DBRS Morningstar Comments on No Impact to Cajamar Caja Rural S.C.C. Covered Bonds’ Credit Ratings Following Issuer Upgrade

DBRS Ratings GmbH (DBRS Morningstar) notes that its AA (high) credit ratings on the Covered Bonds (CB) issued under the Cajamar Caja Rural S.C.C. Covered Bonds (Cédulas Hipotecárias - Mortgages) (the mortgage CB programme), and its AA (low) credit rating on the covered bond issued under the Cajamar Caja Rural S.C.C. Covered Bonds (Cédulas Territoriales - Public Sector) (the public sector CB programme) remain unchanged following DBRS Morningstar’s credit rating upgrades on Cajamar Caja Rural, Sociedad Cooperativa de Credito (the Issuer).

On 17 November 2023, DBRS Morningstar upgraded its Long-Term Issuer Rating (LTIR) on the Issuer to BBB (low) from BB (high). For more information, please see the relevant press release at https://www.dbrsmorningstar.com/research/423469/dbrs-morningstar-upgrades-grupo-cooperativo-cajamars-long-term-issuer-rating-to-bbb-low-trend-revised-to-stable.

The CB Attachment Point (CBAP) for both programmes is the LTIR plus one notch, now BBB from previous BBB (low). The Legal and Structuring Framework (LSF) Assessment remains at “Strong” for both programmes.

Looking at the mortgage CB programme, in the LSF matrix of “Strong”, the maximum LSF Implied Likelihood (LSF-L) is AA (low), which is the current one, and is the same for a CBAP of BBB (low) as well as BBB. As the LSF-L is still AA (low), the upgrade on the CBAP did not trigger an upgrade on the CB credit ratings.

Looking at the public sector CB programme, in the LSF matrix of “Strong”, for a Cover Pool Credit Assessment (CPCA) of A (low), which is Cajamar’s current CPCA, the LSF-L is “A”, which is the current one, and is the same for a CBAP of BBB (low) as well as BBB. As the LSF-L is still “A”, the upgrade on the CBAP did not trigger an upgrade on the CB credit ratings. In any case, when the public sector pool is largely concentrated in a single sovereign, which is the case, it can very rarely (if at all) be expected that a reasonable level of overcollateralisation may suffice to achieve a full credit rating category (three notches) above the credit rating of that domicile sovereign. This CB credit rating stands two notches above the Sovereign credit rating of Spain (rated “A” by DBRS Morningstar with a Stable trend). Please see “Modelling Assumptions for Portfolios of Public Sector Exposures”, https://www.dbrsmorningstar.com/research/417064/modelling-assumptions-for-portfolios-of-public-sector-exposures, for more information.

DBRS Morningstar’s credit ratings on the Issuer's covered bond series address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the related Interest Payment Amounts and the related Principal Balance.

DBRS Morningstar’s credit rating does not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) 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
Credit rating actions on the Issuer are likely to have an impact on this credit rating.

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” (4 July 2023) at https://www.dbrsmorningstar.com/research/416784.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the credit ratings is: “Global Methodology for Rating and Monitoring Covered Bonds” (8 May 2023), https://www.dbrsmorningstar.com/research/413651.

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/421590.

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.

DBRS Ratings GmbH, Sucursal en España
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For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.