DBRS Confirms Ratings on Foncaixa Leasings 2 F.T.A.

DBRS Ratings Limited (DBRS) has today taken the following rating actions on the bonds issued by Foncaixa Leasings 2 F.T.A. (the Issuer):

-- Series A notes confirmed at A (high) (sf)
-- Series B notes confirmed at BBB (low) (sf)

The rating actions on the Series A and Series 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 March 2017.
-- Updated default, recovery and loss assumptions on the remaining receivables.
-- Current available credit enhancement to the Series A and Series B notes to cover the expected losses at the A (high) (sf) and BBB (low) (sf) rating levels, respectively.

The Issuer is a securitisation of Spanish finance leases, originated and serviced by CaixaBank S.A. (Caixabank). The pool is comprises leases on real estate, vehicles and equipment.

PORTFOLIO PERFORMANCE
As of March 2017, the 90+ delinquency ratio was at 0.55%. Gross cumulative defaults are currently 2.90%.

PORTFOLIO ASSUMPTIONS
DBRS has conducted a loan-level analysis of the collateral pool and increased its cumulative net loss assumption to 17.71% from 17.24%. The main driver for the increased loss assumption is the increased proportion of real estate leases in the remaining collateral pool.

CREDIT ENHANCEMENT
Credit enhancement to the Series A notes is currently 81.26%, up from 31.00% at the DBRS initial rating, and is provided by subordination of the Series B notes as well as the Cash Reserve. Credit enhancement to the Series B notes is currently 35.31%, up from 16.00% at the DBRS initial rating, and is provided solely by the Cash Reserve.

The transaction benefits from a Cash Reserve, currently at the target level of EUR 132.56 million. The Cash Reserve is permitted to amortise providing certain triggers have not been breached.

CaixaBank is the account bank for the transaction. The account bank reference rating of ‘A’ – being one notch below the DBRS public Long-Term Critical Obligations Rating of CaixaBank of A (high) – complies with the Minimum Institution Rating, given the rating assigned to the Series 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 rating is the “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 the DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” found at http://www.dbrs.com/industries/bucket/id/10036/name/commentaries.

The sources of data and information used for these ratings include investor reports provided by CaixaBank Titulizacion, S.G.F.T., S.A. and data from the European DataWarehouse GmbH.

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 purpose 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 on this transaction took place on 18 May 2016 when DBRS upgraded the rating on the Series A notes to A (high) (sf) from A (sf), and upgraded the rating on the Series B notes to BBB (low) (sf) from BB (high) (sf).

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

To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios as compared with the parameters used to determine the rating (the “Base Case”):
-- DBRS expected a lifetime base case probability of default (PD) and loss given default (LGD) 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 PD and LGD of the current pool of loans for the Issuer are 17.79% and 98.09%, respectively.
-- The Risk Sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base case assumption. For example, if the LGD increases by 50%, the rating of the Series A notes would be expected to remain at A (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Series A notes would be expected to remain at A (high) (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Series A notes would be expected to fall to BBB (high) (sf).

Series A notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD, expected rating of A (high) (sf)
-- 50% increase in PD, expected rating of A (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf)

Series B notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (low) (sf)
-- 50% increase in LGD, expected rating of BBB (low) (sf)
-- 25% increase in PD, expected rating of BBB (low) (sf)
-- 50% increase in PD, expected rating of BBB (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BB (sf)

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: Andrew Lynch, Assistant Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 22 March 2013

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
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- United Interest Rate Model for European 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.