DBRS Morningstar Confirms Credit Rating on IM BCG RMBS 2, FONDO DE TITULIZACIÓN DE ACTIVOS
RMBSDBRS Ratings GmbH (DBRS Morningstar) confirmed its credit rating of AAA (sf) on the Class A notes issued by IM BCG RMBS 2, FONDO DE TITULIZACIÓN DE ACTIVOS (the Issuer).
The credit rating addresses the timely payment of interest and the ultimate payment of principal on or before the legal final maturity date in September 2061.
The confirmation follows an annual review of the transaction and is based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults, and losses, as of the August 2023 payment date;
-- Portfolio default rate (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables; and
-- Current available credit enhancement to the Class A notes to cover the expected losses at the AAA (sf) credit rating level.
The transaction is a securitisation of Spanish prime residential mortgage loans originated and serviced by Banco Caixa Geral, S.A. (BCG). Since March 2020, BCG has been fully integrated into Abanca Corporación Bancaria S.A. The transaction follows Spanish securitisation law and closed in November 2013.
As of the August 2023 payment date, the outstanding EUR 591.9 million portfolio consisted of 7,718 loans extended to borrowers mainly located in Galicia (21.4% of the pool balance), Catalonia (20.3%), and Extremadura (17.3%). The collateral is amortising with a pool factor of 45.5% (down from 52.4% 12 months ago at the time of the latest credit rating action) and has a weighted-average current loan-to-value ratio of 43.7% compared with 45.4% a year ago.
PORTFOLIO PERFORMANCE
As of the August 2023 payment date, loans that were one to two months and two to three months delinquent represented 0.3% and 0.1% of the portfolio balance, respectively, while loans more than three months delinquent represented 0.2%. Gross cumulative defaults were 0.8% of the original portfolio balance, with cumulative recoveries of 41.4% to date.
PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of receivables and updated its base case PD and LGD assumptions to 1.2% and 10.4%, respectively.
CREDIT ENHANCEMENT
The overcollateralisation of the portfolio provides credit enhancement to the Class A notes. As of the August 2023 payment date, credit enhancement to the Class A notes was 19.8%, up from 17.2% at the last annual review.
The transaction benefits from a cash reserve, funded at closing through a subordinated loan provided by BCG, which is available to cover senior expenses and interest payments on the Class A notes. The cash reserve, which does not amortise as long as the Class A notes are outstanding, is currently at its target level of EUR 39.0 million.
Banco Santander SA (Santander) acts as the account bank for the transaction. Based on the account bank reference rating of A (high) on Santander (which is one notch below its DBRS Morningstar Long Term Critical Obligations Rating 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 credit rating assigned to the Class A notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.
DBRS Morningstar’s credit rating on the Class A notes addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents.
DBRS Morningstar’s credit rating does not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction documents that are not financial obligations.
DBRS Morningstar’s long-term credit ratings provide opinions on risk of default. DBRS Morningstar considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.
ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the “DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings” at https://www.dbrsmorningstar.com/research/416784/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.
DBRS Morningstar analysed the transaction structure in Intex DealMaker.
Notes:
All figures are in euros unless otherwise noted.
The principal methodology applicable to the credit ratings is the “Master European Structured Finance Surveillance Methodology” (7 February 2023), https://www.dbrsmorningstar.com/research/409485/master-european-structured-finance-surveillance-methodology.
Other methodologies referenced in this transaction are listed at the end of this press release.
DBRS Morningstar 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 credit rating action.
For a more detailed discussion of the sovereign risk impact on Structured Finance credit ratings, please refer to “Appendix C: The Impact of Sovereign Ratings on Other DBRS Morningstar Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrsmorningstar.com/research/401817/global-methodology-for-rating-sovereign-governments.
The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.
The sources of data and information used for this credit rating include transaction reports provided by InterMoney Titulización S.G.F.T., S.A. 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 credit rating, DBRS Morningstar was not supplied with third-party assessments. However, this did not affect the credit rating analysis.
DBRS Morningstar considers the data and information available to it for the purposes of providing this credit rating to be of satisfactory quality.
DBRS Morningstar does not audit or independently verify the data or information it receives in connection with the credit rating process.
The last credit rating action on this transaction took place on 16 September 2022, when DBRS Morningstar confirmed the credit rating on the Class A notes at AAA (sf).
Information regarding DBRS Morningstar credit ratings, including definitions, policies, and methodologies, is available at www.dbrsmorningstar.com.
Sensitivity Analysis: To assess the impact of changing the transaction parameters on the credit rating, DBRS Morningstar considered the following stress scenarios as compared with the parameters used to determine the credit 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.
-- The base case PD and LGD of the pool of loans for the Issuer are 1.2% and 10.4%, respectively.
-- The risk sensitivity overview below illustrates the credit 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 credit rating of the Class A Notes would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the credit rating of the Class A Notes would be expected to remain at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the credit rating of the Class A Notes would be expected to remain at AAA (sf).
Class A Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD, expected credit rating of AAA (sf)
-- 50% increase in PD, expected credit rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of AAA (sf)
For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on DBRS Morningstar historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.
This credit rating is endorsed by DBRS Ratings Limited for use in the United Kingdom.
Lead Analyst: Preben Cornelius Overas, Assistant Vice President
Credit Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Credit Rating Date: 19 November 2013
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The credit 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 (30 June 2023), https://www.dbrsmorningstar.com/research/416730/legal-criteria-for-european-structured-finance-transactions.
-- Master European Structured Finance Surveillance Methodology (7 February 2023), https://www.dbrsmorningstar.com/research/409485/master-european-structured-finance-surveillance-methodology.
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2022), https://www.dbrsmorningstar.com/research/402774/operational-risk-assessment-for-european-structured-finance-servicers.
-- Interest Rate Stresses for European Structured Finance Transactions (22 September 2022), https://www.dbrsmorningstar.com/research/402943/interest-rate-stresses-for-european-structured-finance-transactions.
-- European RMBS Insight Methodology (27 March 2023) and European Asset RMBS Insight Model version 6.0.0.0, https://www.dbrsmorningstar.com/research/411634/european-rmbs-insight-methodology.
-- European RMBS Insight: Spanish Addendum (1 March 2023),
https://www.dbrsmorningstar.com/research/410420/european-rmbs-insight-spanish-addendum.
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (4 July 2023),
https://www.dbrsmorningstar.com/research/416784/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.
A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at https://www.dbrsmorningstar.com/research/278375.
For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.
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