DBRS Confirms Bocage Mortgages No. 2

DBRS, Inc. (DBRS) has today confirmed the rating at AA (high) (sf) of the Bocage Mortgages No. 2 (Bocage 2) Class A notes issued by SAGRES – Sociedade de Titularização de Créditos, S.A. (the Issuer). The rating action follows the signing of the Amendment Agreement and the Variable Funding Agreement between the Issuer and other transaction parties on 27 November 2012. The rating remains 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.

Upon the signing of the Amendment Agreement, certain changes were made to the transaction documents to provide for appointment of a back-up servicer (Finsolutia – Counsultoria e Gestão de Créditos, S.A.), amendment to certain eligibility criteria and issuance by the Issuer of a variable funding note and the creation of a liquidity account. The pool composition remains unchanged despite the amendment to certain eligibility criteria. In addition, pursuant to a swap termination letter the swap counterparty (Barclays Bank plc, Madrid Branch) will terminate the Swap Agreement and remove all references to such agreement in the transaction documents.

The Variable Funding Note will be issued by the Issuer to Barclays Bank plc in the initial amount of €20 million. Proceeds from the Variable Funding Note will be deposited into a newly created Liquidity Account to be held with the Account Bank. Proceeds in the Liquidity Account will be available to be applied to the Cash Reserve Account following an Interest Payment Date at which the Cash Reserve Account has reached the Cash Reserve Floor Amount.

The rating confirmation is based upon the following analytical considerations:
• The transaction is performing within DBRS expectations and available credit enhancement is sufficient to cover DBRS expected losses.
• The transaction parties’ financial strengths and capabilities to perform their respective duties, and the quality of origination, underwriting and servicing practices.
• The credit quality of the collateral and ability of the Servicer to perform collection activities on the collateral.
• The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms of the transaction documents, including the back-up servicing fee schedule, the swap termination costs and the removal of the interest rate swap form the structure.

Notes:
All figures are in Euros unless otherwise noted.

The principal methodologies applicable are:
• Master European Structured Finance Surveillance Methodology
• Master European Residential Mortgage-Backed Securities Rating Methodology
• Legal Criteria for European Structured Finance Transactions
• Operational Risk Assessment for European Structured Finance Servicers
• Unified Interest Rate Model Methodology for European Securitisations
• Swap Criteria for European Structured Finance Transactions

These can be found on www.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 quarterly remittance reports and data relating to the underlying mortgages provided by Barclays Bank plc. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

For additional information on this rating, please see 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: Alastair Bigley
Surveillance Analyst: Keith Gorman
Rating Committee Chair: Claire Mezzanotte
Initial Rating Date: 11 February 2011
Most Recent Rating Update: 25 May 2012