DBRS Confirms Ratings on Notes Issued by GAMMA – Sociedade de Titularização de Créditos, S.A. (ATLANTES SME No. 4)

DBRS Ratings Limited (DBRS) has today confirmed its ratings on the following notes issued by GAMMA – Sociedade de Titularização de Créditos, S.A. (ATLANTES SME No. 4) (the Issuer):
-- EUR 182,152,456.20 Class A Notes: A (low) (sf)
-- EUR 55,000,000.00 Class B Notes: BBB (low) (sf)

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 Legal Maturity Date in December 2043. The rating on the Class B Notes addresses the ultimate payment of interest and the ultimate payment of principal payable on or before the Final Legal Maturity Date in December 2043.

The Issuer is a bankruptcy remote, limited liability company incorporated in accordance with Portuguese law. The transaction is a securitisation collateralised by a portfolio of term loans and current accounts granted by BANIF – Banco Internacional do Funchal, S.A. (Banif) to Portuguese Small and Medium-Sized Enterprises (SMEs).

The rating actions reflect an annual review of the transaction. Credit enhancement has increased considerably as a result of the deleveraging of the Class A Notes, currently at 39.17% of their initial balance after four periods since the closing date.

As of the September 2015 payment date, 1-3 month delinquencies and 3-6 month delinquencies were 2.35% and 1.36% of the original collateral balance, respectively, while the gross cumulative default ratio was 11.20%.

Credit enhancement for the Class A Notes (69.27%) and Class B Notes (59.37%) is provided by the subordination of the junior notes and the Cash Reserve Account.

A Cash Reserve (CR) is available to cover senior expenses and missed interest payments on the Class A Notes and, once this tranche has been redeemed in full, the CR will also support the Class B Notes. The CR was funded at the Issue Date with EUR 11.375 million, and the Required Balance is subject to a floor of 2.5% of the outstanding balance of the Class A, Class B, Class C and Class D Notes less the Initial Cash Reserve Amount. The balance of the CR has been constant since the closing date.

Banif – Banco Internacional do Funchal, S.A. is the Originator, Servicer and Collection Account Bank for this transaction, Whitestar Asset Solutions S.A. is the Back-up Servicer, and Citibank International plc, Sucursal em Portugal is the Paying Agent.

Citibank N.A., London Branch is the Account Bank for this transaction. The DBRS private rating complies with the Minimum Institution Rating given the rating assigned to the 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 “Rating CLOs Backed by Loans to European Small and Medium-Sized Enterprises (SMEs)”. DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

A review of the transaction’s legal documents was not conducted, as the documents have remained unchanged since the most recent rating action.

Other methodologies referenced in this transaction are listed at the end of this press release. This may be found at http://www.dbrs.com/about/methodologies.

For a more detailed discussion of the 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 action include information provided by Citibank N.A., London Branch and Banif Banco de Investimento, S.A., and loan-level data from the European DataWarehouse GmbH.

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.

DBRS considers the information available to it for the purposes of providing these ratings 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.

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.

To assess the impact of changing the transaction parameters on the ratings, DBRS considered the following stress scenarios, as compared to the parameters used to determine the ratings (the Base Case):
-- Probability of Default (PD) Rates Used: Base Case PD of 10.93%, and a 10% and 20% increase in the Base Case PD.
-- Recovery Rates Used: Base Case Recovery Rates, corresponding to a recovery rate of 26.75% at the A (low) (sf) stress level and 27.36% at the BBB (low) (sf) stress level for the Class A Notes and Class B Notes, respectively, and a 10% and 20% decrease in the Base Case Recovery Rates.

DBRS concludes that either a hypothetical increase of the base PD by 20% or a hypothetical decrease of the Recovery Rate by 20%, ceteris paribus, would produce model results suggesting a confirmation of the Class A Notes and Class B Notes at their current ratings respectively. 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 ratings.

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: Mudasar Chaudhry
Initial Rating Date: 9 September 2014
Initial Rating Committee Chair: Jerry Van Koolbergen

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

DBRS Ratings Limited
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The rating methodologies 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 Small and Medium-Sized European Enterprises (SMEs)
-- Rating CLOs and CDOs of Large Corporate Credit
-- Cash Flow Assumptions for Corporate Credit Securitizations
-- 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

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.