DBRS Assigns Rating to Banco Comercial Português Covered Bond Programme, Series 8

DBRS, Inc. (DBRS) has today assigned a rating of ‘A’ (low) Under Review with Negative Implications to the Series 8 covered bonds issued under the Banco Comercial Português (BCP) Covered Bond Programme (the Programme). The Series 8 is a €2 billion floating rate covered bond with a 3-month Euribor + 0.50% coupon maturing in August 2015. In addition to the issuance of the Series 8 Notes, BCP has amended the terms of the Series 6 covered bonds to mature in August 2015 (original maturity date of August 2020). As all covered bonds issued under the Programme rank pari-passu with each other, DBRS maintains a rating of ‘A’ (low) Under Review with Negative Implications on all other outstanding series.

The rating is Under Review with Negative Implications as a result of the 22 May 2012 DBRS placement of the Republic of Portugal’s long-term foreign and local currency debt ratings Under Review with Negative Implications.

The ratings are based on the following factors:
• The Covered Bonds are senior unsecured direct deposit obligations of BCP which is rated BBB (low) Under Review with Negative Implications by DBRS.
• Portuguese Covered Bond Laws which in case of issuer insolvency give the holders of the Covered Bonds recourse to the cover pool in priority of other creditors.
• DBRS Legal and Structuring Framework assessment of “Adequate”.
• DBRS Cover Pool Credit Assessment of BBB.
• Issuer Commitment Overcollateralisation (OC) level of 27%.
• BCP’s capabilities with respect to origination of cover pool assets and servicing of the cover pool.
• The credit quality of the collateral and structural features of the Programme (Extendable Maturity and collateral eligibility criteria).

BCP has increased the Issuer Commitment OC level from 24.1% to 27% in parallel with the issuance of the Series 8 covered bonds. As of 31 July 2012, the notional balance of the cover pool was €11.8 billion which results in a nominal OC level of 29% (assuming the issuance of the Series 8 covered bonds).

DBRS credit analysis of the cover pool is performed on a loan-level basis and includes a probability of default and loss given default assessment, an originator- and servicer-specific historical performance review, a Portuguese housing market and property price trend evaluation, and finally a cash flow simulation based on various stresses to the timing of defaults and recoveries and interest rates.

On 13 March 2023, DBRS Morningstar amended the above press release to correct the Initial Rating Date.

Notes:
All figures are in Euros unless otherwise noted.

The principal methodologies applicable are:
• Master European Residential Mortgage-Backed Securities Rating Methodology
• Legal Criteria for European Structured Finance Transactions
• Rating European Covered Bonds
• Global Methodology for Rating Banks & Banking Organisations
• Swap Criteria For European Structured Finance Transactions
• Operational Risk Assessment for European RMBS Servicers
• Unified Interest Rate Model Methodology for European Securitisations

These can be found on dbrs.com under Methodologies. 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”.

The sources of information used for this rating include a loan level collateral file of the cover pool provided by the issuer. 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 the Series 8 covered bond.

The rating on the Series 8 covered bond concerns a newly issued financial instrument.

For additional information on this rating, please see the linking document.

This credit rating has been issued outside the European Union (EU) and may be used for regulatory purposes by financial institutions in the EU.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

Lead Analyst: Keith Gorman
Rating Committee Chair: Claire Mezzanotte
Initial Rating Date: 28 February 2012