DBRS Assigns Rating to Caixa Económica Montepio Geral Covered Bonds Series 5

DBRS Ratings Limited (DBRS) has today assigned an “A” rating to the Series 5 Covered Bonds issued under the Caixa Económica Montepio Geral (Montepio) €5,000,000,000 Covered Bonds Programme (the Programme). The Series is a €500 million floating-rate security maturing in December 2020. The “A” rating has been placed Under Review with Developing Implications pending the determination of the updated Covered bonds Attachment Point following the finalisation of the request for comment on the European Covered Bonds Methodology in September 2015.

At the same time, DBRS has confirmed the “A” rating on all other outstanding series and maintained the Under Review with Developing Implications status.

Concurrently, DBRS has discontinued its rating of Series 3, fully repaid on 5 November 2015. Following the issuance of Series 5 and the repayment of Series 3, there are three series of Obrigações Hipotecárias (OH or the Portuguese legislative covered bonds) for a nominal amount of EUR 2 billion outstanding under the Programme.

The “A” rating, Under Review with Developing Implications assigned to Montepio OH reflects the following analytical considerations:

-- A Covered Bonds Attachment Point (CBAP) of BBB (low), currently under review. Montepio is the Issuer and Reference Entity for the Programme. The Issuer ratings of Montepio were downgraded to BB (high) from BBB (low) on 29 September 2015.

-- A Legal and Structuring Framework (LSF) Assessment of Modest associated with the Programme.

-- A Cover Pool Credit Assessment (CPCA) of BBB, being the lowest CPCA in line with the covered bond rating.

-- An LSF-Implied Likelihood (LSF-L) of BBB (high).

-- A two-notch uplift for high recovery prospects.

-- A committed minimum overcollateralisation of 35%. DBRS gives full credit to such commitment in accordance with its methodology.

The transaction was modelled with the DBRS European Covered Bond Cash Flow Model. The main assumptions focused on the timing of defaults and recoveries of the assets, interest rate stresses and market value spreads to calculate liquidation values on the cover pool.

Everything else being equal, a downgrade of the CBAP by one notch would lead to a downgrade of the LSF-L by two notches, resulting in a downgrade of the covered bonds rating by two notches. In addition, the ratings of the Programme would be downgraded if any of the following occurs: (1) the quality and consistency of the cover pool were no longer sufficient to support a two-notch uplift for good recovery prospects, or (2) volatility in the financial markets caused the currently estimated market value spreads to increase.

DBRS has assessed the LSF related to Montepio 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,” available at www.dbrs.com.

As at 30 September 2015, the cover pool had a total outstanding balance of EUR 2,725,944,021. The available OC is 36.3%, which is above the current Issuer commitment OC of 35%. For further information on Montepio OH Programme, please refer to the rating report that can be found at www.dbrs.com.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is: “Rating European Covered Bonds.” This can be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies. DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

In DBRS’s opinion, the change(s) under consideration do not require the application of the entire principal methodology. Therefore, an asset analysis was not conducted. A review of the transaction’s legal documents was limited to the documentation related to the issuance of Series 5 OH. All the other documents have remained unchanged since the most recent rating action

Other methodologies and criteria referenced in this transaction are listed at the end of this press release. This may 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 these ratings include historical default performance data, loan-by-loan level as well as stratification information on the cover pool provided by the Issuer that allowed DBRS to further assess the portfolio. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

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 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 26 May 2015, when DBRS placed the ratings of all the OH Under Review with Developing Implications status. The lead responsibilities for this transaction have been transferred to Vito Natale.

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

For further information on DBRS historic default rates published by the European Securities and Markets Administration 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: 30 November 2011
Initial Rating Committee Chair: Claire Mezzanotte

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

DBRS Ratings Limited
1 Minster Court, 10th Floor Mincing Lane, London EC3R 7AA
United Kingdom
Registered in England and Wales: No. 7139960
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
Derivative Criteria for European Structured Finance Transactions
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
Rating European Covered Bonds

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