DBRS Confirms A (sf) Rating to the Class A Notes issued by Caravela SME No. 1 Limited

DBRS Ratings Limited (“DBRS”) has today confirmed the rating of A (sf) to the €2,184,000,000 Class A Notes issued by Caravela SME No. 1 Limited. The transaction is a cashflow securitisation collateralised primarily by a portfolio of loans and commercial paper originated by Banco Comercial Português, S.A. ("Millennium bcp") to Portuguese small-and medium-sized enterprises (“SMEs”) and corporates. The portfolio continues to be serviced by Millennium bcp. The rating addresses timely payment of interest and principal on or before the Final Legal Maturity Date of June 2038.

The confirmation of the A (sf) rating to the Class A Notes is based on its assessment of the changes made to the transaction as part of the Master Amendment and Restatement Deed dated 20 September 2011. The amendment reflects changes to the frequency of Interest Payment Dates (“IPDs”) from quarterly to monthly, inclusion of a Liquidity Facility to address interest shortfalls of Class A noteholders on IPDs and a Subordinated Loan Facility to address the set-off risk. In addition, amendments include the increase of credit enhancement by way of one-off amortization of EUR 810 million on September 2011 IPD (although end of reinvestment period is on December 2011 IPD). Banco Santander, S.A. (the “Fund Accounts Bank”) and Deutsche Bank AG, London Branch (the “Transaction Manager”) will replace Millennium bcp. The replenishment criteria have also been changed including the increase in Weighted Average Remaining Term test of the portfolio from 60 to 70 months and concentration of 10 largest borrowers has been increased from 13.5% to 17.5% to reflect the reduction of the aggregate principal outstanding balance. By itself the increase in the Weighted Average Remaining Term has a negative impact by extending the credit risk exposure of the transaction. However, DBRS analysis concluded that the risk is mitigated by an increase in the Credit Enhancement to 40%. DBRS considers that collectively, the above-mentioned changes to have either neutral or positive impact on the transaction.

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.

The principal methodology is Master European Granular Corporate Securitisations (SME CLOs), which can be found on our website under Methodologies.

The sources of information used for this rating include Royal Bank of Scotland Plc., Caravela SME No. 1 Limited and Banco Comercial Português, 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: Mudasar Chaudhry
Rating Committee Chair: Jerry van Koolbergen
Initial Rating Date: 24 February 2011
Most recent Rating Update: 26 May 2011

Notes:
All figures are in Euro unless otherwise noted.