DBRS Assigns Provisional Ratings to IM GBP Leasing 3 F.T.

DBRS Ratings Limited (DBRS) has today assigned provisional ratings to the notes to be issued by IM GBP Leasing 3 F.T. (the Issuer or IM GBP Leasing 3) as follows:

-- Series A Notes: AA (low) (sf)
-- Series B Notes: CC (sf)

The above-mentioned ratings are provisional. The ratings can be finalised upon receipt of an execution version of the governing transaction documents. To the extent that the documents and the information provided to DBRS as of this date differ from the execution version of the governing transaction documents, DBRS may assign a different final rating to the notes.

The transaction represents the issuance of notes backed by a portfolio of approximately EUR 1.10 billion of receivables related to commercial real estate and non-real estate leases contracts granted by Banco Popular Español S.A. and Banco Pastor S.A.U. (Banco Popular Español and Banco Pastor, the originators and the servicers) to corporates, small and medium-sized enterprises and self-employed individuals in the Kingdom of Spain.

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

-- Transaction capital structure and form and sufficiency of available credit enhancement.
-- The credit enhancement level is sufficient to support the expected net loss assumptions projected under various stress scenarios at the AA (low) (sf) stress level for the Series A Notes. The Series B Notes benefit from a credit enhancement of 3.0% that DBRS considers to be sufficient to support the CC (sf) rating. Credit enhancement is provided by subordination and the Reserve Fund.
-- The transaction is unhedged with the notes paying 1-month Euribor and the collateral paying either a fixed rate, 6-month Euribor, 12-month Euribor or other floating-rate indexes closely linked to 12-month Euribor.
-- The credit quality of the collateral and the ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested.
-- The transaction parties’ capabilities with respect to originations, underwriting and servicing.
-- The operational risk review conducted on Banco Popular Español and Banco Pastor by DBRS to conclude that it is an acceptable servicer.
-- The transaction parties’ financial strength with regard to their respective roles.
-- The sovereign rating of the Kingdom of Spain, currently at A (low).
-- The legal structure and presence of legal opinions addressing the assignment of assets to the Issuer and the consistency with DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

The transaction was modelled in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is: “Rating European Consumer and Commercial Asset-Backed Securitisations.”

DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

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 performance and portfolio data relating to the leasing contracts originated by Banco Popular Español and Banco Pastor. In particular, DBRS received quarterly default, recovery static vintage analysis relating to originations from January 2007 to December 2016. All data was sourced by Banco Popular Español and Banco Pastor directly or through the management Company, Intermoney Titulización, S.G.F.T., S.A.

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

DBRS has been 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 to be of satisfactory quality.

DBRS does not audit the information it receives in connection with the rating process, and it does not independently verify that information in every instance.

These ratings concern a newly issued financial instrument. These are the first DBRS ratings on this financial instrument.

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 to the parameters used to determine the rating:

-- Probability of Default (PD) Rates Used: Expected PD of 6.81% was applied. A 25% and 50% increase on the base case PD.
-- Recovery Rate Used: Expected Recovery Rate of 13.09%.
-- Loss Given Default (LGD) Used: Expected LGD of 86.91%, a 25% and 50% increase in the LGD.

DBRS concludes that for the Series A Notes:
-- A hypothetical increase of the base case PD by 25% or a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Series A Notes to A (high) (sf) and A (sf), respectively.
-- A hypothetical increase of the base case PD by 50% or a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Series A Notes to A (high) (sf) and A (low) (sf), respectively.
-- A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Series A Notes to A (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 a downgrade of the Series A Notes to A (low) (sf).
-- A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Series A Notes 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 a downgrade of the Series A Notes to BBB (sf).

Regarding the Series B Notes, the rating would not be affected by any hypothetical change in either the PD or the Recovery Rate.

For further information on DBRS historical 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: Maria Lopez, Vice President
Rating Committee Chair: Vito Natale, Senior Vice President
Initial Rating Date: 16 May 2017.

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

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