Ratings Assigned To Deutsche Bank SAE's ... - Standard & Poor's
Ratings Assigned To Deutsche Bank SAE's ... - Standard & Poor's Ratings Assigned To Deutsche Bank SAE's ... - Standard & Poor's
Ratings Assigned To Deutsche Bank SAE's Spanish Mortgage Covered Bonds RATINGS ASSIGNED TO DEUTSCHE BANK SAE'S MORTGAGE COVERED BONDS The mortgage covered bonds that we have rated today, which have been issued by Deutsche Bank SAE, are "cédulas hipotecarias". In assigning today's ratings, we have applied our 2009 covered bond criteria (see "Revised Methodology And Assumptions For Assessing Asset-Liability Mismatch Risk In Covered Bonds," published on Dec. 16, 2009). Under our criteria for rating covered bonds, we evaluate the maximum potential rating on a covered bond program as the bank's obligor's creditworthiness plus the maximum number of notches of ratings uplift. The maximum number of notches of uplift results from our assessment and classification of the program's asset-liability mismatch (ALMM) risk and the program categorization. When determining the program categorization, we consider primarily our view of the jurisdiction of a program and its ability to access external financing or monetize the cover pool. Finally, we assign the covered bonds to one of three distinct categories. Under our criteria, to achieve the maximum potential number of notches of uplift, the available credit enhancement needs to be commensurate with the target credit enhancement. Following our analysis, and given our view of the Spanish legal framework, we have categorized Deutsche Bank SAE's mortgage covered bonds in category "1" and determined a "low" ALMM classification. Based on our criteria and the application of our credit and cash flow stresses using the latest information we received from the issuer, we have assessed that the overcollateralization available to support Deutsche Bank SAE's cédulas hipotecarias can sustain the maximum potential uplift above the long-term obligor's creditworthiness on Deutsche Bank SAE. Therefore, we have assigned our 'AA+' long-term rating to Deutsche Bank SAE's mortgage covered bond program and all related series, which reflects this maximum ratings uplift capped by the sovereign rating on Spain, in line with our "Nonsovereign Ratings That Exceed EMU Sovereign Ratings: Methodology And Assumptions," published on June 14, 2011. At the same time, we have placed on negative outlook the assigned 'AA+' ratings on these covered bonds. The negative outlook reflects the outlook for the rating on the Kingdom of Spain (BBB+/Negative/A-2). Our ratings on Deutsche Bank SAE's mortgage covered bonds follow our analysis of the issuer's asset and cash flow information as of March 31, 2012. We have analyzed the credit risk in stressed scenarios using structured finance techniques--i.e., foreclosure frequency and loss severity assumptions--which we typically apply for Spanish mortgage assets (see " Methodology And Assumptions: Update To The Criteria For Rating Spanish WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JUNE 29, 2012 2 982598 | 300076937
Residential Mortgage-Backed Securities," published on Jan. 6, 2009). As per our "Revised Methodology And Assumptions For Assessing Asset-Liability Mismatch Risk In Covered Bonds," published on Dec. 16, 2009, we evaluate cash flows generated by the cover pool, and the cash flow required to service outstanding covered bonds under severe economic conditions. This evaluation aims to determine whether the assets in the cover pool are sufficient to meet the payments on the covered bonds in a timely manner. Our cash flow analysis assesses the cover pool's performance by considering: • Credit risk (as described in the paragraphs below); • Interest rate and currency risk; • ALMM risk resulting from cash flow mismatches between assets and liabilities in terms of maturity, and from market value mismatches if the program has to liquidate assets; • Prepayment risk and servicing costs; and • An appropriate stress-testing of these risks, using our cash flow model (Imake). We assess the cover pool's credit risk as per our "Criteria for Rating Spanish Residential Mortgage-Backed Securities," published on March 1, 2002, " Methodology And Assumptions: Update To The Criteria For Rating Spanish Residential Mortgage-Backed Securities," published on Jan. 6, 2009, "Principles Of Credit Ratings," published on Feb. 16, 2011, and "Expanding European Covered Bond Universe Puts Spotlight on Key Analytics," published on July 16, 2004. In our modeling, we use cash flow assumptions as per our general cash flow criteria ("Cash Flow Criteria for European RMBS Transactions," published on Nov. 20, 2003, and "Methodology And Assumptions: Update To The Cash Flow Criteria For European RMBS Transactions," published on Jan. 6, 2009), because we consider these to be appropriate to apply to covered bonds, due to the similar cash flow risk nature of residential mortgage-backed securities (RMBS) and covered bonds. The ratings on the covered bonds reflect our expectation of timely interest payment and ultimate principal repayment by the final maturity date of the covered bonds. As of March 31, 2012, the key characteristics of the combined residential mortgage books of the three entities were: KEY CHARACTERISTICS Ratings Assigned To Deutsche Bank SAE's Spanish Mortgage Covered Bonds Classification of ALMM Low Program categorization 1 Maximum potential rating AA+ Current available credit enhancement (%) 51.98 Target credit enhancement commensurate with the highest credit rating (%) 48.71 WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JUNE 29, 2012 3 982598 | 300076937
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- Page 5 and 6: Weighted-average LTV ratio (%) 76.1
- Page 7 and 8: July 16, 2004 • Cash Flow Criteri
Residential Mortgage-Backed Securities," published on Jan. 6, 2009).<br />
As per our "Revised Methodology And Assumptions For Assessing Asset-Liability<br />
Mismatch Risk In Covered Bonds," published on Dec. 16, 2009, we evaluate cash<br />
flows generated by the cover pool, and the cash flow required to service<br />
outstanding covered bonds under severe economic conditions. This evaluation<br />
aims to determine whether the assets in the cover pool are sufficient to meet<br />
the payments on the covered bonds in a timely manner.<br />
Our cash flow analysis assesses the cover pool's performance by considering:<br />
• Credit risk (as described in the paragraphs below);<br />
• Interest rate and currency risk;<br />
• ALMM risk resulting from cash flow mismatches between assets and<br />
liabilities in terms of maturity, and from market value mismatches if the<br />
program has to liquidate assets;<br />
• Prepayment risk and servicing costs; and<br />
• An appropriate stress-testing of these risks, using our cash flow model<br />
(Imake).<br />
We assess the cover pool's credit risk as per our "Criteria for Rating Spanish<br />
Residential Mortgage-Backed Securities," published on March 1, 2002, "<br />
Methodology And Assumptions: Update <strong>To</strong> The Criteria For Rating Spanish<br />
Residential Mortgage-Backed Securities," published on Jan. 6, 2009, "Principles<br />
Of Credit <strong>Ratings</strong>," published on Feb. 16, 2011, and "Expanding European<br />
Covered Bond Universe Puts Spotlight on Key Analytics," published on July 16,<br />
2004.<br />
In our modeling, we use cash flow assumptions as per our general cash flow<br />
criteria ("Cash Flow Criteria for European RMBS Transactions," published on<br />
Nov. 20, 2003, and "Methodology And Assumptions: Update <strong>To</strong> The Cash Flow<br />
Criteria For European RMBS Transactions," published on Jan. 6, 2009), because<br />
we consider these to be appropriate to apply to covered bonds, due to the<br />
similar cash flow risk nature of residential mortgage-backed securities (RMBS)<br />
and covered bonds.<br />
The ratings on the covered bonds reflect our expectation of timely interest<br />
payment and ultimate principal repayment by the final maturity date of the<br />
covered bonds.<br />
As of March 31, 2012, the key characteristics of the combined residential<br />
mortgage books of the three entities were:<br />
KEY CHARACTERISTICS<br />
<strong>Ratings</strong> <strong>Assigned</strong> <strong>To</strong> <strong>Deutsche</strong> <strong>Bank</strong> <strong>SAE's</strong> Spanish Mortgage Covered Bonds<br />
Classification of ALMM Low<br />
Program categorization 1<br />
Maximum potential rating AA+<br />
Current available credit enhancement (%) 51.98<br />
Target credit enhancement commensurate with<br />
the highest credit rating (%) 48.71<br />
WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JUNE 29, 2012 3<br />
982598 | 300076937
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