OREANDA-NEWS. April 10, 2015. Fitch Ratings has affirmed 14 tranches of four AyT RMBS series. The agency has also revised the Outlook on one tranche to Stable from Negative. A full list of rating actions is available at the end of this commentary.

The transactions are part of a series of RMBS transactions that are serviced by Kutxabank, S.A. (BBB/Positive/F3) for AyT Hipotecario BBK I and AyT Hipotecario BBK II; Banco de Castilla La Mancha S.A. (BB+/Negative/FB) for AyT CGH CCM I; and Abanca Corporacion Bancaria, S.A. (BB+/Negative/B) for AyT CGH Caixa Galicia II.

KEY RATING DRIVERS

Stable Credit Enhancement
The notes in AyT CGH CCM I and AyT Hipotecario BBKI and BBKII are currently paying sequentially. As delinquencies are above the trigger levels a switch to pro-rata is not expected in the near future. AyT CGH Caixa Galicia II may see a change to pro-rata in the next 12 to 18 months as arrears are decreasing and could soon fall below the 1.25% trigger level.

Stable Asset Performance
Both AyT CGH deals have shown similar asset performance compared with the Spanish average whereas both AyT BBK deals have exhibited better-than-average performance. Three-months plus arrears (excluding defaults) as a percentage of the current pool balance range from 0.8% (BBK I) to 1.6% (Caixa Galicia II). These numbers remain below Fitch's index of three-months plus arrears (excluding defaults) of 1.7%.

With the exception of AyT CCM I, cumulative defaults, defined as mortgages in arrears by more than 18 months, are currently below the average for the sector of 4.9%. Fitch believes that this difference can be attributed to the high proportion of self-employed borrowers at origination on AyT CCM I.

Reserve Fund Draws
The reserve fund for AyT CGH Caixa Galicia II is close to its target at 99% after a draw in October 2013 and partial replenishment in October 2014. The reserve fund for AyT CGH CCMI was almost fully depleted on May 2011, but improved performance has allowed continued replenishments since then. As of end-November 2014 the reserve stood at 35% of its target amount, up from 16% in November 2013. Given the stable performance of these deals Fitch believes further replenishments will take place in the next payment dates.

In contrast AyT BBK deals feature a fully funded reserve fund that has never been drawn. Given the low level of arrears, Fitch believes the transaction will continue to maintain its reserve funds at target.

Payment Interruption Risk
For AyT CCM I a dynamic cash reserve is sized to cover for two payment dates worth of interest on tranche A and senior fees. However, Fitch considers this cash reserve plus the utilised reserve fund balance insufficient to fully cover payment interruption risk. Therefore even if the transaction's performance improves in future, the ratings will not be upgraded above 'Asf'.

In contrast AyT CGH Caixa Galicia II and both BBK deals have sufficient liquidity to cover payments due to relevant counterparties, in case of default of the servicer and the collection account bank.

Given the stable performance, reduction in arrears and the current reserve fund balance Fitch considers the D class notes of AyT Caixa Galicia II have sufficient protection to sustain current ratings, leading to today's Outlook revision.

RATING SENSITIVITIES

A worsening of the Spanish macroeconomic environment, especially employment conditions, or an abrupt shift in interest rates might jeopardise the ability of the underlying borrowers to meet their payment obligations.

More volatile arrears patterns and a rapid increase in defaults beyond Fitch expectations could trigger negative rating actions.

The rating actions are as follows:

AyT CGH Caixa Galicia II:
Class A notes (ISIN ES0312273404): affirmed at 'AA-sf'; Outlook Stable
Class B notes (ISIN ES0312273412): affirmed at 'Asf'; Outlook Stable
Class C notes (ISIN ES0312273420): affirmed at 'BB-sf'; Outlook Stable
Class D notes (ISIN ES0312273438): affirmed at 'Bsf'; Outlook revised to Stable from Negative

AyT CGH CCM I:
Class A notes (ISIN ES0312273248): affirmed at 'A-sf'; Outlook Stable
Class B notes (ISIN ES0312273255): affirmed at 'BBsf'; Outlook Stable
Class C notes (ISIN ES0312273263): affirmed at 'CCCsf'; Recovery Estimate (RE) 95%
Class D notes (ISIN ES0312273271): affirmed at 'CCsf'; RE 5%

AyT Hipotecario BBK I:
Class A notes (ISIN ES0312364005): affirmed at 'AA+sf'; Outlook Stable
Class B notes (ISIN ES0312364013): affirmed at 'Asf'; Outlook Stable
Class C notes (ISIN ES0312364021): affirmed at 'BBsf'; Outlook Stable

AyT Hipotecario BBK II:
Class A notes (ISIN ES0312251004): affirmed at 'AA+sf'; Outlook Stable
Class B notes (ISIN ES0312251012): affirmed at 'Asf'; Outlook Stable
Class C notes (ISIN ES0312251020): affirmed at 'BBsf'; Outlook Stable