DBRS Confirms Rating on the Class A Notes Issued by GAMMA - STC, SA (ATLANTES SME No. 3)

DBRS Ratings Limited (DBRS) has today confirmed its rating on the €201,545,793.69 Class A Asset-Backed Floating Rate Notes (the Class A Notes) issued by GAMMA - Sociedade de Titularização de Créditos, S.A. (ATLANTES SME No. 3) (the Issuer) at A (low) (sf).

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 and current accounts originated by Banif-Banco Internacional do Funchal, S.A., (BANIF or the Originator) 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 December 2043.

The rating action reflects an annual review of the transaction. In approximately one year, the Class A Notes are at 46.1% of its initial balance. Given this deleveraging, the current credit enhancement available has increased considerably. Performance is in line with our expectations at closing. At the end of the last collection period, 30 November 2014, the delinquency ratio was 6.52% while the cumulative default ratio was 11.42%.

The portfolio annualised probability of default (PD) used has been updated based on the latest historical data available and has slightly increased since closing to 8.69% (from 8.57%).

As included in the original documentation of the transaction, the Originator has the option to substitute all ineligible loans or loans where material terms have been amended by the servicer. The transaction allows up to 30% of the original principal outstanding balance to be replaced such that it maintains or improves the quality of the collateral and 11.5% has been substituted so far. There are substitution criteria where some limits are no longer being met due, according to the Issuer, to the natural pay down of the portfolio. DBRS sees that as a credit negative component of the transaction. Nevertheless, the Issuer will keep substituting loans (up to a maximum of 30%) as long as those substitutions do not reduce the granularity of the pool.

The principal methodology applicable is “Rating CLOs Backed by Loans to European Small and Medium Sized Enterprises (SMEs)”, which can be found on the DBRS website under Methodologies 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 the parties involved in the rating, including but not limited to the Originator, the Issuer and their agents.

DBRS considers the information made available to it for the purposes of providing this rating to have been 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.

To assess the impact of 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):
-- Probability of Default Rates Used: Base Case PD of 8.69%, a 10% and 20% increase on the Base Case PD.
-- Recovery Rates Used: Base Case Recovery Rates, corresponding to a recovery rate of 20.34% at the A (low) (sf) stress level, a 10% and 20% decrease in the Base Case Recovery Rates.

DBRS concludes that a hypothetical increase of the base PD by 20%, ceteris paribus, would produce model results suggesting a confirmation of the Class A Notes at A (low) (sf). A hypothetical decrease of the Recovery Rate by 20% would also produce model results suggesting a confirmation of the Class A Notes at A (low) (sf). A scenario combining both a hypothetical increase in the PD by 10% and a hypothetical decrease in the Recovery Rate by 10% would lead to model results suggesting a confirmation of the current rating of the Class A Notes.

It should be noted that the interest rates and other parameters that would normally vary with the rating level, including the recovery rates, were allowed to change as per the DBRS methodologies and criteria.

This is the first rating action since the Initial Rating Date.

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

For further information on DBRS’s 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

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.

Notes:
All figures are in euros unless otherwise noted.

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

Initial Lead Analyst: Mudasar Chaudhry
Initial Rating Date: 4 February 2014
Initial Rating Committee Chair: Simon Ross

Last Rating Date: Not applicable as no last rating date
Lead Surveillance Analyst: Alfonso Candelas
Rating Committee Chair: Jerry van Koolbergen

DBRS Ratings Limited
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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
Rating CLOs Backed by Loans to European Small and Medium-Sized Enterprises (SMEs)
Rating Methodology for CLOs and CDOs of Large Corporate Credit
Cash Flow Assumptions for Corporate Credit Securitizations
Operational Risk Assessment for European Structured Finance Servicers
Unified Interest Rate Model for U.S. and European Structured Credit
Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda