DBRS Takes Rating Actions on IM CAJAMAR EMPRESAS 5, FTA and IM BCC Cajamar PYME 1, FT

DBRS Ratings Limited (DBRS) has today taken rating actions on two SME CLOs originated and serviced by Cajamar Caja Rural, Sociedad Cooperativa de Crédito (Cajamar) transactions as follows:

IM CAJAMAR EMPRESAS 5, FTA (IM Cajamar 5):
-- Series A1 notes upgraded to AAA (sf) from AA (sf)
-- Series A2 notes upgraded to AAA (sf) from AA (sf)
-- Series B notes confirmed at B (sf)

IM BCC Cajamar PYME 1, FT (IM BCC 1):
-- Series A Notes upgraded to A (high) from A (sf)
-- Series B Notes confirmed at CCC (low) (sf)

The ratings of the senior notes (Series A Notes) address the timely payment of interest and the ultimate payment of principal on or before the legal final maturity date.

The ratings of the Series B notes address the ultimate payment of interest and principal on or before the legal final maturity date.

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 March 2017 payment date.
-- Probability of Default (PD) rate for the remaining collateral pools.
-- The Credit Enhancement (CE) available to the rated notes.

Both transactions are cash flows securitisation collateralised by a portfolio of bank loans originated and serviced by Cajamar to self-employed individuals and small and medium-sized enterprises (SMEs) based in Spain.

PORTFOLIO PERFORMANCE
The portfolios of both transactions are performing within DBRS’s expectations. For IM Cajamar 5, the 90+ delinquency ratio was at 1.68% as of March 2017 and the cumulative default ratio was 5.12%. For IM BCC 1, the 90+ delinquency ratio was at 0.25% as of March 2017 and the cumulative default ratio remained at 0.00 %.

PORTFOLIO ASSUMPTIONS
DBRS has kept the same PD assumptions as of closing on the remaining collateral pools for both transactions. Base Case PD rates used are as follows: 3.80% for IM Cajamar 5 and for IM BCC 1, 3.82% for normal loans and 8.83% for refinance loans.

CREDIT ENHANCEMENT
The CE available to all rated notes has continued to increase as the transactions continue to deleverage. The CE available to each series of rated notes was 113.44% and 52.12% for the IM Cajamar 5 Series A and B notes, respectively, as of the March 2017 payment date and 33.96% and 3.57% for the IM BCC 1 Series A and B Notes, respectively, also as of the March 2017 payment date. The increase in the CE prompted today’s confirmation and upgrade rating actions.

Banco Santander SA acts as Account Bank provider for both transactions. 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 most senior class of rated notes in each transaction, 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 transactions in accordance with the surveillance section of the principal methodology.

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

Other methodologies referenced in these transactions 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 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 ratings of IM Cajamar 5, DBRS was not supplied with third-party assessments. At the time of the initial ratings of IM BCC 1, DBRS was supplied with third-party assessments. In both cases, this did not impact the rating analysis.

DBRS considers the data and information available to it for the purposes 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 IM Cajamar 5 took place on 1 August 2016 when DBRS upgraded the Series A Notes to AA (sf) from A (sf) and the Series B notes to B (sf) from CCC (sf).

The is the first rating action since the initial rating date of IM BCC 1. The lead analyst responsibilities for IM BCC 1 have been transferred to Alfonso Candelas.

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):

IM Cajamar 5
-- PD Rates Used: base case PD of 3.80% a 10% increase of the base case and a 20% increase of the base case PD.
-- Recovery Rates Used: base case recovery rates of 13.50% at the AAA (sf) stress level and 21.50% at the B (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 AAA (sf) and a hypothetical decrease of the recovery rate by 20%, ceteris paribus, would also lead to a confirmation of the Series A Notes at AAA (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 AAA (sf).

For the Series B notes, 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 downgrade of the Series B notes to B (low) (sf) and a hypothetical decrease of the recovery rate by 20% would lead to a downgrade of the Series B notes to B (low) (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 downgrade of the Series B notes to B (low) (sf).

IM BCC 1
-- Probability of Default Rates Used: base case PD of 3.82% for normal loans and 8.83% for refinance loans, a 10% increase of the base case and a 20% increase of the base case PD.
-- Recovery Rates Used: base case recovery rates of 27.63% at the A (high) (sf) stress level and 35.79% at the CCC (low) (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% or a hypothetical decrease of the recovery rate by 20%, ceteris paribus, would lead to a confirmation of the Series A Notes at A (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 A (sf).

For the Series B Notes, a hypothetical increase of the base case PD by 20% would lead to a confirmation of the Series B Notes at CCC (low) (sf), a hypothetical decrease of the recovery rate by 20%, ceteris paribus, would lead to a downgrade of the Series B Notes to C (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 downgrade of the Series B Notes to C (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.

IM Cajamar 5
Lead Analyst: Alfonso Candelas, Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 26 March 2013

IM BCC 1
Lead Analyst: Alfonso Candelas, Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 21 July 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.

-- 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.