KBRA Europe has assigned preliminary ratings to seven classes of notes issued by Lugo Funding 2026-1 DAC, a static RMBS securitisation backed by a €560.5 million portfolio of seasoned, predominantly reperforming Spanish mortgages. The underlying collateral consists of mortgage participations and mortgage transfer certificates issued by Banco Bilbao Vizcaya Argentaria, S.A., representing economic rights to payments from loans that are 93.3% owner-occupied and 6.5% second homes, with a weighted average seasoning of 18.4 years and 92.0% previously restructured. BBVA acts as lender of record and primary servicer, while Pepper Spanish Servicing, S.L.U. serves as special servicer for loans in arrears of five days or more. The notes feature a sequential payment priority under a combined collections waterfall, and interest payments on Class A are supported by a liquidity reserve fund funded at closing.
Banco Bilbao Vizcaya Argentaria S.ABBVA is the originator and servicer of the securitised mortgages, but the rating action is a routine capital markets transaction with no material impact on BBVA's financials or operations.