DBRS Assigns A Rating to Banco Popular Espanol SA Cedulas Hipotecarias New Issuances

DBRS Ratings Limited (DBRS) has today assigned a rating of ‘A’ to four new covered bonds issuances “Cedulas Hipotecarias 2013-4”, “Cedulas Hipotecarias 2013-5”, “Cedulas Hipotecarias 2013-6” and “Cedulas Hipotecarias 2013-7” issued by Banco Popular Espanol SA (BPE). At the same time, DBRS has confirmed the ‘A’ rating on all BPE Cedulas Hipotecarias (CH) outstanding.

The rating reflects the following analytical considerations:
•The senior unsecured debt rating of BPE (the “Issuer”) of A (low) with Negative Trend.
•The credit quality of the collateral cover pool and the substantial support of the cover pool in case of the default of BPE.
•BPE’s capabilities with respect to origination of the cover assets and servicing of the cover pool.

The new series pay floating coupon linked to 3 months Euribor plus a margin ranging between 1.5% and 2.25%, and including a cap on the coupon paid by the cedulas. The new series main characteristics are as follows:
•Cedulas Hipotecarias 2013-4 (ES0413790272) is a EUR1bn maturing in August 2025
•Cedulas Hipotecarias 2013-5 (ES0413790280) is a EUR1.25bn maturing in September 2026
•Cedulas Hipotecarias 2013-6 (ES0413790298) is a EUR1.5bn maturing in October 2027
•Cedulas Hipotecarias 2013-7 (ES0413790306) is a EUR1.5bn maturing in November 2028

At the same time Banco Popular Espanol is early amortising EUR6.05bn of existing cedulas that were expected to mature during the next three years. As a result, on 31 July 2013 the volume of outstanding covered bonds will decrease, the maturity mismatch between assets and liabilities will improve due to the longer weighted average life of the liabilities, and the interest rate risk will slightly decrease due to the cap in place on the coupon of the new series.

As of 31 July 2013, the total outstanding amount of CH will be 24.14bn backed by EUR60.7bn mortgages resulting in a nominal over-collateralisation of 151.7%.

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 Legal and Structuring Framework (LSF) matrices cannot be applied or their application would otherwise result in the covered bonds being rated at the same level as the Issuer.

A downgrade of the Issuer would lead to a downgrade of the CH by an equal number of notches.

Notes:
All figures are in Euros unless otherwise noted.

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 Granular Corporate Securitisations (SME CLOs)
• Master European Structured Finance Surveillance Methodology
• Operational Risk Assessment for European Structured Finance Servicers
• 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 BPE. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

The most recent rating action on this transaction took place on 24 May 2013, when DBRS assigned ratings to a tap issuance of the existing covered bond “Cedulas Hipotecarias 2012-1 (ES0413790173)”.

For additional information on this rating, please see the related linking document. The individual linking document for this transaction is located at http://www.dbrs.com/research/256759/linking-document-banco-popular-espa-ol-covered-bond-programme.pdf

For further information on DBRS’s historic default rates published by the European Securities and Markets Administration (“ESMA”) in a central repository see http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml

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

Initial Lead Analyst: Vito Natale
Initial Rating Date: 24 April 2013
Rating Committee Chair: Claire Mezzanotte
Previous Rating Date: 24 May 2013

Lead Analyst: Vito Natale
Most Recent Rating Date: 23 May 2013
Rating Committee Chair: Claire Mezzanotte

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