DBRS Assigns Final Ratings to BBVA RMBS 12, FONDO DE TITULIZACIÓN DE ACTIVOS

DBRS Ratings Limited (“DBRS”) assigned final ratings to the following bonds issued by BBVA RMBS 12, FONDO DE TITULIZACIÓN DE ACTIVOS:

-- ‘A’ (low)(sf) to EUR 3,610,500,000 Series A Bonds

-- BB (sf) to EUR 739,500,000 Series B Bonds

BBVA RMBS 12, FONDO DE TITULIZACIÓN DE ACTIVOS is a securitisation of a portfolio of Spanish prime residential mortgages. The mortgage loans were originated and will be serviced by Banco Bilbao Vizcaya Argentaria, S.A. (“BBVA”).

The rating is based upon review by DBRS of the following analytical considerations:

• The transaction’s capital structure and the form and sufficiency of available credit enhancement; Series A Bonds credit enhancement consists of the subordinated Series B Bonds of EUR 739,500,000 and EUR 217,500,000 reserve fund, which equals to 22.00% the sum of the outstanding balance of Series A and Series B Bonds (“the Rated Bonds”). The Series B Bonds credit enhancement consists of a EUR 217,500,000 cash reserve fund, which equals to 5.00% the sum of the outstanding balance of Series A and Series B Bonds.
• The mortgage portfolio consists of loans which have a variable interest rate mainly linked to 12-month Euribor. In comparison the interest rate paid on the Rated Bonds is linked to 3-month Euribor. This basis risk is un-hedged. DBRS has stressed the interest receipts from the mortgage portfolio in its cash flow analysis of the transaction structure using its Unified Interest Rate Model.
• The credit quality of the mortgages backing the bonds and the ability of the servicer to perform its servicing duties; The mortgage portfolio in BBVA RMBS 12, FONDO DE TITULIZACIÓN DE ACTIVOS, whilst well-seasoned, also has a large proportion of mortgage loans originated after the onset of the global financial crisis in 2008 or later. DBRS was provided with the historical performance data of all BBVA RMBS originated transactions (BBVA RMBS 1 to 11 (excluding VPO deal BBVA RMBS 8)) as well as loan level data for the mortgage portfolio of this transaction. Details of estimated defaults, loss given default and expected losses for the mortgage portfolio at “A(low)(sf)” and “BB(sf)” stress scenarios are highlighted below.
• The transaction parties’ capabilities with respect to originations, underwriting and servicing; the mortgage portfolio will be serviced by BBVA. DBRS used a combination of default timing curves (front- and back-ended), rising and declining interest rates and low, mid and high prepayment scenarios in accordance with the DBRS rating methodology to stress the cash flows. Given the low prepayment level observed in Spain, currently below 5%, DBRS also tested a scenario with zero prepayments.
• The legal structure and presence of legal opinions addressing the assignment of the assets to the issuer and the consistency with the DBRS Legal Criteria for European Structured Finance Transactions.
Notes:
All figures are in Euro unless otherwise noted.

The principal methodology applicable is:
Master European Residential Mortgage-Backed Securities Rating Methodology and the Spanish Jurisdictional Addendum

Other methodologies and criteria referenced in this transaction are listed at the end of this press release.

This can be found on www.dbrs.com at:
http://www.dbrs.com/about/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” on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/

The sources of information used for this rating include BBVA, Europea de Titulización S.A., S.G.F.T and their agents. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality. The information upon which DBRS ratings and reports are based, and any other content displayed on the Site, is obtained by DBRS from sources DBRS believes to be accurate and reliable.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance. The extent of any factual investigation or independent verification depends on facts and circumstances.

This rating concerns a newly issued financial instrument. This is the first DBRS rating on this financial instrument.

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.

To assess the impact of a change in the transaction parameters (probability of defaults and/or loss given default) on the rating of Series A and Series B Bonds, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the “Base Case”):
• In respect of Series A Bonds and a rating category of “A(low)(sf)” , the Probability of Default (“PD”) of 18.51%, a 25% and 50% increase on the PD.
• In respect of Series A Bonds and a rating category of “A(low)(sf)”,Loss Given Default (“LGD”)of 48.51%, a 25% and 50% increase on the LGD.
• In respect of Series B Bonds and a rating category of “BB(sf)” , the Probability of Default (“PD”) of 10.56%, a 25% and 50% increase on the PD.
• In respect of Series B Bonds and a rating category of “BB(sf)”,Loss Given Default (“LGD”)of 40.43%, a 25% and 50% increase on the LGD.

DBRS concludes that for the Series A Bonds:
• A hypothetical increase of the PD by 25% or a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to maintain the Series A Bonds to A (low) (sf).
• A hypothetical increase of the PD by 50% or a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to maintain the Series A Bonds to A (low) (sf).
• A hypothetical increase of the PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to maintain the Series A Bonds to A (low) (sf).
• A hypothetical increase of the PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to maintain the Series A Bonds to A (low) (sf).
• A hypothetical increase of the PD by 25% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to maintain the Series A Bonds to A (low) (sf).
• A hypothetical increase of the PD by 50% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to maintain the Series A Bonds to A (low) (sf).

DBRS concludes that for the Series B Bonds:
• A hypothetical increase of the PD by 25%, ceteris paribus, would lead to a downgrade of the Series B Bonds to B (high) (sf).
• A hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Series B Bonds to BB (low) (sf).
• A hypothetical increase of the PD by 50%, ceteris paribus, would lead to a downgrade of the Series B Bonds to B (sf).
• A hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Series B Bonds to B (high) (sf).
• A hypothetical increase of the PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Series B Bonds to B (sf).
• A hypothetical increase of the PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Series B Bonds to CC (sf) .
• A hypothetical increase of the PD by 50% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Series B Bonds to CC (sf).

For further information on DBRS 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: David Sanchez Rodriguez
Initial Provisional Rating Date: 02/12/2013 (Final Rating Date: 10/12/2013)
Initial Provisional Rating Committee Chair: Quincy Tang
Last Rating Date: Not applicable; no last rating date.
Lead Surveillance Analyst: Keith Gorman

DBRS Ratings Limited
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Registered in England and Wales: No. 7139960

The rating methodologies and criteria used in the analysis of this transaction can be found at:
http://www.dbrs.com/about/methodologies

• Master European Residential Mortgage Backed Securities Rating Methodology and Jurisdictional Addenda
• Legal Criteria for European Structured Finance Transactions
• Operational Risk Assessment for European Structured Finance Servicers
• Unified Interest Rate Model for European Securitisations