement.

RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

For senior notes rated at 'AAAsf', a downgrade of Spain's Long-Term Issuer Default Rating (IDR) that could lower the maximum achievable rating for Spanish structured finance transactions would result in a downgrade of the notes. This is because these notes are rated at the maximum achievable rating, six notches above the sovereign IDR.

CE ratios unable to fully compensate the credit losses and cash flow stresses associated with the current ratings, all else being equal, would also result in downgrades. For example, a combination of increased defaults and decreased recoveries by 15% each could trigger a downgrade of up to two notches on Kutxa II's class C notes.

For BBK II's class B notes and Kutxa I's class C notes, a downgrade of the SPV TAB's long-term deposit rating could trigger a corresponding downgrade of the notes. This is because their ratings are capped at the TAB's rating due to excessive counterparty risk.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

Notes rated at 'AAAsf' are at the highest level on ���������ֳ�'s scale and cannot be upgraded.

For BBK II's class B notes and Kutxa I's class C notes, an upgrade of the TAB's long-term deposit rating could trigger a corresponding upgrade. For Kutxa II's class C notes, defaults decreasing by 15% could trigger an upgrade to the TAB rating cap.

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. ���������ֳ� 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' 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, and together with any assumptions referred to above, ���������ֳ�'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

BBK II class B notes and Kutxa I class C notes' ratings are directly linked to their TABs' long-term deposit ratings due to excessive counterparty dependency.

ESG Considerations

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' 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. ���������ֳ�'s ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on ���������ֳ�'s ESG Relevance Scores, visit /topics/esg/products#esg-relevance-scores.

Additional information is available on

APPLICABLE MODELS

Numbers in parentheses accompanying applicable model(s) contain hyperlinks to criteria providing description of model(s).

• Multi-Asset Cash Flow Model, v3.5.0 (1)
• ResiGlobal Model: Europe, v1.11.0 (1)

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