DBRS Downgrades 11 Classes of Portuguese RMBS and SME CLO Structured Finance Transactions

DBRS Ratings Limited (DBRS) has today downgraded 11 ratings for Portuguese residential mortgage-backed securities (RMBS) and small to medium sized enterprises collateral loan obligations (SME CLOs) transactions. The RMBS rating actions consist of downgrades of 5 classes of debt from 5 discrete transactions. The SME CLOs rating actions consist of downgrades of 6 classes of debt from 5 discrete transactions.

The above rating actions reflect the May 24th, 2011 DBRS downgrade of the Republic of Portugal’s Long Term Foreign Currency and Long-Term Local Currency ratings from A (low) to BBB (high) and maintained the Negative Trend (see press release “DBRS Downgrades Portugal to BBB (high) with a Negative Trend on Weaker Outlook”). The DBRS downgrade of the Republic of Portugal reflects significantly weaker than expected growth outlook and larger than expected fiscal imbalances. Consequently, prospects for Portuguese debt stabilisation are more challenging. The above rating actions also reflect the subsequent downgrades taken on DBRS public ratings and internal assessments for certain Portuguese banks.

As part of the monitoring process for outstanding securitisations, DBRS incorporates changes to the level of sovereign risk and subsequent changes to the level of risks related to transaction parties and counterparties into its analysis. DBRS employs a case-by-case approach that is jurisdiction-specific and asset-class specific with the risks and protections of each transaction identified and considered. The lower the sovereign rating, the greater relevance and potential impact on securitisation ratings due to less favorable macroeconomic conditions, stress factors related to the transaction parties and increased likelihood for unknown events to occur.

For a more detailed discussion of sovereign risk impact on Structured Finance ratings, please refer to DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area”, located at http://dbrs.com/research/239786.

For a more detailed discussion of the rating actions taken on the transactions listed below, please refer to the links below.

RMBS Transactions

1.Hipototta No. 8 Limited
---- Class A2 Notes Downgraded from AAA (sf) to AA (high) (sf)

2.Magellan Mortgages No. 5 Limited
---- Class A Notes Downgraded from AAA (sf) to AA (high) (sf)

3.Magellan Mortgages No. 6 Limited
---- Class A Notes Downgraded from AAA (sf) to AA (high) (sf)

4.Lusitano Mortgages No. 7 Limited
---- Class A Notes Downgraded from AAA (sf) to AA (high) (sf)

5.TAGUS Sociedade de Titularização de Créditos, S.A., Aqua Mortgage No. 1
---- Class A Notes Downgraded from AAA (sf) to AA (high) (sf)

SME CLO Transactions

6.GAMMA - Sociedade de Titularização de Créditos, S.A. (ATLANTES No. 1)
---- Class A Notes Downgraded from AAA (sf) to AA (high) (sf)

7.SAGRES SOCIEDADE DE TITULARIZAÇÃO DE CRÉDITOS, S.A. (DOURO SME No.2)
---- Class A Notes Downgraded from AAA (sf) to AA (sf)

8.TAGUS SOCIEDADE DE TITULARIZAÇÃO DE CRÉDITOS, S.A. (Caravela SME No.2)
---- Class A Notes Downgraded from AAA (sf) to AA (sf)

9.Caravela SME No. 1 Limited
---- Class A Notes Downgraded from AA (high) (sf) to A (sf)

10.SAGRES – SOCIEDADE DE TITULARIZAÇÃO DE CRÉDITOS, S.A. (Lusitano SME No.2)
---- Class A Notes Downgraded from AAA (sf) to AA (sf)
---- Class B Notes Downgraded from A (low) (sf) to BBB (high) (sf)