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

DBRS Ratings Limited (DBRS) has today taken the following rating actions on the bonds issued by IM Tarjetas 1, FTA (the Issuer):

-- Class A confirmed at A (sf)
-- Class B confirmed at C (sf)

The rating actions on the Class A and Class B notes follow an annual review of the transaction and are based on the following analytical considerations:

-- Portfolio Performance, in terms of delinquencies and defaults, as of the February 2017 payment date.
-- No early amortisation events have occurred.
-- Current available credit enhancement to the Class A notes to cover the expected losses at the A (sf) rating level.

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 would most likely be recognised at maturity or following 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 2012. In September 2014, after Bancopopular-e 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.

In October 2015, a new amendment was signed, extending the accumulation period and the legal maturity of the transaction for a further 18 months.
In May 2016, the Guarantee Agreement under which Banco Popular Español, S.A. guaranteed the performance of the obligations of Bancopopular-e, S.A. with regard to the Servicer Agreement, was terminated.

Additionally, the function of the Commingling Reserve was modified in order to cover any shortfalls resulting from the breach of any of the Servicer’s obligations, and the target level increased to EUR 17.650 million from EUR 8.825 million.

PORTFOLIO PERFORMANCE AND ASSUMPTIONS
As of February 2017, two-to-three month arrears were at 0.70% and the 90+ delinquency ratio was at 1.59%.
The annualised portfolio yield is currently at 23.13%. The annualised charge-off rate as of February 2017 was at 4.17%, and has averaged 4.14% over the last 12 months. The Monthly Payment Rate (MPR) has been ranging between 12.47% and 15.49% since closing and has averaged 13.81% over the last 12 months.

CREDIT ENHANCEMENT
Class A credit enhancement has remained stable at 16.00% and is provided by subordination of the Class B notes. The transaction is still in its Accumulation Period which ends on 22 July 2017. During the Accumulation Period, principal collections and any amount standing credit to the Acquisition Reserve may be used to purchase new receivables generated from the credit card agreements.

A Commingling Reserve is available to mitigate liquidity shortfalls in the event of insolvency of the Servicer, or other shortfalls due to the breach of any of the Servicer’s obligations. On each payment date, amounts standing credit to the Commingling Reserve will become part of the Principal Available Funds up to the amount of collections that can be considered Commingled Collections. The Commingling Reserve is currently at its target level of EUR 17.650 million.
A dilution reserve is available to protect the issuer against potential losses arising from Credit Card Dilutions, including merchandise disputes, servicer rebates and fraud. The Dilution Reserve is currently at its target level of EUR 10.625 million.

Banco Santander S.A. (Santander) is the Account Bank for this transaction. The account bank reference rating of “A” – being one notch below the DBRS Long-Term Critical Obligations Rating of Santander of A (high) – complies with the Minimum Institution Rating given the rating assigned to the Class A 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 to the ratings 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.

A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent rating action.

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

These 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 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 data and information used for these ratings include information provided by InterMoney Titulización S.G.F.T., S.A. (the Management Company).

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

At the time of the initial rating, DBRS was not supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.

DBRS does not audit or independently verify the data or information it receives in connection with the rating process.

The last rating action took place on 5 May 2016, when DBRS confirmed the rating on the Class A notes at A (sf) and the rating on Class B notes at C (sf).

The lead analyst responsibilities for this transaction have been transferred to Joana Seara da Costa.

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 Rate (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 Rate of the current pool of receivables are 20.00%, 11.00% and 10.50%, 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 by a certain percentage over the Base Case assumption, while holding the other variables constant.

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 (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 (sf)
-- 100% decrease in portfolio yield, expected rating of BB (high) (sf)

Given the characteristics of the Class B notes as stated above, sensitivity analysis is not applicable.

For further information on DBRS historic default rates published by the European Securities and Markets Authority (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.

Lead Analyst: Joana Seara da Costa, Senior Financial Analyst
Rating Committee Chair: Vito Natale, Senior Vice President
Initial Rating Date: 23 November 2012

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.

-- 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.