Press Release

DBRS Assigns BBB (high) Rating to Banco Popular Portugal Covered Bonds Programme Series 6

Covered Bonds
June 30, 2015

DBRS Ratings Limited (DBRS) has today assigned a rating of BBB (high) to Series 6 issued under Banco Popular Portugal’s (BPP, or the Issuer) Covered Bonds programme. Series 6 is a €225 million floating-rate security maturing in June 2018. At the same time, DBRS has maintained its BBB (high) rating Under Review with Developing Implications on all series.

Following the issuance of Series 6 and the repayment of Series 2, 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 BPP OH Programme
-- An LSF-Implied Likelihood (LSF-L) of BBB. In DBRS’s view, BPP OH’s 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.

This rating is Under Review with Developing Implications following, on one end, the placement Under Review with Negative Implications of the Senior Unsecured Long Term Debt & Deposit Rating of BPP on 20 May 2015 and DBRS’s view regarding the financial institutions systemic support and, on the other end, the publication on 22 May 2015 of a Request For Comments for the “Rating European Covered Bonds” methodology that proposes a new analysis for the determination of the CBAP for those reference entities that are subject to the Bank Recovery and Resolution Directive (BRRD).The review on the covered bonds will be resolved only once the conditions that lead to the assignment of review on the Issuer rating are resolved and the Request For Comments for the “Rating European Covered Bonds” methodology is finalised.

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 March 2015, the cover pool had a total outstanding balance of €874,908,246. The available OC is of 7.35%, which is above the minimum legal OC%.

For further information on BPP OH programme, please refer to the ratings 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’s “The Effect of Sovereign Risk on Securitisations in the Euro Area” commentary on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.

DBRS is undertaking a review and will remove the rating from this status as soon as it is appropriate.

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.

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.

This rating concerns a newly issued financial instrument. The last rating action on this Programme took place on 26 May 2015, when DBRS placed the BBB (high) rating Under Review with Developing Implications.

Information regarding DBRS ratings, including definitions, policies and methodologies is 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: 26 May 2015

Lead Analyst: Valentina Cicerone
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

-- 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

Ratings

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  • CA = Lead Analyst based in Canada
  • EU = Lead Analyst based in EU
  • UK = Lead Analyst based in UK
  • E = EU endorsed
  • U = UK endorsed
  • Unsolicited Participating With Access
  • Unsolicited Participating Without Access
  • Unsolicited Non-participating

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