DBRS Confirms Ratings on Notes Issued by IM Tarjetas 1, FTA

DBRS Ratings Limited (DBRS) has today confirmed its ratings on the following notes (the Notes) issued by IM Tarjetas 1, FTA (the Issuer):
-- €840,000,000 Class A Notes at A (sf)
-- €160,000,000 Class B Notes at C (sf)

The confirmations of the ratings on the Notes are based upon the following analytical considerations:
-- Portfolio performance, in terms of delinquencies and defaults, as of the April 2016 payment date;
-- No early amortisation events have occurred;
-- The capital structure has not changed; and
-- The amendment signed on 3 May 2016, removing the Servicer Guarantee and increasing the Commingling Reserve target amount, is not expected to have an impact on the previous points.

The rating of the Class A Notes addresses the timely payment of interest and the ultimate payment of principal on the Maturity Date. The Class B Notes are in the first loss position and, as such, are highly likely to default. Given the characteristics of the Class B Notes as defined in the transaction documents, the default most likely would only be recognised at the maturity or early termination of the transaction.

The Issuer is a Spanish securitisation of credit card receivables initially originated and serviced by Citibank España S.A. The transaction closed in November 2013 and in September 2014, after Bancopopular-e, a joint venture currently detained by Banco Popular Español, S.A. and Värde Partners, acquired Citibank España’s retail business, the following amendments were made to the transaction:
-- Bancopopular-e replaced Citibank España S.A. as Originator and Servicer;
-- Banco Santander S.A. substituted Citibank International, PLC (Spanish Branch) as Treasury Account Bank and Paying Agent, and Citibank España S.A. as Reinvestment Account Bank; and
-- The guarantee provided by Citibank N.A. on the Servicer obligations was replaced by the Servicer Guarantee provided by Banco Popular Español, S.A.

On 30 October 2015 a new amendment was signed, extending the accumulation period and the legal maturity of the transaction for more 18 months.

The transaction benefited from a Guarantee Agreement, according to which Banco Popular Español, S.A. guaranteed the performance of the obligations of Bancopopular-e, S.A. with regards to the Servicer Agreement.

Under the amendment signed on 3 May 2016, the Guarantee Agreement has been terminated. Additionally:
-- The Commingling Reserve Purpose has been modified, in order to cover any shortfalls due to the breach of any of Servicer’s obligations and
-- The Commingling Reserve target amount has increased to EUR 17.650 million from EUR 8.825 million.

The transaction also benefits from a Dilution Reserve, available to protect against possible losses derived from Credit Card Dilutions, such as merchandise disputes, servicer rebates and fraud. The Commingling Reserve and the Dilution Reserve are currently at the target level of EUR 8.825 million (target level before the amendment) and EUR 10.625 million, respectively.

Delinquencies have been stable since closing. As of April 2016, one- to 30-day delinquencies and 30- to 60-day delinquencies were at 2.36% and 1.36% of the collateral balance, respectively, while 60- to 90-day delinquencies and more than 90-day delinquencies were at 1.04% and 1.83%, respectively.

The annualised portfolio yield is currently 23.37%, and the Monthly Payment Rate (MPR) has been running between 12.47% and 15.43% over the life of the transaction and averaged 14.10% over the last 12 months. The annualised charge-off rate has averaged 3.67% since closing (3.76% over the last 12 months) and currently stands at 3.88%.

The Class A Notes are supported by subordination of the Class B Notes and excess spread, while the Class B Notes are supported by excess spread only. Credit enhancements for the Class A and Class B Notes have been stable at 16% and 0%, respectively, since the initial rating in November 2012.

Banco Santander S.A. is the Account Bank for this transaction. The DBRS Long-Term Critical Obligations Rating of Banco Santander S.A. at A (high) complies with the Minimum Institution Rating given the rating assigned to the Notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is “Master European Structured Finance Surveillance Methodology.”

DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology. DBRS conducted a review of the amendments to the deed of constitution of the fund, which spells out the amendments under consideration. The other transaction legal documents have remained unchanged since the most recent rating action, and were not reviewed.

An asset and a cash flow analysis were both conducted. However, due to the inclusion of a revolving period in the transaction, and no change in assumptions, the initial analysis based on worst-case replenishment criteria set forth in the transaction legal documents was assumed.

Other methodologies referenced in this transaction are listed at the end of this press release. This may be found on www.dbrs.com at http://www.dbrs.com/about/methodologies.

For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to DBRS’s ‘The Effect of Sovereign Risk on Securitisations in the Euro Area’ commentary on
http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.

The sources of information used for this rating include information provided by InterMoney Titulización S.G.F.T., S.A. (the Management Company).

DBRS does not rely upon third-party due diligence in order to conduct its analysis.

DBRS was not supplied with third-party assessments; however, this did not impact the rating analysis.

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 took place on 05 November 2015, when DBRS confirmed the rating on Class A Notes at A (sf) and the rating on Class B Notes at C (sf).

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

To assess the impact of the changing transaction parameters on the rating, DBRS considered the following stress scenarios compared with the parameters used to determine the rating (the base case):

-- DBRS expected base case portfolio yield, MPR and charge-off rate for the pool based on a review of the current assets. Adverse changes to asset performance may cause stresses to base case assumptions and therefore have a negative effect on credit ratings.

-- The base case portfolio yield, MPR and charge-off rates of the current pool of receivables are 20.0%, 11.0% and 10.5%, respectively.

-- The Risk Sensitivity overview below illustrates the ratings expected for the Class A Notes if each variable (portfolio yield, MPR and charge-off rate) was stressed over the base case assumption, while holding the other variables constant. For example, if the charge-off rate increases by 75%, the rating for the Class A Notes would be expected to drop to A (low) (sf), all else being equal. If the MPR decreases by 75%, the rating for the Class A Notes would be expected to drop to BB (sf), all else being equal.

Class A Notes Risk Sensitivity:
-- 50% increase in charge-off rate, expected rating of A (sf)
-- 75% increase in charge-off rate, expected rating of A (low) (sf)
-- 100% increase in charge-off rate, expected rating of BBB (sf)
-- 50% decrease in MPR, expected rating of BBB (low) (sf)
-- 75% decrease in MPR, expected rating of BB (sf)
-- 100% decrease in MPR, expected rating of BB (sf)
-- 50% decrease in portfolio yield, expected rating of A (sf)
-- 75% decrease in portfolio yield, expected rating of A (low) (sf)
-- 100% decrease in portfolio yield, expected rating of BB (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: Alexander Garrod
Initial Rating Date: 23 November 2012
Initial Rating Committee Chair: Chuck Weilamann

Lead Surveillance Analyst: Vito Natale
Rating Committee Chair: Chuck Weilamann

DBRS Ratings Limited
20 Fenchurch Street
31st Floor
London EC3M 3BY
United Kingdom

Registered in England and Wales: No. 7139960

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

-- Legal Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators
-- Rating European Consumer and Commercial Asset-Backed Securitisations

A description of how DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at http://www.dbrs.com/research/278375.