DBRS Confirms Ratings on CRU Cédulas Hipotecarias

DBRS Ratings Limited (DBRS) has today confirmed the ‘BBB’ (high) rating of Cajas Rurales Unidas (CRU or “Issuer”) Cédulas Hipotecarias (CH). The confirmation follows the completion of a full review of the rating.

The ratings are based on the following analytical considerations:
• DBRS Legal and Structuring Framework assessment of “Modest” associated with the CRU CH programme.
• DBRS Cover Pool Credit Assessment of BBB.
• CRU’s capabilities with respect to origination of the cover assets and servicing of the cover pool.

The transaction was modelled using the 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 value spreads to calculate liquidation values on the cover pool.

The total outstanding amount of CH is EUR 7.10bn while the aggregate balance of the mortgages in the cover pool is EUR 19.99bn (as at 31/May/2014) resulting in a total over-collateralisation (OC) of 167%. The eligible cover pool stands at EUR 10.68bn, resulting in an eligible OC of 50% above the minimum mandatory level of 25%. CRU has currently a remaining issuance capacity of roughly EUR 1.45bn.

The cover pool is 58% residential, 25% commercial, 11% developers and 6% land and other type of loans. This is a 66-month seasoned pool geographically distributed among CRU’s main areas of influence: Andalucia (34%), Valencia (28%) and Murcia (16%). The weighted average current unindexed loan-to-value ratio (WACLTV) ratio is 63.4%.

The vast majority of the loans in the cover pool (97%) are floating rate, while 95% of the liabilities pay fixed coupon. As customary in Spanish CH, swaps are not for the benefit of CH holders. This has been accounted for in DBRS cash flow modelling.

The weighted average life of the assets is roughly 11 years, and that of the CH is roughly 3 years, producing a mismatch of approximately 8 years. This has been accounted for in DBRS cash flow modelling.

For further information on CRU CH please refer to the ratings report that can be found on 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 and recoveries performance data and cover pool stratification tables 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.

The last rating action on this programme took place on 4 December 2013, when DBRS assigned ratings to CRU Cédulas Hipotecarias new issuance.

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 two 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: 19 July 2013
Initial Rating Committee Chair: Quincy Tang

Lead Analyst: Covadonga Aybar
Rating Committee Chair: Quincy Tang

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

• Rating European Covered Bonds
• Legal Criteria for European Structured Finance Transactions
• Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
• Rating CLOs Backed by Loans to European Small and Medium-Sized Enterprises (SMEs)
• Master European Structured Finance Surveillance Methodology
• Operational Risk Assessment for European Structured Finance Servicers
• Unified Interest Rate Model for European Securitisations