DBRS Assigns BBB (high) Rating to Banco Popular Portugal Covered Bonds Programme Series 5

DBRS Ratings Limited (DBRS) has today assigned a rating of BBB (high) to Series 5 issued under Banco Popular Portugal’s (BPP or the Issuer) Covered Bonds programme. Series 5 is a €290 million floating rate security maturing in December 2017. DBRS confirms the BBB (high) rating on all other outstanding Series.

Following the issuance of Series 5 and the repayment of Series 1 and 3, there are €815 million Obrigações Hipotecárias (OH or the Portuguese legislative covered bonds) outstanding under the programme.

The ratings are based on the following analytical considerations:
-- A Covered Bonds Attachment Point (CBAP) of BBB, being the Senior Unsecured Long Term Debt & Deposit Rating of BPP. BPP is the Issuer and Reference Entity for the programme
-- A Legal and Structuring Framework (LSF) Assessment of “Modest” assigned to the BPP OH Programme
-- An LSF-Implied Likelihood (LSF-L) of BBB. In DBRS’s view, the BPP OH LSF-L is limited by the CBAP due to insufficient historical performance data for DBRS to form a view on the timeliness of cash flows deriving from the cover pool in case of an assumed default of BPP
-- One notch uplift for good recovery prospects. DBRS has formed a view on the availability and sufficiency of the cover pool to satisfy the claims of the OH holders in a post-issuer insolvency scenario
-- The minimum legislative OC of 5.26% envisaged for Portuguese OH

Everything else equal, a downgrade of the Reference Entity rating by one notch would lead to a downgrade of the LSF-L by one notch, resulting in a downgrade of the covered bonds rating by one notch.

In addition, everything else equal, the ratings of the BPP OH would be downgraded if the quality and consistency of the cover pool were no longer sufficient to support one notch uplift for good recovery prospects.

As at 30 September 2014, the cover pool had a total outstanding balance of €888,995,544. The available OC is of 9.08%, which is above the minimum legal OC%.

For further information on the BPP OH programme, please refer to the rating report that can be found on www.dbrs.com.

DBRS has assessed the LSF related to BPP OH as “Modest” according to its rating methodology. For more information, please refer to DBRS commentaries “DBRS Assigns LSF Assessment to Portuguese Covered Bonds” and “Portuguese Covered Bonds: Legal and Structuring Framework Review”, both available at www.dbrs.com.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is: “Rating European Covered Bonds” (December 2014). This can be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies.

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 data related to the CP provided by BPP. 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 programme took place on 17 December 2014, when DBRS upgraded the ratings on all outstanding covered bonds issued under the programme to BBB (high) following the implementation of DBRS’s “Rating European Covered Bonds” methodology, published on 17 December 2014.

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: 31 August 2012
Initial Rating Committee Chair: Claire Mezzanotte

Last Rating Date: 17 December 2014

Lead Analyst: Valentina Cicerone
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

Rating European Covered Bonds
Global Methodology for Rating Banks and Banking Organisations
Legal Criteria for European Structured Finance Transactions
Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
Master European Structured Finance Surveillance Methodology
Operational Risk Assessment for European Structured Finance Servicers
Unified Interest Rate Model Methodology for European Securitisations