DBRS Ratings Limited assigns Provisional Ratings to BBVA Consumo 6, FTA

DBRS Ratings Limited (‘DBRS’) has assigned provisional ratings to the following bonds issued by BBVA Consumo 6, FTA:

--A (sf) to €255,000,000 to Series A bonds
--BBB (low) (sf) to €45,000,000 to Series B bonds

BBVA Consumo 6, FTA (the ‘Issuer’) is a securitisation of a consumer loan receivables portfolio issued in Spain and originated by Banco Bilbao Vizcaya Argentaria, S.A. (‘BBVA’, also the ‘Seller’ or the ‘Originator’). At closing, the transaction will use the proceeds of Series A and Series B to purchase a € 300 million portfolio of consumer loan receivables. The Portfolio will be serviced by BBVA (also the ‘Servicer’).

The ratings are based upon review by DBRS of the following analytical considerations:

• Transaction capital structure and form and sufficiency of available credit enhancement. The Series A bonds benefit from 27% credit enhancement in the form of € 45 million (15%) Series B bonds and a € 36 million reserve fund (12%) which will be funded through a subordinated loan granted by the Seller to the Issuer. The reserve fund is available to meet payments on the senior fees and interest and principal on the Series A and Series B bonds. The transaction envisages a revolving period of one year starting on the first interest payment date until the payment date as of 18 January 2016. Through the revolving period, the Seller may sell new receivables to the Issuer according to specific purchase criteria detailed within the transaction documents. Following the end of the revolving period (or upon an early amortization event), principal will be paid to the series of bonds. Principal will be used to amortise the Series A bonds first and after payment in full of Series A, the Series B bonds will start to amortise.
• The portfolio consists entirely of fixed loan receivables. The fixed payment on the series of bonds and fixed payment of the loan receivables is un-hedged. DBRS deems basis risk in this transaction to be limited.
• The main characteristics of the preliminary portfolio as of 16 September 2014 include: (i) 53,939 loans, (ii)€ 6,478 average loan amount, (iii) 7.10 years weighted average original term, (iv) 3.86 years weighted average remaining term, (v) 3.25 years seasoning, (vi) 9.62% weighted average interest rate, (vii) 22.51% of consumer loans were granted to finance the purchase of vehicles, (viii) top geographical concentrations are Cataluña (19.88%), Andalucía (17.87%) and Madrid (11.75%).

• Relevant credit enhancement in the form of a cash reserve account and subordination. Credit enhancement levels are sufficient to support DBRS projected expected cumulative net loss (CNL) assumption under various stress scenarios at ‘A’ (sf) and ‘BBB’ (low) (sf).
• The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms in which they have invested.
• The transaction parties’ capabilities with respect to originations, underwriting, servicing, and financial strength.
• The credit quality of the collateral and ability of BBVA to manage collections activities on the collateral.
• 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 the EU ABS Methodology.

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 Europea de Titulización S.G.F.T. and BBVA. 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 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 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 the changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the “Base Case”):

• Base Case Probability of Default (PD) of 13.60%, a 25% and 50% increase on the base case PD.
• Base case Recovery Rate of 34.31% (or a Loss Given Default (LGD) of 65.69%), a 25% and 50% increase on the base case LGD.

DBRS concludes that for the Series A bonds:

• A hypothetical increase of the base case PD by 25% or a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to downgrade the rating of the Series A bonds to A (low) (sf).
• A hypothetical increase of the base case PD by 50% or a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to downgrade the rating of the Series A bonds to BBB (high) (sf).
• A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to downgrade the rating of the Series A bonds to BBB (high) (sf).
• A hypothetical increase of the base case PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to downgrade the rating of the Series A bonds to BBB (sf).
• A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 50%, ceteris paribus, would to downgrade the rating of the Series A bonds to BBB (sf).
• A hypothetical increase of the base case PD by 50% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to downgrade the rating the Series A bonds to BBB (sf).

DBRS concludes that for the Series B bonds:
• A hypothetical increase of the base case PD by 25% or a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to maintain the rating of the Series B bonds to BBB (low) (sf).
• A hypothetical increase of the base case PD by 50% or a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to downgrade the rating of the Series B bonds to BB (low) (sf).
• A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to downgrade the rating of the Series B bonds to BB (low) (sf).
• A hypothetical increase of the base case PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to downgrade the rating of the Series B bonds to B (low) (sf).
• A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 50%, ceteris paribus, would to downgrade the rating of the Series B bonds to B (low) (sf).
• A hypothetical increase of the base case PD by 50% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to downgrade the rating the Series B bonds to CCC (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 Final Rating Date: October 9, 2014
Initial Final Rating Committee Chair: Chuck Weilamann
Lead Surveillance Analyst: Vito Natale

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

• EU ABS Methodology.
• Legal Criteria for European Structured Finance Transactions.
• Operational Risk Assessment for European Structured Finance Servicers.
• Derivative Criteria for European Structured Finance Transactions