OREANDA-NEWS. Fitch Ratings has affirmed AyT CGH, FTA Serie AyT CGH BBK I (BBKI) and AyT CGH, FTA Serie AyT CGH BBK II (BBKII), as follows:

BBK I
Class A notes (ISIN ES0312273008): affirmed at 'A-sf'; Outlook revised to Stable from Negative

BBK II
Class A notes (ISIN ES0312273362): affirmed at 'AA-sf'; Outlook Stable;
Class B notes (ISIN ES0312273370): affirmed at 'BBBsf'; Outlook Stable

The transactions are part of a series of RMBS transactions that were originated and are serviced by Kutxabank, S.A. (Kutxabank; BBB/Positive/F3).

KEY RATING DRIVERS
Sufficient Credit Enhancement
The notes in both transactions are currently amortising sequentially. As the reserves are not at target level, a switch to pro-rata is not expected in the near future. The credit enhancement (CE) available in these structures is deemed sufficient to support the ratings, as reflected in the affirmation.

As of September 2014 the CE for BBK I was 17%, up from 16.1% 12 months ago, while the December 2014 CE for class A and B of BBK II were 13.4% and 8.4%, respectively, up from 13% and 8.3% 12 months ago.

Stable Arrears
The rating actions reflect the good asset performance reported over the past 12 months. As of the last payment dates, three-months plus arrears (excluding defaults) as a percentage of the current pool balance was 1.3% and 0.8% for BBK I and BBK II, respectively. Given the high seasoning of these deals and the good performance to date, Fitch expects these levels to remain stable. This view is also reflected in the revision of BBK I's Outlook on the class A to Stable from Negative.

Cumulative gross defaults (defined as loans in arrears by more than 18 months) are also low at 2.8% of the initial portfolio balance for BBK I and 1.1% for BBK II. Both transactions are well below the average 4.8% for other Spanish RMBS.

Recently, the excess spread has not always been sufficient for default provisioning purposes, which resulted in some reserve fund draws during 2014. As of the last payment date, the reserve was at 96.2% of its target for BBK I and 91% for BBK II.

Counterparty Risk Mitigated
In both deals, the proceeds from the collection account banks (held with Kutxabank) are swept daily to the treasury account banks, both held with Barclays (A/Stable/F1). Fitch has tested the transactions for payment interruption. Both BBK I and BBK II structures have sufficient liquidity to cover six months of senior fees and interest payments in case of default of the servicer and collection account bank.

Absence of Hedging
Fitch believes the removal of the swap and use of fixed interest rate coupons introduces a basis risk to the transactions, which we have factored into the analysis. Nevertheless, the agency considers the available CE sufficient to withstand the resulting stresses.

RATING SENSITIVITIES
A worsening of the Spanish macroeconomic environment, especially employment conditions, or an abrupt shift of interest rates could jeopardise the underlying borrowers' affordability.

More volatile arrears trends and a rapid increase in defaults, beyond Fitch's expectations, could trigger negative rating actions.