OREANDA-NEWS. Fitch Ratings has affirmed FTA PYMES Banesto 2, as follows:

Class A2 (ISIN ES0372260010): affirmed at 'BBB-sf'; Outlook Stable
Class B (ISIN ES0372260028): affirmed at 'Bsf'; Outlook Negative
Class C (ISIN ES0372260036): affirmed at 'CCsf'; RE 0%

FTA PYMES Banesto 2 (the issuer) is a cash flow SME CLO originated by Banco Espanol de Credito S.A, now part of Banco Santander S.A. (Banco Santander; A-/Stable/F2). At closing, the issuer used the note proceeds to purchase a EUR1bn portfolio of secured and unsecured loans granted to Spanish small and medium enterprises and self-employed individuals. The transaction is managed by Santander de Titulizacion, S.G.F.T., S.A.

KEY RATING DRIVERS
The affirmation of the class A2 and B notes reflects the portfolio's performance, which has stabilised throughout the past year. The class A2 notes are continuing to deleverage, leading to increased credit enhancement for the most senior notes. Since the last review, the class A2 notes have amortised by and credit enhancement has increased to 37.8% from 31.9%. Credit enhancement for the class B notes has marginally decreased to 15.8% from 16.6% as a result of increased defaults.

Defaults increased by EUR7.97m over the past year, with current defaults now making up for 20% of the outstanding balance, compared with 16.4% at the last review. However, delinquency levels have decreased significantly, with 90+ day delinquencies now representing 3.4% of the portfolio compared with 6.7% at the last review. 180 day delinquencies have decreased to 2.2% from 4.0%.

The current recovery rate of 11% is very low compared with other Spanish SME deals. In its analysis, Fitch assumed the portfolio to be unsecured to reflect the low observed recovery rate. In addition, the agency applied a 10-year recovery lag.

The Negative Outlook on the class B notes continues to reflect that credit enhancement could erode quickly if the transaction was exposed to further defaults and recoveries remain low.

Credit enhancement for the class C notes has decreased significantly over the past year to -15.09% from -4.8%. This is due to the increase in the principal deficiency ledger to EUR16.6m from EUR7.7m over the past year and the reserve fund being depleted since March 2012.

RATING SENSITIVITIES
Applying a 1.25x default rate multiplier to all assets in the portfolio would result in a downgrade of the class B notes by one category.

DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.

DATA ADEQUACY
Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.

Fitch did not undertake a review of the information provided about the underlying asset pool ahead of the transaction's initial closing. The subsequent performance of the transaction over the years is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable.

Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.