DBRS Confirms Rating on Aqua Mortgage No. 1

DBRS Ratings Limited (DBRS) has today confirmed its rating of the EUR 203,176,000 Class A Mortgage-Backed Floating Rate Notes (the Class A notes) of TAGUS Sociedade de Titularização de Créditos, S.A (Aqua Mortgage No. 1) at AA (high) (sf).

The confirmation of the ratings of the Class A notes is based upon the following analytical considerations, as described more fully below:
-- Portfolio performance, in terms of delinquencies and defaults, as of the March 2015 payment date.
-- Updated portfolio default rate, loss given default (LGD) and expected loss assumptions for the remaining collateral pool.
-- Incorporation of a sovereign-related stress component in the rating analysis to address the impact of macroeconomic variables on collateral performance, given the long-term foreign and local currency rating of BBB (low) for the Republic of Portugal.
-- Current available credit enhancement to the Class A notes to cover the expected losses at the AA (high) (sf) rating level.

Aqua Mortgage No.1 is a securitisation of Portuguese residential mortgage loans originated and serviced by Caixa Economica Geral (Montepio).

As per the March 2015 payment date, the 90+ delinquency ratio (excluding defaulted loans and written-off mortgage assets) stands at 1.70%, down from 3.23% in April 2014. The gross cumulative default ratio (calculated as the ratio of the aggregate outstanding balance of the defaulted loans to the aggregate outstanding balance of the portfolio) has been quite stable over the year, and is currently at 4.04%.

Credit enhancement to the Class A notes is provided by subordination of the Class B notes and a Reserve Fund. Credit enhancement to the Class A notes (as a percentage of the performing balance of the portfolio) increased to 25.18% in March 2015, up from 22.86% in April 2014.

The transaction benefits from a Reserve Fund available to cover losses and interest shortfalls on the Class A notes. The Reserve Fund is allowed to amortise if certain conditions defined in the legal documentation are met. As of March 2015, the Reserve Fund stands at the initial and target level of EUR 3.50 million.

Deutsche Bank AG, London branch is the Account Bank for the transaction. The DBRS private rating of Deutsche Bank AG, London branch 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.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is the Master European Structured Finance Surveillance Methodology. 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 the DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” at: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.

The sources of information used for this rating include payment reports provided by Deutsche Bank AG, London branch 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 9 May 2014, when DBRS confirmed the Class A notes at AA (high) (sf).

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 LGD for the pool, based on a review of the current assets. 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 7.83% and 11.99%, respectively. At the AA (high) (sf) rating level, the corresponding PD is 28.40% and the LGD is 26.19%.
-- 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 the Class A notes would be expected to remain at AA (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A notes would be expected to remain at AA (high) (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A notes would be expected to remain at AA (high) (sf).

Class A notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD, expected rating of AA (high) (sf)
-- 50% increase in PD, expected rating of AA (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (high) (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: Richard Hewitt
Initial Rating Date: 28 March 2011
Initial Rating Committee Chair: Claire Mezzanotte

Lead Surveillance Analyst: Elisa Scalco
Rating Committee Chair: Quincy Tang

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
Unified Interest Rate Model for European Securitisations