Press Release

DBRS Confirms Rating on Class A Notes Issued by SAGRES - Sociedade de Titularização de Créditos, S.A. (DOURO SME No.2)

Structured Credit
December 07, 2017

DBRS Ratings Limited (DBRS) confirmed its rating on the Class A Notes issued by SAGRES - Sociedade de Titularização de Créditos, S.A. (DOURO SME No.2) (the Issuer) at AA (sf).

The rating addresses the timely payment of interest and the ultimate payment of principal payable on or before the Final Maturity Date in December 2039. The confirmation follows an annual review of the transaction and is based on the following analytical considerations:

-- Portfolio performance, in terms of level of delinquencies and defaults, as of September 2017;
-- The fact that no early amortisation event has occurred; and
-- The current available credit enhancement (CE) to the Class A Notes to cover the expected losses assumed in line with the AA (sf) rating level.

The transaction is a cash flow securitisation collateralised primarily by a portfolio of term loans, credit lines and commercial paper facilities originated and serviced by Banco BPI, S.A. (BPI; the Originator) to Portuguese corporations, small- and medium-sized enterprises (SMEs) and self-employed individuals. Since February 2017, BPI has been owned by Caixabank, S.A.

The transaction is still in its revolving period, after three amendments of the initial amortisation period start date from March 2014 to March 2017, from March 2017 to December 2018 and from December 2018 to December 2019. During the revolving period, BPI may sell additional portfolios to the Issuer, subject to certain conditions and limitations. To date, all conditions are being met.

PORTFOLIO PERFORMANCE
As of 21 September 2017 payment date, the overall portfolio consisted of 26,941 loans with an aggregate principal balance of EUR 3.4 billion.

The portfolio is performing within DBRS’s expectations. As of the September payment date, 3.1% of the loans in the portfolio by outstanding balance was in arrears for more than 90 days. The Net Default Ratio was at 4.4% in terms of the current outstanding portfolio amount.

CREDIT ENHANCEMENT
As of September 2017, the CE to the Class A Notes was 49.88%. The CE of the Class A Notes considers the subordination of Class B Notes and the reserve fund (RF). The RF is available to cover missed interest and principal payments on the Class A Notes throughout the life of the transaction.

Citibank Europe plc – Netherlands Branch holds the Issuer Account Bank for the transaction. On the basis of the DBRS private rating of Citibank Europe plc – Netherlands Branch and the mitigants outlined in the transaction documents, DBRS considers the risk arising from the exposure to the Account Bank to be consistent with the rating assigned to the Class A Notes.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is: “Rating CLOs Backed by Loans to European SMEs.”

DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the surveillance section of the principal methodology.

An asset and a cash flow analysis were both conducted. Due to the inclusion of a revolving period in the transaction, the analysis continues to be based on the worst-case replenishment criteria set forth in the transaction legal documents.

A review of the transaction legal documents was not conducted as the legal 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.

These may be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies.

For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Rating Sovereign Governments” methodology at: http://dbrs.com/research/319564/rating-sovereign-governments.pdf

The sources of data and information used for these ratings include reports provided by Citigroup, Inc., and loan-level data from the European DataWarehouse GmbH.

DBRS did not rely upon third-party due diligence in order to conduct its analysis.

At the time of the initial rating, DBRS was not supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS considers the data and information available to it for the purposes of providing this rating to be of satisfactory quality.

DBRS does not audit or independently verify the data or information it receives in connection with the rating process.

The last rating action on this transaction took place on 7 December 2016 when DBRS confirmed its rating of AA (sf) on the Class A Notes.

The lead analyst responsibilities for this transaction have been transferred to Francesco Amato.

Information regarding DBRS ratings, including definitions, policies and methodologies, is 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”):

-- Probability of Default (PD) Rates Used: base case PD of 2.8%, a 10% increase of the base case and a 20% increase of the base case PD.
-- Recovery Rates Used: base case recovery rates of 17.6% at the AA (sf) stress level for the Class A Notes, a 10% and 20% decrease in the base case recovery rates. Note that the percentage decreases in the recovery rates are assumed for the other stress recovery rate levels.

DBRS concludes that a hypothetical increase of the base case PD by 20% or a hypothetical decrease of the recovery rate by 20%, ceteris paribus, would lead to a confirmation of the Class A Notes at AA (sf). A scenario combining both an increase in the base case PD by 10% and a decrease in the base case recovery rate by 10%, ceteris paribus, would also lead to a confirmation of the Class A Notes at AA (sf).

For further information on DBRS historical default rates published by the European Securities and Markets Authority (“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 and US regulations only.

Lead Analyst: Francesco Amato, Financial Analyst
Rating Committee Chair: Vito Natale, Senior Vice President
Initial Rating Date: 11 February 2011

DBRS Ratings Limited
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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
-- Master European Structured Finance Surveillance Methodology
-- Rating CLOs Backed by Loans to European SMEs
-- Rating CLOs and CDOs of Large Corporate Credit
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators
-- Unified Interest Rate Model for European Securitisations
-- Cash Flow Assumptions for Corporate Credit Securitizations

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.

Ratings

  • US = Lead Analyst based in USA
  • 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