OREANDA-NEWS. Fitch Ratings has upgraded IM Grupo Banco Popular Empresas 1, FTA Class D notes, and affirmed all others as follows:

EUR58.1m Class A2 (ISIN ES0347843015): affirmed at 'AA+sf'; Outlook Stable
EUR28.8m Class B (ISIN ES0347843023): affirmed at 'AA+sf'; Outlook Stable
EUR27m Class C (ISIN ES0347843031): affirmed at 'AA+sf'; Outlook Stable
EUR54.9m Class D (ISIN ES0347843049): upgraded to 'BBBsf' from 'BBsf'; Outlook Stable
EUR30.1m Class E (ISIN ES0347843056): affirmed at 'CCsf'; Recovery Estimate revised to 60% from 50%

IM Grupo Banco Popular Empresas 1 is a cash flow securitisation of an initial EUR1.8bn static pool of Spanish SME loans granted by six entities of Grupo Banco Popular, which have since merged with Banco Popular Espanol SA (BB+/Negative/B).

KEY RATING DRIVERS
The upgrade of the class D notes is driven by the transaction's improved performance and deleveraging over the last 12 months. The tranche has seen its credit enhancement increase to 26.7% from 20.8% over the period as a result of EUR47.3m of the class A2 notes being paid down sequentially. While credit enhancement for the class A2 to C notes have also increased over the period, these notes are affirmed at their 'AA+sf' rating due to the Spanish Country Ceiling cap.

Over the same period, 90 days+ arrears have fallen to 1.19% from 1.91%, while 180 days+ arrears have fallen to 0.82% from 1.1%. While current defaults have increased to 21.1% from 18%, this is solely due to amortisation as the absolute amount of current defaults in the portfolio has fallen to EUR31.9m from EUR36.9m.

The absolute fall in current defaults is reflected in the transaction's improved recovery rate, which has risen to 65% from 58%. The EUR45m reserve fund remains undrawn, to the extent that excess spread has reduced the outstanding class E balance to EUR30.06m from EUR32.4m. The recovery estimate for the class E tranche has subsequently been revised up to 60% from 50%.

RATING SENSITIVITIES
Fitch ran two sensitivities. In the first the recovery rate was reduced by 25%, and in the second, the default probability was increased by 25%. This would result in a one-notch downgrade to the class D notes in the first scenario, and no changes to any of the ratings in the second.