DBRS Takes Rating Actions on IM Grupo Banco Popular Empresas VI, FTA

DBRS Ratings Limited (DBRS) has today taken rating actions on IM Grupo Banco Popular Empresas VI, FTA (IM GBP VI or the Issuer) as follows:

-- Series A Notes confirmed at AA (sf)
-- Series B Notes upgraded to BB (sf) from CCC (high) (sf)

The rating of the Series A Notes addresses the timely payment of interest and the ultimate payment of principal on or before the legal maturity date in January 2046. The rating of the Series B Notes addresses the ultimate payment of interest and principal on or before the legal maturity date in January 2046.

Today’s rating actions follow an annual review of the transactions and are based on the following analytical considerations:

-- Portfolio performance in terms of delinquencies and defaults as of the April 2017 payment date.
-- Probability of Default (PD) rate for the remaining collateral pools.
-- The Credit Enhancement (CE) available to the rated notes.

The Issuer is a cash flow securitisation collateralised by a portfolio of bank loans originated by Banco Pastor, S.A. (Pastor) and Banco Popular Español S.A. (Popular) to self-employed individuals and small and medium-sized enterprises (SMEs) based in Spain. Banco Santander, following its recent acquisition of Popular, acts as servicer of the transaction. Please refer to http://www.dbrs.com/research/311664/dbrs-takes-rating-actions-following-resolution-of-popular-sale-to-santander.html for more information.

PORTFOLIO PERFORMANCE
The portfolio is performing within DBRS’s expectations. As of April 2017, the 90+ delinquency ratio was at 1.51%, and the cumulative defaults ratio was at 0.87%.

PORTFOLIO ASSUMPTIONS
DBRS has kept the same PD assumption as of closing on the remaining collateral pool. Base case PD rate used is 2.56%.

CREDIT ENHANCEMENT
The CE available to all rated notes has continued to increase as the transaction continues to deleverage. The CE available to each of the rated notes was 97.59% and 11.71% for the Series A and Series B Notes, respectively, as of the April payment date. The increase in the CE prompted today’s confirmation and upgrade rating actions.

Santander acts as an Account Bank provider for the transaction. The account bank reference rating of “A” – being one notch below the DBRS public Long-Term Critical Obligations Rating of Santander 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: “Rating CLOs Backed by Loans to European SMEs.”

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

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

Other methodologies referenced in the 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 information used for these ratings include reports provided by InterMoney Titulización S.G.F.T., S.A 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 of IM GBP VI, 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 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 IM GBP VI took place on 1 August 2016 when DBRS upgraded Series A Notes to AA (sf) from A (sf) and confirmed Series B Notes at CCC (high) (sf).

The lead analyst responsibilities for this transaction have been transferred to Francesco Amato.

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):

-- Probability of Default Rates Used: base case PD of 2.56%, a 10% increase of the base case and a 20% increase of the base case PD.
-- Recovery Rates Used: base case recovery rates of 15.75% at the AA (sf) stress level and 21.50% at the BB (sf) stress level for the Series A Notes and Series B Notes, respectively, a 10% and 20% decrease in the base case recovery rates. Note that the percentage decreases in the recovery rates are assumed for the other stress recovery rate levels.

DBRS concludes that a hypothetical increase of the base case PD by 20%, ceteris paribus, would lead to a confirmation of the Series A Notes at AA (sf), and a hypothetical decrease of the recovery rate by 20%, ceteris paribus, would lead to a confirmation of the Series A Notes at AA (sf). A scenario combining both an increase in the base case PD by 10% and a decrease in the base case recovery rate by 10%, ceteris paribus, would also lead to a confirmation of the Series A Notes at AA (sf).

Regarding the Series B Notes, either a hypothetical increase of the base case PD by 20% or a hypothetical decrease of the base case recovery rate by 20%, ceteris paribus, would lead to a confirmation of the Series B Notes at BB (sf). A scenario combining both an increase in the base case PD by 10% and a decrease in the base case recovery rate by 10% would also lead to a confirmation of the Series B Notes at BB (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: Francesco Amato, Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 24 March 2015

DBRS Ratings Limited
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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.

-- Legal Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Rating CLOs Backed by Loans to European SMEs
-- Rating CLOs and CDOs of Large Corporate Credit
-- Operational Risk Assessment for European Structured Finance Servicers
-- European RMBS Insight: Spanish Addendum
-- Unified Interest Rate Model for European Securitisations
-- Cash Flow Assumptions for Corporate Credit 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.