DBRS Confirms Rating on HT ABANCA RMBS I, Fondo de Titulización

DBRS Ratings Limited (DBRS) has today confirmed its AAA (sf) rating on the Series A notes issued by HT ABANCA RMBS I, FT (the Issuer) following an annual review of the transaction.

The confirmation is based on the following analytical considerations:
-- The portfolio performance, in terms of level of delinquencies and defaults, as of the April 2017 payment date;
-- Updated portfolio default rate, loss given default (LGD) and expected loss assumptions for the remaining collateral pool; and
-- The current available credit enhancement to the Series A notes to cover expected losses assumed in line with the AAA (sf) rating level.

The rating on the Series A notes addresses the timely payment of interest and ultimate payment of principal payable on or before the Legal Maturity Date in July 2062.

The Issuer is a Spanish securitisation collateralised by a portfolio of first-lien residential mortgage loans granted by Abanca Corporación Bancaria S.A. (Abanca). The transaction follows the standard structure under the Spanish securitisation law and closed in May 2016.

As of 19 April 2017, the balance of the Series A notes was EUR 697.2 million and the balance of the Series B Loan was EUR 162.0 million. The EUR 859.2 million securitised portfolio consists of first-ranking loans over residential properties mainly located in the Galicia region (57.6% of the current portfolio).

PORTFOLIO PERFORMANCE
As of the April 2017 payment date, total delinquencies were 2.9% of the outstanding principal balance of the portfolio. To date, no loans have been classified as defaulted.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis on the remaining pool and updated its base case probability of default (PD) and LGD assumptions on the outstanding portfolio to 26.0% and 53.7%, respectively.

CREDIT ENHANCEMENT
As of April 2017, credit enhancement to the Series A notes was 23.6%, up from 22.5% at the initial rating. Credit enhancement to the Series A notes is provided by the subordination of the Series B Loan and the Reserve Fund.

The transaction benefits from an amortising Reserve Fund available to cover senior expenses and missed payments on the Series A notes. This reserve was funded at closing through the proceeds of a subordinated loan granted by Abanca and, from October 2019 onward, if +90 days delinquencies do not exceed 1.5% of the portfolio balance and the reserve has been replenished to its target level on the previous payment date, it will amortise to a minimum between EUR 40.5 million and 9.0% of portfolio balance, subject to a EUR 20.25 million floor. Up to April 2017, the Reserve Fund has always been at its target level.

Banco Santander SA acts as Account Bank for this transaction. The Account Bank reference rating of “A,” which is one notch below the DBRS Long-Term Critical Obligations Rating of Banco Santander SA at 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: “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 this rating include investor reports provided by HAYA Titulización, S.G.F.T., S.A.U. (the Management Company) and loan-level 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 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 25 May 2016, when DBRS finalised the provisional rating on the Series A notes at AAA (sf).

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

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 ratings, 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 portfolio 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 receivables are 6.1% and 32.5%, respectively. At the AAA (sf) rating level, the corresponding PD is 26.0% and the LGD 53.7%.

-- The Risk Sensitivity below illustrates the ratings expected for the Series A notes if the PD and LGD increase by a certain percentage over the Base Case assumptions. For example, if the LGD increases by 50%, the rating of the Series A notes would be expected to remain at AAA (sf), all else being equal. If the PD increases by 50%, the rating of Series A notes would be expected to remain at AAA (sf), all else being equal. Furthermore, if both the PD and LGD increase by 50%, the rating of the Series A notes would be expected to decrease to AA (sf), all else being equal.

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

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: Joana Seara da Costa, Senior Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 19 May 2016

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.

-- Master European Structured Finance Surveillance Methodology
-- European RMBS Insight: Spanish Addendum
-- Legal Criteria for European Structured Finance Transactions
-- Unified Interest Rate Model for European Securitisations
-- Operational Risk Assessment for European Structured Finance Servicers

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.