DBRS Morningstar Confirms Ratings of AyT Goya Hipotecario IV and V FTA

DBRS Ratings GmbH (DBRS Morningstar) confirmed the following ratings of two Spanish RMBS transactions:

AyT Goya Hipotecario IV, Fondo de Titulización de Activos (Goya IV):

-- Series A Notes at AA (sf)
-- Series B Notes at A (high) (sf)

AyT Goya Hipotecario V, Fondo de Titulización de Activos (Goya V):

-- Series A Notes at AA (sf)
-- Series B Notes at A (high) (sf)

The ratings address the timely payment of interest and the ultimate payment of principal on or before their respective legal final maturity dates.

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

-- Portfolio performance, in terms of delinquencies and defaults.
-- Updated portfolio default rate (PD), loss given default (LGD), and expected loss assumptions on the outstanding collateral pools.
-- The credit enhancement available to the rated notes to cover the expected losses at their respective rating levels.

The two transactions are securitisations of Spanish prime residential mortgage loans originated and serviced by CaixaBank S.A. (previously, Barclays Bank S.A./Spain).

PORTFOLIO PERFORMANCE
The performance of both transactions remains within DBRS Morningstar expectations.

For Goya IV, as of March 2020, loans that were two to three months in arrears represented 0.03% of the outstanding portfolio balance, down from 0.06% in March 2019; the 90+ delinquency ratio was 0.31%, down from 0.32% a year earlier; and the cumulative default ratio was 1.65%, up from 1.60% in March 2019.

For Goya V, as of March 2020, loans that were two to three months in arrears represented 0.06% of the outstanding portfolio balance, up from 0.01% in March 2019; the 90+ delinquency ratio was 0.30%, down from 0.44% a year earlier; and the cumulative default ratio was 1.20%, up from 1.14% in March 2019.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted a loan-by-loan analysis on the remaining receivables and updated its base case PD and LGD assumptions. For Goya IV, the PD and LGD base case assumptions are 2.12% and 16.9%, respectively. For Goya V, the PD and LGD base case assumptions are 1.94% and 15.41%, respectively.

CREDIT ENHANCEMENT
The Series A Notes for both transactions are supported by the subordination of the Series B Notes and the reserve fund, which is available to cover senior fees, interest, and principal of the Series A and Series B Notes. The Series B Notes are solely supported by the reserve fund. For Goya IV, as of the March 2020 payment date, credit enhancement to the Series A Notes was 46.0%, up from 23.0% at the DBRS Morningstar initial rating. Credit enhancement to the Series B Notes was 10.0%, up from 5.0% at the DBRS Morningstar initial rating. For Goya V, as of the March 2020 payment date, credit enhancement to the Series A Notes was 50.0%, up from 26.0% at the DBRS Morningstar initial rating. Credit enhancement to the Series B Notes was 10.0%, up from 6.0% at the DBRS Morningstar initial rating.

Both transactions switched to pro rata amortisation at the March 2020 (Goya IV) and September 2019 payment dates (Goya V). The reserve funds may amortise over the life of the transactions, subject to a floor and certain amortisation triggers. For Goya IV, the reserve fund is currently at EUR 56.4 million. The reserve fund for Goya V is currently at EUR 62.9 million. Both reserve funds are at their target levels.

On behalf of the issuer, the management company entered into an interest rate swap with Banco Santander SA and CaixaBank, S.A. (CaixaBank) for Goya IV and Goya V, respectively, in order to hedge the basis risk that may arise from the difference between 12 months’ Euribor (assets) and six months’ Euribor (liabilities).

The DBRS Morningstar Critical Obligations Ratings of Banco Santander SA and CaixaBank SA are above the First Rating Threshold as described in DBRS Morningstar’s “Derivative Criteria for European Structured Finance Transactions” methodology, given the AA (sf) ratings of the Series A Notes.

CaixaBank acts as the account bank for the transactions. Based on the account bank reference rating of CaixaBank at A (high), which is one notch below the DBRS Morningstar Long-Term Critical Obligations Rating (COR) of AA (low), the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS Morningstar considers the risk arising from the exposure to the account bank to be consistent with the rating assigned to the Series A Notes as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

Banco Santander SA and CaixaBank act as the swap providers for Goya IV and Goya V, respectively. The DBRS Morningstar COR of Banco Santander SA and CaixaBank are above the First Rating Threshold as described in DBRS Morningstar’s “Derivative Criteria for European Structured Finance Transactions” methodology, given the AA (sf) ratings of the Series A Notes.

DBRS Morningstar analysed the transaction structures in Intex DealMaker.

The Coronavirus Disease (COVID-19) and the resulting isolation measures have caused an economic contraction, leading to sharp increases in unemployment rates and income reductions for many borrowers. DBRS Morningstar anticipates that delinquencies may arise in the coming months for many RMBS transactions, some meaningfully. The ratings are based on additional analysis and adjustments to expected performance as a result of the global efforts to contain the spread of the coronavirus. On 16 April 2020, the DBRS Morningstar Sovereign group published its outlook on the impact to key economic indicators for the 2020-22 time frame. For details see the following commentaries: https://www.dbrsmorningstar.com/research/359679/global-macroeconomic-scenarios-implications-for-credit ratings and https://www.dbrsmorningstar.com/research/359903/global-macroeconomic-scenarios-application-to-credit-ratings. The DBRS Morningstar analysis considered impacts consistent with the moderate scenario in the referenced reports.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information on DBRS Morningstar considerations for European RMBS transactions and Coronavirus Disease (COVID-19), please see the following commentary:
https://www.dbrsmorningstar.com/research/360599/european-rmbs-transactions-risk-exposure-to-coronavirus-covid-19-effect

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is: “Master European Structured Finance Surveillance Methodology” (22 April 2020).

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

A review of the transactions 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 at: http://www.dbrsmorningstar.com/about/methodologies.

For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrsmorningstar.com/research/350410/global-methodology-for-rating-sovereign-governments.

The sources of data and information used for these ratings include reports and information received from HAYA Titulización, S.G.F.T., S.A.U. and loan-level data provided by the European DataWarehouse GmbH.

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

At the time of the initial ratings, DBRS Morningstar was supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS Morningstar considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.

DBRS Morningstar does not audit or independently verify the data or information it receives in connection with the rating process.

The last rating actions on these transactions took place on 24 May 2019, when DBRS Morningstar confirmed the rating of the Goya IV Series A Notes at AA (sf) and upgraded the rating of the Series B Notes to A (high) (sf) from A (sf), and confirmed the rating of the Goya V Series A Notes at AA (sf) and upgraded the rating of the Series B Notes to A (high) (sf) from BBB (high) (sf).

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies is available at www.dbrsmorningstar.com.

To assess the impact of changing the transaction parameters on the ratings, DBRS Morningstar considered the following stress scenarios, as compared to the parameters used to determine the rating (the Base Case):

-- DBRS Morningstar expected a lifetime 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.

For Goya IV, the PD and LGD base case assumptions are 2.12% and 16.9%, respectively.
For Goya V, the PD and LGD base case assumptions are 1.94% and 15.41%, respectively.
-- 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 Goya IV Series A Notes would be expected to remain at AA (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Goya IV Series A Notes would be expected to remain at AA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Series A Notes would be expected to remain at AA (sf).

Goya IV, Series A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD, expected rating of AA (sf)
-- 50% increase in PD, expected rating of AA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (sf)

Goya IV, Series B Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (low) (sf)
-- 50% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD, expected rating of A (low) (sf)
-- 50% increase in PD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (high) (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)

Goya V, Series A Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD, expected rating of AA (sf)
-- 50% increase in PD, expected rating of AA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (sf)

Goya V, Series B Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (high) (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 A (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf)

For further information on DBRS Morningstar 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 GmbH are subject to EU and U.S. regulations only.

Lead Analyst: Alfonso Candelas, Senior Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date:
Goya IV: 4 May 2011
Goya V: 29 December 2011

DBRS Ratings GmbH
Neue Mainzer Straße 75
60311 Frankfurt am Main – Deutschland
Tel. +49 (69) 8088 3500

Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

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

-- Legal Criteria for European Structured Finance Transactions (11 September 2019)
https://www.dbrsmorningstar.com/research/350234/legal-criteria-for-european-structured-finance-transactions
-- Master European Structured Finance Surveillance Methodology (22 April 2020)
https://www.dbrsmorningstar.com/research/359884/master-european-structured-finance-surveillance-methodology
-- Operational Risk Assessment for European Structured Finance Servicers (28 February 2020)
https://www.dbrsmorningstar.com/research/357429/operational-risk-assessment-for-european-structured-finance-servicers
-- European RMBS Insight Methodology (2 April 2020) and European RMBS Insight Model 4.2.1.1.
https://www.dbrsmorningstar.com/research/359192/european-rmbs-insight-methodology
-- European RMBS Insight: Spanish Addendum (10 July 2019)
https://www.dbrsmorningstar.com/research/347838/european-rmbs-insight-spanish-addendum
-- Interest Rate Stresses for European Structured Finance Transactions (10 October 2019)
https://www.dbrsmorningstar.com/research/351557/interest-rate-stresses-for-european-structured-finance-transactions
-- Derivative Criteria for European Structured Finance Transactions (26 September 2019)
https://www.dbrsmorningstar.com/research/350907/derivative-criteria-for-european-structured-finance-transactions

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at http://www.dbrsmorningstar.com/research/278375.

For more information on these credits or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.