RPT-Fitch Upgrades I m Grupo Banco Popular E mPRESAS 1, FTA's Class C Notes

Tue May 6, 2014 7:21am EDT

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may 6 (Reuters) - (The following state ment was released by the rating agency)

Fitch Ratings has upgraded IM Gupo Banco Popular Empresas

1's class C notes and affir med the others, as follows:

EUR105 m Class A2 (ISIN ES0347843015): affir med at 'AA+sf'; Outlook Stable

EUR28.8 m Class B (ISIN ES0347843023): affir med at 'AA+sf'; Outlook Stable

EUR27.0 m Class C (ISIN ES0347843031): upgraded to 'AA+sf' fro m 'A+sf'; Outlook

Stable

EUR54.9 m Class D (ISIN ES0347843049): affir med at 'BBsf'; Outlook Stable

EUR32.4 m Class E (ISIN ES0347843056): affir med at 'CCsf'; RE 50 percent

I m Grupo Banco Popular E mpresas 1 is a cash flow securitisation of an initial

EUR1.8bn static pool of S mE loans granted by six entities of Grupo Banco

Popular, which have since merged with Bano Popular Espanol SA (BB+/Stable/B).

KEY RATING DRIVERS

The upgrade of the class C notes reflects the transaction's improved performance over the past year and increase in credit enhance ment as the transaction has deleveraged. Credit enhance ment for the class C notes has risen to 49 percent fro m 36 percent at the last review allowing it to withstand stresses at the 'AA+sf' level.

Although the class C can defer interest once the class B beco mes undercollateralised, this trigger is unlikely to be breached under the 'AA+sf' stress due to the large credit enhance ment for the class B notes.

Credit enhancement has significantly improved for the two senior notes, rising to 76 percent from 55 percent for the class A notes and to 62 percent fro m 59 percent for the class B notes.

Both classes have been affirmed as the sovereign rating of Spain (BBB+/Stable/F2) caps the highest achievable rating for the transaction at 'AA+sf'.

The class E notes have been affirmed at 'CCsf' and the Recovery Estimate reduced to 50 percent due to the increased reliance of the junior tranche on recoveries as defaults increase.

The portfolio has a mortised to 11 percent of its original outstanding balance down from 14 percent at the last review. The 90+ and 180+ arrears buckets have also continued to decrease following a peak of 4.8 percent 90+ days in arrears in November 2012. 90+ arrears are currently 2 percent of the outstanding principal balance and 180+ arrears 1 percent. The decrease in arrears is due to the movement of delinquent loans into default.

RATING SENSITIVITIES

Fitch ran two sensitivities. In the first the default probability (PD) was increased by 25 percent and in the second the recovery rate was reduced by 25 percent. The increase of the PD resulted in a one-notch downgrade for the class D notes. The decrease of 25 percent to the recovery rates resulted in a two-notch downgrade for the class D notes.

(Reporting by Arnab Sen in Bangalore)

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