Union de Creditos Inmobiliarios (UCI) is planning what will be the first investor-placed Spanish residential mortgage securitization since BBVAR 3 in July 2007.

The transaction, dubbed Prado I, features mortgages with low original loan-to-value ratios that were originated after the 2008/2009 financial crisis. The trust will issue €342 million ($372 million) of class A notes rated ‘AA’ by Standard & Poor’s that benefit from 24% credit enhancement. There is also a €108 million of unrated, subordinate notes. All of the notes are due June 2055.

The notes are backed by 3,761 residential mortgages with a weighted average seasoning of 54.16 months and a weighted average original LTV of 57.14%.

Just under 16% of the mortgages were originated as bridge loans to individuals looking to purchase a new home before selling their old one. All have since been converted to standard, amortizing loans. By comparison, previous UCI transactions included bridge loans that had not yet been converted to standard, amortizing loans.

“We believe that the profiles of the loans in this transaction are stronger than those of standard residential mortgage-backed securities (RMBS) borrowers, due to the seasoning, the lower loan-to-value (LTV) ratios, and the fact that they have never been in arrears despite the years of origination,” S&P stated in its presale report.

The report notes that the credit enhancement for the class A notes is sufficient to mitigate their exposure to credit and cash flow risks at the 'AAA' rating level. 

However S&P caps the rating single-jurisdiction securitizations at four notches above the sovereign foreign currency rating, which for Spain is ‘BBB.’

Banco Santander and BNP Paribas are the arrangers.

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