DBRS Ratings Limited Rates Magellan Mortgages No. 6 Limited

DBRS Ratings Limited (DBRS) has today assigned a AAA (sf) rating to the Class A Mortgage Backed Floating Rate Notes issued by Magellan Mortgages No. 6 Limited. The transaction is back by residential mortgages secured on collateral in the Republic of Portugal and originated by Banco Comercial Português, S.A. The transaction originally closed in March 2009 and was restructured in March 2010 following the termination of the interest rate swap. The total collateral balance is €3,639,650,000. The DBRS rated Class A note is €2,150,250,000.

Magellan Mortgages No. 6 Limited has three classes of mortgaged-backed floating rate notes. The Class A is the most senior note in the structure and is supported by two classes of subordinated mortgage backed notes, Classes B and C. DBRS rates Class A only, which has 43.74% of credit support provided by subordination and a cash reserve fund.

The transaction has a revolving period. The revolving period lasts a maximum of three years from the initial start of the transaction (March 2009) and is subject to performance triggers, which, if breached cause the revolving period to end. During the revolving period redeemed principal can be used to buy new loans. All new loans will be subject to standard representations and warranties and there are portfolio conditions in place that limit the type of loans that can be sold into the transaction.

The transaction pays principal sequentially until the Class A note is redeemed in full. The transaction also features a cash reserve fund, which at the time DBRS issued its rating stood at €105.75 million. The cash reserve fund can be used to cover losses and pay interest shortfalls. The Class C note can be repaid from excess spread. This effectively means that over collateralization replaces subordination as a means of credit enhancement.

The Class A note allows for deferral of interest in the event that there is insufficient cash to pay scheduled interest due. DBRS has rated the note AAA (sf), because in its opinion, the structure has the ability to pay timely interest and principal and deferral is only possible in the event of having insufficient funds.

Interest and principal payments on the notes will be made quarterly on the 17th day January, April, July and October. The first payments following the issuance of the DBRS rating will be on the 17th April 2011.

Principal losses will be recorded by debiting the Principal Deficiency Ledger by an amount equal to any Deemed Principal Loss or Principal Draw Amount on each Payment Date as defined in the prospectus. Any interest remaining after paying Class A interest amount will be used to credit the Principal Deficiency Ledger until its balance is reduced to zero.

The transaction does not have any interest rate hedging mechanism in place. The risk is mitigated in part by the fact that the majority of assets and all the liabilities are priced to 3-months Euribor. Residual interest rate does exist owing to the fact that there is a small portion of fixed rate loans and because the reference 3-months Euribor for the assets and the liabilities re-prices on different dates. DBRS has applied its standard interest rate stresses.

DBRS conducted a loan-level credit analysis and cash flow analysis, as well as an analysis of historical performance data from Banco Comercial Português, S.A dating back to 1996.

Note:
All figures are in Euros unless otherwise noted.

The applicable methodologies are Master European Residential Mortgage-Backed Securities Rating Methodology and Legal Criteria for European Structured Finance Transactions, which can be found on our website under Methodologies with adjustments made for the Portuguese mortgages and the originator- and servicer-specific historical performance.

The sources of information used for this rating include data relating to the underlying mortgages provided by Banco Comercial Português, S.A.. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

This is the first DBRS rating on this financial instrument.

For additional information on these ratings, please refer to the linking document located below.

Lead Analyst: Alastair Bigley
Rating Committee Chair: Claire Mezzanotte
Initial Rating Date: 27 February 2011