DBRS Upgrades Banco de Investimento Imobiliário Covered Bonds Programme
Covered BondsDBRS Ratings Limited (DBRS) has today upgraded the EUR 895 mn outstanding series issued under Banco de Investimento Imobiliário (BII) Covered Bond Programme to A(low) from BBB(high).
The rating action follows a full review and the implementation of a pass-through mechanism with a long Extended Maturity Date. The amended covered bonds documentation now envisages a Maturity Date in January 2017 and an Extended Maturity Date in January 2037.
The ratings are based on the following analytical considerations:
• The Covered Bonds are a direct, unconditional and senior obligation of BII, a wholly owned subsidiary of Banco Comercial Português S.A. (BCP) which is rated BBB(low) with a Negative Trend, as confirmed on 28 June 2013.
• The Legal and Structuring Framework (LSF) assessment of “Adequate” associated with the programme.
• The cover pool credit assessment of BBB(low) in association with an Issuer Commitment overcollateralisation (OC) of 10%.
• BII capabilities with respect to origination of cover pool assets and servicing of the cover pool.
If the issuer fails to redeem the covered bonds on the Maturity Date, the covered bonds will be redeemed, pro rata and pari passu, on any Interest Payment Date until the Extended Maturity Date. Cash flows are applied on a pass-through basis until the Extended Maturity Date. According to the unstressed amortization profile of the assets, not considering any prepayments, approximately 24% of the cover pool is expected to be outstanding by the Extended Maturity Date.
DBRS has maintained an LSF assessment of “Adequate” for BII Covered Programme, due to the lack of liquidity provisions to avoid interruption of payments in the immediate aftermath of an assumed insolvency of the issuer.
All else being equal, a downgrade of the Issuer rating by one notch would lead to a downgrade of the covered bonds by two notches.
As at 30 September 2013, the cover pool had a total outstanding balance of EUR 1,171,718,736 of residential mortgage loans and EUR 257,805,173 of cash. The available OC is of 30%, which is above the current Issuer commitment OC of 10%.
The WA seasoning of the loans in the cover pool is 124 months and the WA current unindexed loan-to-value is 57.53%. 99.58% of the loans in the cover pool are floating rate.
All the loans in the cover pool and all covered bonds are denominated in Euros.
Notes:
All figures are in Euro unless otherwise noted.
The principal methodology applicable is: “Rating European Covered Bonds”. This can be found on www.dbrs.com. As a deviation from its Rating European Covered Bonds methodology, DBRS has assumed several prepayment scenarios ranging between 0% and 20% PPR.
Other methodologies and criteria referenced in this transaction are listed at the end of this press release.
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” on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.
The sources of information used for this rating include historical default performance data and loan by loan level information on the cover pool provided by BII that allowed DBRS to further assess the portfolio. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.
DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.
The last rating action on this transaction took place on February 25, 2013 when DBRS confirmed the rating of BBB(high) on the covered bond upon full review of the programme and implementation of the updated Rating European Covered Bonds methodology published on 16 January 2013.
Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.
For further information on DBRS historic default rates published by the European Securities and Markets Administration (“ESMA”) in a central repository, see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.
Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.
Initial Lead Analyst: Keith Gorman
Initial Rating Date: 28 February 2012
Initial Rating Committee Chair: Claire Mezzanotte
Last Rating Date: 25 February 2013
Lead Analyst: Valentina Cicerone
Rating Committee Chair: Quincy Tang
The lead and back-up responsibilities for this transaction have been transferred to Valentina Cicerone and Vito Natale, respectively.
DBRS Ratings Limited
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The rating methodologies and criteria used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies
• Rating European Covered Bonds
• Global Methodology for Rating Banks & Banking Organisations
• Legal Criteria for European Structured Finance Transactions
• Master European Residential Mortgage-Backed Securities Rating Methodology
• Master European Structured Finance Surveillance Methodology
• Operational Risk Assessment for European Structured Finance Servicers
• Unified Interest Rate Model Methodology for European Securitisations
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