DBRS Confirms Ratings on the Notes of IM BCC Cajamar 1

DBRS Ratings Limited (DBRS) has today confirmed the ratings on the following notes issued by IM BCC Cajamar 1 (the Issuer):

-- Series A notes confirmed at AA (sf)
-- Series B notes confirmed at C (sf)

The confirmations follow an annual review of the transaction and are based on the following analytical considerations:

-- Portfolio performance in terms of delinquencies and defaults.
-- Portfolio default (PD) rate, loss given default (LGD) rate and expected loss assumptions for the remaining collateral portfolio.
-- Current available credit enhancement (CE) to the Series A notes to cover the expected losses at the AA (sf) rating level. The Series B notes are in a first loss position supported only by available excess spread. Given the characteristics of the Series C notes as defined in the transaction documents, a default would most likely be recognised at maturity or following an early termination of the transaction.

The Issuer is a securitsation of residential mortgage loans secured by first-lien and a small portion of second-lien mortgages on properties in Spain originated by Cajamar Caja Rural, Sociedad Cooperativa de Crédito (Cajamar). Cajamar is also the servicer of the portfolio.

PORTFOLIO PERFORMANCE
The performance of the transaction portfolio is within DBRS’s expectations. As of 28 February 2017, loans more than 90 days in arrears were at 0.33% of the outstanding performing portfolio balance. Defaults are defined as loans in arrears for more than 12 months; the current cumulative defaults are at 0.04% of the collateral balance at the transaction closing.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis on the remaining pool and updated its PD and LGD assumptions on the remaining collateral pool to 28.09% and 55.19% at the AA (sf) rating level from 33.86% and 54.92%, respectively.

CREDIT ENHANCEMENT
The Series A notes are supported by the subordinated notes (Series B) and the Reserve Fund. As of the March 2017 payment date, CE for the Series A notes as a percentage of the non-defaulted mortgage loans had increased to 22.5% from 21.0% at the transaction closing. The Reserve Fund provides liquidity and credit support to the Series A notes, and its target will remain at 3.0% of the initial balance of the notes (EUR 22.50 million). The repayment of the notes is fully sequential, where principal on the Series B notes will not be paid until the Series A notes have been redeemed in full. Additionally, the payment of Series A principal is senior to the Series B interest payments in the priority of payments.

Banco Santander S.A. (Santander) acts as the Account Bank for this transaction. Santander’s reference rating, being one notch below its Long-Term Critical Obligations Rating 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 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 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 this rating include an investor report from InterMoney Titulización S.G.F.T., S.A and loan-level data from 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 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 this rating 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 2 June 2016, when DBRS upgraded the Series A notes to AA (sf) from A (high) (sf) and confirmed the Series B notes at C (sf).

The lead analyst responsibilities for this transaction have been transferred to Kevin Ma.

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 (the Base Case):
-- DBRS expected a Base Case PD and 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 assumptions for the remaining portfolio collateral are 8.75% and 39.83%, respectively. At the AA (sf) rating level, the corresponding PD is 28.09% and the LGD is 55.19%.

-- 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 on the Series A notes would be expected to be at A (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Series A notes would be expected to be at A (sf), assuming no change in the LGD. Furthermore, if both the PD and the LGD increase by 50%, the rating on the Series A notes would be expected to be at BBB (high) (sf).

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

The Series B notes rating would not be affected by a hypothetical change in either the PD or LGD.

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: Kevin MA, Assistant Vice President
Rating Committee Chair: Vito Natale, Senior Vice President
Initial Rating Date: 15 January 2016

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

-- Master European Structured Finance Surveillance Methodology
-- European RMBS Insight: Spanish Addendum
-- Legal Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
-- 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.