DBRS Confirms Rating on the Class A Notes Issued by SAGRES – STC, S.A. (Douro SME No. 2)

DBRS Ratings Limited (DBRS) has today confirmed its A (sf) rating on the €1,819,400,000.00 Class A notes issued by Sagres Sociedade de Titularização de Créditos, S.A. (Douro SME No. 2) (the Issuer).

The transaction is a cash flow securitisation collateralised primarily by a portfolio of term loans, credit lines and commercial paper facilities originated by Banco BPI, S.A. (BPI) 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 2039.

BPI acts as the Servicer for the Portfolio. Banco Comercial Português has acted as Back-up Servicer since its appointment on 22 March 2012.

The rating action reflects an annual review of the transaction. This transaction is still in its revolving period, after an amendment of the initial amortisation period start date from March 2014 to March 2017. The composition of the portfolio has not deteriorated since our last rating action while the transaction performance is in line with DBRS’s expectations. As of the March 2015 payment date, the net default ratio as per the transaction definition was 4.68% (revolving period will end if this ratio breaches 7.00%).

The portfolio annualised probability of default (PD) used has not changed (2.78%).

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’s “The Effect of Sovereign Risk on Securitisations in the Euro Area” commentary 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 these 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 2.78%, a 10% and 20% increase on the Base Case PD.
-- Recovery Rates Used: Base Case Recovery Rates, corresponding to an average recovery rate of 18.85% at the A (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 (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 (sf). A scenario combining both a hypothetical increase in the PD by 10% and a hypothetical decrease in the Recovery Rate by 10% would also 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.

The previous rating action on this transaction took place on 19 March 2014, when the rating of the Class A notes was confirmed and removed from Under Review with Developing Implications.

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: Simon Ross
Initial Rating Date: 11 February 2011
Initial Rating Committee Chair: Jerry van Koolbergen
Last Rating Date: 19 March 2014

Lead Surveillance Analyst: Alfonso Candelas
Rating Committee Chair: Jerry van Koolbergen

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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

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