OREANDA-NEWS. Fitch Ratings has upgraded BBVA Leasing 1, FTA's class A notes and affirmed the rest as follows:

EUR29.3m Class A1 notes upgraded to 'BBBsf' from 'BB+sf'; Outlook Stable
EUR62.6m Class A2 notes upgraded to 'BBBsf' from 'BB+sf'; Outlook Stable
EUR82.5m Class B notes affirmed at 'CCsf'; Recovery Estimate 60%
EUR61.3m Class C notes affirmed at 'Csf'; Recovery Estimate 0%

BBVA Leasing 1 FTA is a securitisation of a pool of leasing contracts (real estate leases and chattel finance leases) originated by Banco Bilbao Vizcaya Argentaria S.A. (BBVA; A-/Stable/F2) and extended to non-financial small- and medium-enterprises (SMEs) domiciled in Spain. BBVA is also servicer, account bank and swap provider for the transaction.

KEY RATING DRIVERS
The upgrade of the class A notes is driven by an improvement in performance and by the build-up of credit enhancement, provided by the subordination of the class B and class C notes. As of the latest reporting date in January 2015, arrears in excess of 30 days have decreased to 6.3% from a 10.3% peak in 2011. Cumulative defaults reached 4.8% and we believe that they will stabilise at 5%-7%.

However, the transaction is exposed to increasing obligor concentration levels. As of the latest reporting date, the largest 20 borrowers accounted for 11.1% of the outstanding collateral balance, which compares with only 3.5% at closing in 2007. Fitch has captured a lifetime default assumption of 15% to address tail risk from significant obligor concentration.

The affirmation of the class B and class C notes at 'CCsf' and 'Csf', respectively, is driven by an outstanding principal deficiency ledger of EUR64.3m. With limited excess spread, coupled with slow incoming recoveries, it is unlikely that PDL will be significantly reduced in the near term.

RATING SENSITIVITIES
The class A notes could be upgraded if performance continues to improve, or if obligor concentration levels decrease. However, the class A notes are exposed to servicer disruption risk, since the reserve fund is fully depleted and the structure lacks a dedicated liquidity facility to address class A interest shortfalls.

In Fitch's rating analysis, expected remaining defaults and lifetime recoveries are each assumed at 15%, the latter to reflect low historical recoveries. The ratings are fairly robust.

Expected impact upon the note ratings of increased defaults (class A/B/C):
Current Rating: 'BBBsf'/'CCsf'/'Csf'
Increase expected case defaults by 50%: 'BBB-sf'/'CCsf'/'Csf'
Expected impact upon the note ratings of reduced recoveries (class A/ B/C):
Current Rating: 'BBBsf'/'CCsf'/'Csf'
Reduce expected case recoveries by 50%: 'BBBsf'/'CCsf'/'Csf'

Expected impact upon the note ratings of increased defaults and reduced recoveries (class A/ B/C):
Current Rating: 'BBBsf'/'CCsf'/'Csf'
Increase expected case defaults by 50%; reduce expected case recoveries by 50%: 'BB+sf'/'CCsf'/'Csf'