DBRS Confirms 13 Classes of Portuguese RMBS and SME CLO Structured Finance Transactions

DBRS Ratings Limited (DBRS) has today taken rating actions on 13 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 confirms of six classes of debt from six discrete transactions. The SME CLOs rating actions consist of confirms of five classes of debt and downgrades of two classes of debt from six discrete transactions.

The above rating actions reflect the October 19th, 2011 DBRS downgrade of the Republic of Portugal’s Long Term Foreign Currency and Long-Term Local Currency ratings from BBB (high) to BBB and maintained the Negative Trend (see press release “DBRS Downgrades Republic of Portugal to BBB on Fiscal Risks”). The DBRS downgrade of the Republic of Portugal reflects the assessment that risks to fiscal consolidation have increased since our last review. The Negative trend reflects downside risks to growth, particularly given the heightened uncertainty over the economic outlook in Europe and the United States and the ongoing turbulence in financial markets. 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.
Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

RMBS Transactions

1.Hipototta No. 8 Limited

2.Magellan Mortgages No. 5 Limited

3.Magellan Mortgages No. 6 Limited

4.Lusitano Mortgages No. 7 Limited

5.TAGUS Sociedade de Titularização de Créditos, S.A., Aqua Mortgage No. 1

6.GAMMA - Sociedade de Titularização de Créditos, S.A. (Azor 2)

SME CLO Transactions

7.GAMMA - Sociedade de Titularização de Créditos, S.A. (ATLANTES No. 1)

8.SAGRES SOCIEDADE DE TITULARIZAÇÃO DE CRÉDITOS, S.A. (DOURO SME No.2)

9.TAGUS SOCIEDADE DE TITULARIZAÇÃO DE CRÉDITOS, S.A. (Caravela SME No.2)

10.Caravela SME No. 1 Limited

11.SAGRES – SOCIEDADE DE TITULARIZAÇÃO DE CRÉDITOS, S.A. (Lusitano SME No.2)

12.Sagres – Sociedade de Titularização de Créditos, S.A. (Pelican SME No. 1)