ֳ

Rating Action Commentary

ֳ Upgrades TDA 29, FTA

Fri 17 Mar, 2017 - 12:56 PM ET

ֳ-London-17 March 2017: ֳ has upgraded two tranches of TDA 29, FTA and affirmed two others as follows:

Class A2 notes (ISIN ES0377931011): upgraded to 'A-sf' from 'BBBsf'; Outlook Stable
Class B notes (ISIN ES0377931029): upgraded to 'BBsf' from 'Bsf'; Outlook Stable
Class C notes (ISIN ES0377931037): affirmed at 'CCCsf'; Recovery Estimate revised to 85% from 65%
Class D notes (ISIN ES0377931045): affirmed at 'CCsf'; Recovery Estimate revised to 50% from 0%

The Spanish RMBS transaction comprises residential mortgages serviced by Banco de Sabadell S.A. and Banca March.

KEY RATING DRIVERS
Stable Credit Enhancement (CE)
ֳ anticipates structural CE to remain stable as the transaction is expected to maintain pro-rata paydown of the rated notes over the coming years. Existing and projected CE is sufficient to support higher stresses as reflected in the upgrades.

Stable Asset Performance
TDA 29 has shown sound asset performance compared with the average ֳ-rated Spanish RMBS. Three-months plus arrears (excluding defaults) as a percentage of the current pool balance of 0.26% for TDA 29 remains below ֳ's index of 0.9%. Cumulative defaults, defined as mortgages in arrears by more than 12 months, of 4.7% also remain below the 5.6% observed on ֳ's index. ֳ believes that these levels are likely to remain stable as the stock of late stage arrears is low. Given the improved performance, ֳ has revised the Recovery Estimate on the junior notes

Payment Interruption Risk
ֳ views TDA 29 as exposed to payment interruption risk as the available structural mitigant - the reserve fund (reduced by the expected loss) - remains insufficient to fully cover stressed senior fees, net swap payments and stressed note interests in the event of a servicer disruption. As a result, ֳ has capped the notes at 'Asf' unless payment interruption risk is sufficiently mitigated. This constitutes a variation from our Counterparty Criteria for Structure Finance and Covered Bonds, as the collection account banks (and servicers) are not rated by ֳ.

VARIATION FROM CRITERIA
Rating Cap Due to Payment Interruption Risk
According to ֳ's Counterparty Criteria for Structure Finance and Covered Bonds, the maximum achievable rating for transactions exposed to payment interruption risk is five notches above the rating of the collection account bank, so long as the bank is a regulated institution in a developed market. Even though the collection account banks in TDA 29 are not rated by ֳ, the maximum achievable rating for TDA 29 of 'Asf' is substantiated by the established retail franchise of both institutions and the robust banking sector supervision in Spain.

RATING SENSITIVITIES
As long as payment interruption risk is not fully mitigated; the maximum achievable rating of the notes will remain capped at 'Asf'.

A worsening of the Spanish macroeconomic environment especially employment conditions, or an abrupt shift of interest rates could jeopardise the underlying borrowers' affordability. This could have negative rating implications, especially for junior tranches that are less protected by structural CE.

USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO 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.

SOURCES OF INFORMATION
The information below was used in the analysis.
- Loan level data were used sourced from the European Data Warehouse with a cut-off date of October 2016.
- Issuer and servicer reports provided by Titulizacion de Activos, SGFT, SA since close and until November 2016.
- Maturity extensions data provided by Titulizacion de Activos, SGFT, SA with a cut-off date of March 2017.

MODELS
ResiEMEA.

EMEA RMBS Surveillance Model.

EMEA Cash Flow Model.

Contacts:
Lead Surveillance Analyst
Ricardo Garcia
Associate Director
+34 917 025 772
ֳ Espana, S.A.
Plaza de Colon 2, Torre II, planta 5
Madrid, 28046

Committee Chairperson
Juan David Garcia
Senior Director
+34 917 025 774

Media Relations: Athos Larkou, London, Tel: +44 203 530 1549, Email: athos.larkou@fitchratings.com.

Additional information is available on

Applicable Criteria
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016)
Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum (pub. 18 Jul 2016)
Criteria Addendum: Spain Residential Mortgage Assumptions (pub. 02 Dec 2016)
Criteria for Country Risk in Global Structured Finance and Covered Bonds (pub. 26 Sep 2016)
EMEA RMBS Rating Criteria (pub. 29 Nov 2016)
Global Structured Finance Rating Criteria (pub. 27 Jun 2016)
Structured Finance and Covered Bonds Interest Rate Stresses Rating Criteria (pub. 17 Feb 2017)

Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
Solicitation Status
Endorsement Policy


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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.

Solicitation Status

The ratings above were solicited and assigned or maintained at the request of the rated entity/issuer or a related third party. Any exceptions follow below.

ENDORSEMENT POLICY

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