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Fitch Upgrades IM Caja Laboral 2 and IM Cajastur MBS 1.

Madrid/London: Fitch Ratings has upgraded two tranches of IM Caja Laboral 2, FTA and one tranche of IM Cajastur MBS 1, FTA. The other tranches have been affirmed. All ratings have been removed from Rating Watch Evolving (RWE). A full list of rating actions is at the end of this rating action commentary.

The two Spanish RMBS transactions comprise mortgages serviced by Caja Laboral Popular Cooperativa de Credito (BBB+/Stable/F2) and Liberbank S.A. (BB/Stable/B), respectively.


Strong Credit Enhancement (CE)

The rating actions reflect that Fitch views current and projected CE ratios as sufficient to withstand the credit and cash flow stresses commensurate with the ratings. The class A notes' CE ratios as of the latest reporting period stood at 28.5% and 59.1% for IM Caja Laboral 2 and IM Cajastur MBS 1, respectively. Both transactions have built up CE for the senior most tranches due to the sequential amortisation of the notes. A switch to pro-rata amortisation could take place over the short to medium term provided the performance-based triggers are achieved and CE ratios would remain broadly stable.

Stable Asset Performance

The transactions continue to show sound asset performance. Three-month plus arrears (excluding defaults) as a percentage of the current pool balance remain below 1.0% in both transactions as of the last reporting period. Fitch expects performance to remain stable especially given the significant seasoning of the securitised portfolios of approximately 12 years.

Counterparty Rating Cap

IM Cajastur MBS 1 documentation was amended in January 2013 to waive swap and reinvestment account bank remedial actions. Fitch analysed the transaction assuming the loss of the cash credit balance available at the reinvestment account (held with Banco Santander; A-/Stable/F2), and assuming no swap agreement in place. Due to the residual operational counterparty exposure, the notes' ratings are capped at 'A+sf' in accordance with Fitch's counterparty criteria.

Geographic Concentration Risk

The securitised portfolios of IM Caja Laboral 2 and IM Cajastur MBS 1 are exposed to substantial geographical concentration in the Basque Country and Asturias, which account for almost 44% and 70% of the collateral balances, respectively. As per its criteria, Fitch has applied a higher set of rating multiples to the base foreclosure frequency assumption to the portion of the portfolios that exceed two and a half times the population within these regions.


SME Loans

IM Cajastur MBS 1 portfolio comprises a 10% of loans granted to micro and small-medium sized enterprises. Given its residual exposure, Fitch applied its European RMBS Rating Criteria to these loans assuming an additional 50% foreclosure frequency hit to account for the greater default risk substantiated by the historical performance analysis. Fitch also employed its commercial property collateral haircuts to derive the recovery rates for this proportion of the pool. Fitch found the current CE sufficient to mitigate the risk. Fitch did not apply its SME Balance Sheet Securitisation Rating Criteria for these loans.

Model-Implied Rating

While assessing the rating impact of the loss of funds held at the reinvestment account of IM Cajastur MBS 1, Fitch did not consider the model-implied rating outcomes linked to scenarios of back and evenly distributed default vectors with rising interest rates and low prepayments, because the agency views the combination of such circumstances as extremely remote in light of the very long seasoning of the mortgage portfolios. This constitutes a variation from Fitch's European RMBS rating criteria with a model-implied rating impact of four notches.


All else being equal, the rating of IM Cajastur MBS 1's class A notes could be upgraded to 'AAsf' or 'AAAsf' if the reinvestment account bank replacement triggers were updated to 'A-' or 'F2' and 'A' or 'F1' respectively, in accordance with Fitch's Structured Finance and Covered Bonds Counterparty Rating Criteria. The class B notes' ratings could be affected by changes to the rating of the reinvestment account bank (Banco Santander), as the cash reserves held in the bank account represent a very material component of the class B notes' CE.

A worsening of the Spanish macroeconomic environment, especially employment conditions or an abrupt shift of interest rates could jeopardise the underlying borrowers' affordability. This could have negative rating implications, especially for junior tranches that are less protected by structural CE.


Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.


Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transactions. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.

Fitch did not undertake a review of the information provided about the underlying asset pool ahead of the transaction's initial closing. The subsequent performance of the transaction over the years is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied up on for its initial rating analysis was adequately reliable.

Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.


The information below was used in the analysis:

- Loan-by-loan data provided by Intermoney Titulizacion SGFT, S.A. as at December 2017

- Transaction reporting provided by Intermoney Titulizacion SGFT, S.A. as at January 2018
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Publication:Daily the Pak Banker (Lahore, Pakistan)
Date:May 28, 2018
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