DBRS Confirms Ratings to Atlantes Mortgage No. 5 - Class A Notes

DBRS Ratings Limited (“DBRS”) has reviewed Atlantes Mortgage No. 5 (the “Issuer”) and confirms the rating to the Class A Notes at AA (sf).

Atlantes Mortgage No. 5 is a Portuguese securitisation of prime mortgages originated and serviced by Banco Banif e Comercial dos Acores S.A. (“Banif”). The transaction is backed by a portfolio EUR 423.2 million of residential mortgage loans. The transaction closed in December 2009 and was amended in July 2011 to increase the size of the Cash Reserve Fund.

Confirmation of the ratings for the Class A Notes is based upon the following analytical consideration, as described more fully below:

• Portfolio performance, in terms of level of delinquencies and defaults, as of the 20 February 2014 payment date.
• Current available credit enhancement to Class A Notes to cover the Expected Losses at the AA (sf) rating level.
• The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms of the transaction documents.

The current 90+ delinquency ratio as a percentage of the performing balance of the portfolio has been relatively stable since the close of the transaction. Current value is 1.89% and is at its lowest level since closing.

Cumulative defaults (loans having more than 12 outstanding and unpaid monthly instalments) as a percentage of the original balance are currently 0.48%; relatively low given the seasoning of the portfolio.

Credit enhancement to the Class A Notes is provided by subordination of a Class B Note and a Cash Reserve Fund. Current credit enhancements as a percentage of the performing balance of the portfolio is 27.83%. The Cash Reserve Fund required amount is calculated based on the balance of the notes at the amendment in July 2011 and can only be reduced if all the conditions are met within the Cash Reserve Fund Amortisation Trigger. Cash Reserve Fund is available to cover losses and interest shortfalls to the Class A Notes. The required amount represents 13.25% of the balance of the Class A and Class B Notes, i.e. EUR 66.25 million. There was for the first time a shortfall of EUR 650,000 at the 20 February 2014 payment date. This was due to a Servicer error who used the available funds to pay junior items instead of fully reimburse the Cash Reserve Fund; the Servicer anticipates it to be corrected at next payment date if funds are sufficient.

HSBC Bank plc is the Treasury Account Bank for the transaction. The DBRS private rating of HSBC Bank plc is above the Minimum Institution Rating given the rating assigned to the Class A Notes, as described in the DBRS Legal Criteria for European Structured Finance Transactions.

As the transaction documents do not allow for the replacement of the swap provider in the event of certain downgrade events, DBRS analysed the transaction without giving benefit to the interest rate swap that exists within the transaction.

Notes:
All figures are in Euro unless otherwise noted.

The principal methodology applicable is the Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda. Other methodologies and criteria referenced in this transaction are listed at the end of this press release.

This can be found on www.dbrs.com at:
http://www.dbrs.com/about/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” on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.

The sources of information used for this rating include investor reports provided by HSBC Bank plc and data from the European DataWarehouse. 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 26 February 2013, when DBRS confirmed the rating of AA (sf) to Class A Notes.

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.

To assess the impact of the changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the “Base Case”):
• DBRS expected a lifetime base case Probability of Default (PD) and Loss Given Default (LGD) for the pool based on a review of the current receivables. Adverse changes to asset performance may cause stresses to base case assumptions and therefore have a negative effect on credit ratings.
• The base case PD and LGD of the current pool of mortgages for the Issuer are 13.71% and 16.01%, respectively. The corresponding levels at the AA (sf) rating level are 37.06% and 31.0%.
• The Risk Sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base case assumption. For example, if the LGD increases by 50%, the rating of Class A Notes would be expected to remain at AA (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A Notes would be expected to remain to AA (sf), assuming no change in the LGD. Furthermore, if both PD and LGD increase by 50%, the rating would be expected to decrease at AA (low) (sf).

Class A Notes Risk Sensitivity:
• 25% increase in LGD, expected rating of AA (sf)
• 50% increase in LGD, expected rating of AA (sf)
• 25% increase in PD, expected rating of AA (sf)
• 50% increase in PD, expected rating of AA (sf)
• 25% increase in PD and 25% increase in LGD, expected rating of AA (sf)
• 25% increase in PD and 50% increase in LGD, expected rating of AA (sf)
• 50% increase in PD and 25% increase in LGD, expected rating of AA (sf)
• 50% increase in PD and 50% increase in LGD, expected rating of AA (low) (sf)

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: Alastair Bigley
Initial Rating Date: 17 May 2012
Initial Rating Committee Chair: Claire Mezzanotte

Last Rating Date: 26 February 2013

Lead Surveillance Analyst: Dylan Cissou
Rating Committee Chair: Claire Mezzanotte

DBRS Ratings Limited
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United Kingdom

Registered in England and Wales: No. 7139960

The rating methodologies and criteria used in the analysis of this transaction can be found at http://www.dbrs.com/about/methodologies

• Legal Criteria for European Structured Finance Transactions
• Master European Structured Finance Surveillance Methodology
• Operational Risk Assessment for European Structured Finance Servicers
• Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
• Derivative Criteria for European Structured Finance Transactions
• Unified Interest Rate Model for European Securitisations