DBRS Confirms Bocage Mortgages No. 1 Limited Rating

DBRS Ratings Limited (DBRS) has today reviewed Bocage Mortgages No. 1 Limited (the Issuer) and confirmed the rating of the Class A Notes at AA (low) (sf).

Confirmation of the ratings for 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 April 2015 payment date.
-- Updated portfolio default rate, loss given default 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 (low) (sf) rating level.

Bocage Mortgages No. 1 Limited is a securitisation of Portuguese residential mortgage loans originated by Barclays Bank plc, through its Portuguese branch. The assets supporting the notes are mortgage loans secured by residential properties located in Portugal. The transaction closed in December 2008.

90+ delinquency ratio ranged between 0.10%-1.51% over the life of the transaction and it is currently at 0.98%. The current cumulative default ratio (as a percentage of the original balance) has been increasing since transaction close in December 2008 and reached the peak of 3.5% in April 2015.

The Class A Notes are supported by subordination of the Class B notes and an amortising cash reserve fund set up at transaction close with the proceeds of the Class C notes. Credit enhancement for the Class A Notes (as a percentage of the performing portfolio) has increased to 14.15% from 9.50% at closing in December 2008.

The cash reserve fund is available to protect the Class A Notes against both interest and principal shortfall on an ongoing basis. Additionally, it is allowed to amortise over the life of the transaction, but subject to the absolute floor of EUR 4.87 million. The current balance of the reserve fund is EUR 8.12 million (equal to 1.51% of the aggregate balance of the Class A Notes) and it is below the current target level of EUR 9.75 million.

Citibank N.A., London branch is the Account Bank for this transaction. The DBRS public rating of Citibank N.A., London complies with the threshold for the Account Bank given the rating assigned to the Class A Notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is the “Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda”. DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal 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 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 investor reports provided by Citibank N.A., London branch and data from the European DataWarehouse. DBRS does not rely upon third-party due diligence in order to conduct its analysis; DBRS was not supplied with third party assessments. However, this did not impact the rating analysis. Data checks were performed and DBRS did not apply additional cash flow stresses in its scenarios.

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 5 June 2014, when DBRS confirmed the ratings of AA (low) (sf) to the Class A notes.

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

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):
-- 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 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 7.64% and 27.01%, respectively. At the AA (low) (sf) rating level, the corresponding PD is 23.56% and the LGD is 41.35%.
-- 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 (low) (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 at AA (low) (sf), assuming no change in the LGD. Furthermore, if both PD and LGD increase by 50%, the rating would be expected to fall to A (low) (sf).

Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in LGD, expected rating of AA (low) (sf)
-- 25% increase in PD, expected rating of AA (low) (sf)
-- 50% increase in PD, expected rating of AA (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (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: Konstantine Pastras
Initial Rating Date: 5 June 2013
Initial Rating Committee Chair: Erin Stafford

Lead Surveillance Analyst: Vito Natale
Rating Committee Chair: Quincy Tang

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
Operational Risk Assessment for European Structured Finance Servicers
Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda

A description of how DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375.