DBRS Assigns BBB Rating to Caja Rural de Granada Cedulas Hipotecarias

DBRS Rating Limited (DBRS) has today assigned a rating of ‘BBB’ to Caja Rural de Granada (CRG or “issuer”) mortgage covered bond.

The ratings are based on the following analytical considerations:
• The Issuer rating of BBB (low) with Negative Trend.
• DBRS Legal and Structuring Framework assessment of “Modest”.
• Cover Pool Credit Assessment of BBB (low)
• CRG’s capabilities with respect to origination of the cover assets and servicing of the cover pool

The transaction was modeled in DBRS European Covered Bond Cash Flow Model. The main assumptions focused on the timing of defaults and recoveries of the assets, interest rate stresses and market spread values to calculate liquidation values on the cover pool.

Caja Rural de Granada issued its first stand-alone Cedula Hipotecaria (CH) on 16th December 2013. The issuance is a EUR600mln fixed rate security maturing in 2018. The CH is backed by EUR 1,576mln mortgages resulting in a nominal over-collateralisation (OC) of 162%.

The cover pool is formed by residential mortgage loans (43%) as well as commercial (35%), land loans (21%) and other type of loans (1%). This is a 65-month seasoned cover pool that is geographically concentrated in Caja Rural de Granada home region.

The reference rate of the underlying loans is primarily floating (98.5%), while the CH yields a fixed coupon. As standard in the Spanish market, the CH holders do not receive the benefit of the swaps that are in place to hedge such mismatch. This has been accounted for in DBRS cash flow modelling.

The weighted average life of the pool is 10.6 years, while that of the covered bonds is 5 years. This generates an asset-liability mismatch that is mitigated by the available OC.

For further information on Caja Rural de Granada CH please refer to the ratings report that will shortly be available on www.dbrs.com

DBRS has assessed the LSF related to the Spanish CH as “Modest” according to its rating methodology. For more information, please refer to “DBRS Commentary on Spanish Cedulas Hipotecarias Legal and Structuring Framework”, available at www.dbrs.com.

Notes:
All figures are in Euros unless otherwise noted.

The principal methodology applicable is: “Rating European Covered Bonds”. This can be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies

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

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 historical default performance data and cover pool loan by loan data that allowed DBRS to further assess the portfolio. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

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.

This is the first DBRS rating on Caja Rural de Granada Cedulas Hipotecarias.

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

All else equal, a downgrade of the Issuer rating by one notch would lead to a downgrade of the covered bonds by an equal number of notches.

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: Covadonga Aybar
Initial Rating Date: 23 December 2013
Initial Rating Committee Chair: Claire Mezzanotte
Last Rating Date: 23 December 2013.

DBRS Ratings Limited
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Mincing Lane
London
EC3R 7AA
United Kingdom

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

• 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
• Unified Interest Rate Model Methodology for European Securitisations