DBRS Assigns Ratings to Class A Notes Issued by GAMMA - STC, S.A. (ATLANTES SME No. 2)

DBRS Ratings Limited (“DBRS”) has today assigned final ratings to the EUR 441.30 million Class A Asset Backed Floating Rate Securitisation Notes (the “Class A Notes”) issued by GAMMA - Sociedade de Titularização de Créditos, S.A. (the “Issuer”).

The Issuer is a limited liability company incorporated under the laws of Portugal. The transaction is a cash flow securitisation collateralised by a portfolio of term loans originated by Banif-Banco Internacional do Funchal, S.A., (“BANIF”) to Portuguese corporates, small and medium sized enterprises (“SMEs”) and self-employed individuals.

The rating on the Class A Notes addresses the timely payment of interest and the ultimate payment of principal payable on or before the Final Maturity Date in May 2042. DBRS does not rate the Class B, Class C, or Class S Notes (the “Junior Notes”) with an aggregate total par balance of EUR 392.70 million.

As of 30 April 2013, the transaction portfolio consisted of 3,221 loans extended to 2,699 borrowers and borrower groups, with an outstanding principal balance equal to EUR 749.31 million. The portfolio has naturally amortised since the cut-off date of 28 February 2013. As of 30 April 2013, the Account Bank has principal collections of EUR 53.10 million. As of 30 April 2013, 88.69% of the portfolio was fully performing, while the remaining 11.31% was in interest arrears for no more than 60 days.

The portfolio exhibits high obligor concentration, with the top obligor and the largest ten obligor groups representing 2.24% and 12.13% of the outstanding balance, respectively. The region with the highest concentration is the Azores with 30.78% of the portfolio. The top three industries by NACE group are “Wholesale and Retail Trade” (18.35%), “Construction” (15.12%), and “Manufacturing” (15.06%). The combined exposure to the “Construction” and “Real Estate” sectors is 28.61%, which remains a source of concern considering the challenging economic situation in Portugal; however, this has been addressed in DBRS’s analysis by way of high correlation assumptions.

BANIF will act as the Servicer for the Portfolio. Banco BPI S.A., will act as Back-up servicer from the Closing Date. At closing, the transaction is not expected to have a Commingling Reserve Account, and the lack of this risk mitigant was factored into DBRS’s analysis of the transaction.

The rating of the Class A Notes is based upon DBRS’s review of the following items:

• The transaction structure, the form and sufficiency of available credit enhancement, the portfolio characteristics.
• The transaction parties’ financial strength and capabilities to perform their respective duties and the quality of origination, underwriting, and servicing practices.
• An assessment of the operational capabilities of key transaction participants. The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the approved terms. Interest and principal payments on the Class A Notes will be made quarterly.
• The soundness of the legal structure and the presence of legal opinions which address the true sale of the assets to the trust and the non-consolidation of the special purpose vehicle, as well as consistency with the DBRS Legal Criteria for European Structured Finance Transactions.
• The static nature of the transaction resulting in the immediate amortisation of the Class A Notes. If Material Terms of the loans are amended by the Servicer, or if the Originator is found to be in breach of its Representations and Warranties, the Originator must either repurchase the loan, at par, or up to 30% of the portfolio could be substituted with new loans based on a “Maintain or Improve” only-basis by following the Substitution Criteria.
• The ramp-up of the Cash Reserve from 1.3% of the current outstanding balance of Class A and Class B Notes (“Asset-Backed Floating Rate Notes”) to 2.5% of the then-outstanding balance of the Asset-Backed Floating Rate Notes on the second Interest Payment Date.
-- The Cash Reserve Account provides additional credit enhancement for the Class A Notes and can be used to pay interest or principal shortfalls of the Class A Notes. The fees and expenses due will be paid prior to the replenishment of the Cash Reserve Account in the Priorities of Payments. It is funded at the beginning of the transaction through the issuance of the Class C Notes.
-- The Cash Reserve Account can start to amortise from the second Interest Payment Date if certain conditions relating to the performance of the portfolio and deleveraging of the transaction are met. The Cash Reserve Account cannot amortise below EUR 6.02 million or 2.5% of the then-outstanding balance of Asset-Backed Floating Rate Notes, whichever is greater.

The set-off risk in the transaction is mitigated by the issuance of the Class S Note, which is held by BANIF, and proceeds of which are deposited by the Issuer with the Account Bank.

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 these ratings include the parties involved in the rating, including but not limited to the Originator, the Issuer and its agents.

The vintage performance data provided did not match the definition that DBRS bases its analysis on. The historical performance data was based on the 180 days past due definition of default. However, DBRS used additional dynamic arrears data provided by BANIF to determine conservative average annual default rate. Aside from the data type issue with regards to the calculation of the average annual default rate, DBRS considers the overall information available to it for the purposes of providing this rating was of satisfactory quality.

Further information on DBRS’s analysis of this transaction will be available in a rating report on http://www.dbrs.com, or by contacting us at info@dbrs.com.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

This rating concerns a newly issued financial instrument. This is the first DBRS rating on this financial instrument.

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: Simon Ross
Initial Rating Date: 29 May 2013

Note:
All figures are in Euros unless otherwise noted.