DBRS Confirms Ratings on Santander Totta Covered Bonds Programmes

DBRS Ratings Limited (DBRS) has today confirmed the ‘A’ (low) rating of the Eur 5.8 bn notes outstanding under Santander Totta S.A. (Totta) Covered Bonds Programme, upon implementation of the updated Rating European Covered Bonds methodology published on16 January 2013.

The rating action reflects the following analytical considerations:
•The senior unsecured debt rating of Totta of BBB (high) with Negative Trend confirmed on 5 December 2012.
•DBRS Legal and Structuring Framework (LSF) assessment of “Adequate”.
•The credit quality of the cover pool and the substantial support of the cover pool in case of the default of Santander Totta.
•The issuer’s capabilities with respect to origination of the cover pool assets and servicing of the cover pool.

According to DBRS “Rating European Covered Bonds” methodology, the rating of the Covered Bonds, although linked to that of the Issuer, can be one notch above the Issuer’s rating in instances where DBRS LSF matrices application would result in the covered bonds being rated at the same level as the Issuer.

The current Issuer commitment of 30% would result in a cover pool credit assessment of BB, as opposed to BBB (low) before. The application of the LSF matrix would equalize the rating of the covered bonds to that of the issuer. However, DBRS has formed a view on the availability and sufficiency of the cover pool to satisfy the claims of the Covered Bonds holders in a post issuer insolvency scenario. As a result, Totta Covered Bonds can be confirmed at A (low).

A downgrade of the Issuer would lead to a downgrade of the covered bonds by an equivalent number of notches.

Notes:
The principal methodologies applicable are:
• Rating European Covered Bonds
• Global Methodology for Rating Banks & Banking Organisations
• Legal Criteria for European Structured Finance Transactions
• Master European Residential Mortgage-Backed Securities Rating Methodology
• Master European Structured Finance Surveillance Methodology
• Operational Risk Assessment for European Structured Finance Servicers
• Swap Criteria for European Structured Finance Transactions
• Unified Interest Rate Model Methodology for European Securitisations

These can be found on dbrs.com under Methodologies. For a more detailed discussion of sovereign risk impact on Structured Finance ratings, please refer to DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area”.

The sources of information used for this rating include data related to the cover pool provided by Totta. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

For additional information on this rating, please see the related linking document.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Lead Analyst: Vito Natale
Rating Committee Chair: Quincy Tang
Initial Rating Date: 27 February 2012
Most Recent Rating Update: 14 December 2012