OREANDA-NEWS. Fitch Ratings has upgraded AyT Caixa Sabadell Hipotecario. A full list of rating actions is at the end of this commentary.

The Spanish prime RMBS transaction comprises loans initially originated by Caixa Sabadell, which is now part of Banco Bilbao Vizcaya Argentaria (BBVA; A-/Stable/F2).

KEY RATING DRIVERS
Improved Credit Profile
The upgrade reflects the improved credit profile of the securitised portfolio and the higher levels of structural credit enhancement (CE) for the rated notes. As of November 2015, three-month plus arrears excluding defaults stood at 3.1% of the outstanding portfolio balance, well below the 13.0% and 10.0% at the prior reporting dates in May 2015 and November 2014, respectively. The large drop in arrears is mainly due to BBVA repurchase of problematic assets, a strategy that Fitch considers would not be sustainable under stress scenarios. The balance of net cumulative defaults is 0.7% of initial portfolio balance, below the average (5.1%) for other Fitch-rated prime Spanish RMBS.

BBVA Repurchases
Fitch understands that loan buy backs by BBVA have taken place since early 2014, of which around EUR30m corresponds to defaulted assets. This repurchase strategy has improved the transaction's credit profile as large recovery cash flows have entered the transaction and have been allocated in accordance with the priority of payments definitions. Therefore, total arrears have substantially decreased, CE has improved for all rated tranches, and the balance of the reserve fund has increased to 98% of its target level. Fitch understands the large buy backs were a one-off event, and our credit analysis assumes no further repurchases will take place.

Very High Exposure to Catalonia
Almost 100% of the securitised portfolio is secured by properties located in Catalonia. To address this high geographical concentration risk in the credit analysis, a default probability hit of 15% is attached to every asset located in this region, and a recovery rate haircut is accommodated. Fitch's credit analysis is carried out under the scenario that Catalonia remains a region of Spain and does not become an independent state.

Maximum Achievable Rating
In accordance with Fitch's counterparty criteria for structured finance transactions, the maximum achievable rating is 'A+sf', as the account bank is currently rated 'A-/F2' and the applicable rating trigger within the transaction documents is 'BBB+'/'F2'.

RATING SENSITIVITIES
Deterioration in asset performance may result from economic factors, in particular the increasing effect of unemployment. A corresponding increase in new defaults and associated pressure on excess spread levels and reserve funds could result in negative rating action.

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.

SOURCES OF INFORMATION
The information below was used in the analysis.
- Loan-by-loan data provided by Haya Titulizacion as at September 2015
- Investor report provided by Haya Titulizacion as at November 2015

MODELS
The model below was used in the analysis. Click on the link for a description of the model.

Fitch has taken the following rating actions:

Class A (ES0312192000) upgraded to 'A-sf' from 'BBB+sf'; Outlook Stable
Class B (ES0312192018) upgraded to 'BBB-sf' from 'BB+sf'; Outlook Stable
Class C (ES0312192026) upgraded to 'BB-sf' from 'B+sf'; Outlook Stable
Class D (ES0312192034) upgraded to 'CCCsf' from 'CCsf'; Recovery Estimate 60%