Fitch Upgrades FTA, Santander Empresas 3
OREANDA-NEWS. Fitch Ratings has upgraded FTA, Santander Empresas 3 class C notes, as follows:
EUR32.6m class A2 (ISIN ES0337710018): affirmed at 'A+sf'; Outlook Stable
EUR13.9m class A3 (ISIN ES0337710026): affirmed at 'A+sf'; Outlook Stable
EUR39.7m class B (ISIN ES0337710034): affirmed at 'A+sf'; Outlook Stable
EUR117.3m class C (ISIN ES0337710042): upgraded to 'BBBsf' from 'BBsf'; Outlook Stable
EUR70m class D (ISIN ES0337710059): affirmed at 'Bsf'; Outlook Negative
EUR45.5m class E (ISIN ES0337710067): affirmed at 'CCsf'; RE 0%
EUR45.5m class F (ISIN ES0337710075): affirmed at 'Csf'; RE 0%
F.T.A. Santander Empresas 3 is a granular cash flow securitisation of a static portfolio of secured and unsecured loans granted to Spanish small- and medium-sized enterprises by Banco Santander S.A.
KEY RATING DRIVERS
The upgrade reflects the increase in credit enhancement and improved transaction performance over the past 12 months. Since the last review, the class A2 and A3 notes have amortised by EUR110m, resulting in a large increase in credit enhancement for the class A2 to C notes. The class D and E notes' credit enhancement is broadly unchanged.
The transaction's performance has improved since last review. Current default decreased to 28.4m from 36.7m and both delinquency over 90 days and over 180 days decreased to 4.2m and 2.1m from 9.9m and 4m respectively. The portfolio became less concentrated following the repayment of one very large obligor. The top obligor concentration decreased to 2.78% from 10.41% and the top 10 obligors decreased to 11.58% from 19.56% at last review.
Despite the total recoveries increase by 7.6m after last review, the weighted average recovery rate is relatively low at 18.97%. In its analysis Fitch assumed the portfolio as unsecured to reflect the low observed recovery rate.
As the reserve fund is completely depleted, the class E and F notes remain under collateralised and are at risk of default. In addition, the transaction has no liquidity line to mitigate any disruption of the collection process and to maintain timely payments to the noteholders. As a result, the transaction's ratings are capped at 'A+sf'.
Fitch tested an increase of the default probability by 25%, which would result in a downgrade of the class C and D notes by one notch and no changes to the other notes.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed 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 transaction. There were no findings that were material to this analysis. 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 upon 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.
SOURCES OF INFORMATION
The information below was used in the analysis.
- Loan-by-loan data provided by European Data Warehouse as at 08 January 2016
- Transaction reporting provided by Santander as at 18 January 2016