DBRS Confirms Ratings of LUSITANO SME No. 2 - SAGRES – SOCIEDADE DE TITULARIZAÇÃO DE CRÉDITOS, S.A. (Lusitano SME No. 2)

DBRS Ratings Limited (“DBRS”) has today confirmed ratings of AAA (sf) of the €1,107.30 million Class A Notes and A (low) (sf) of the €369.10 million Class B Notes issued by SAGRES – SOCIEDADE DE TITULARIZAÇÃO DE CRÉDITOS, S.A. (the “Issuer”). The transaction is a cashflow securitisation collateralised primarily by a portfolio of commercial paper and term loans originated by Banco Espírito Santo, S.A. ("BES") to Portuguese corporates and small-and medium-sized enterprises (“SMEs”). As of 17 February 2011, the transaction had a current portfolio notional amount of €1,942.71 million and included 7,171 loans. The portfolio continues to be serviced by BES.

The confirmation of the ratings is based on the information provided in the executed documents listed below:
• Amendment Agreement, dated 8 April 2011;
• Set-Off Account Agreement, dated 8 April 2011.

The rating confirmation by DBRS does not signify the approval of the amendment by DBRS or an opinion by DBRS as to whether the amendment is beneficial or detrimental to the holders of the securities.

These ratings are based upon DBRS’ review of the following analytical considerations:
• Transaction structure, the form and sufficiency of available credit enhancement.
-- Credit enhancement is in the form of subordination, provided by the Class B and Class C Notes. An additional cash reserve is funded by the issuance of the Class D Notes. A total current credit enhancement level of 45.0% is sufficient to support an AAA (sf) rating for the Class A Notes and a current credit enhancement of 26.0% is sufficient to support an A (low) (sf) rating for the Class B Notes. Additional credit enhancement is provided by interest diversions and the early termination of the Revolving Period if defaults are above pre-set levels.
-- Funded at the beginning of the transaction through the issuance of the Class D Notes, the Cash Reserve provides additional credit enhancement for the Floating Rate Notes and can be used to pay shortfalls in interest or principal.
-- BES will create both a Semi-Annual Reserve Issuer Ledger and an Annual Reserve Issuer Ledger, and corresponding accounts, in which portions of the interest received from SME receivables that pay on a semi-annual or annual basis will be kept to provide protection against interest rate shortfalls due to the longer maturities interest rate reference indices of some of the SME receivables as compared to the quarterly reset of the rated notes.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms in which they have invested. For this transaction, the rating of the Class A Notes addresses the timely payment, as defined in the transaction documents, of principal and interest. The rating of the Class B Notes addresses the ultimate return of principal only. Interest and principal payments on the notes will be made quarterly, generally on the 21st day of the month, with the next payment date on 23 May 2011.

The applicable public methodologies are Master European Granular Corporate Securitisations (SME CLOs) and Legal Criteria for European Structured Finance Transactions.

The sources of information used for these ratings include parties involved in the rating, including but not limited to SAGRES – SOCIEDADE DE TITULARIZAÇÃO DE CRÉDITOS, S.A. and Banco Espírito Santo, S.A. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

For additional information on DBRS European SME CLO(s), please see European Disclosure Requirements, located at http://www.dbrs.com/research/235269.

Lead Analyst: Simon Ross
Rating Committee Chair: Jerry van Koolbergen
Initial Rating Date: 3 January 2011

Notes:
All figures are in Euro unless otherwise noted.