DBRS Takes Rating Actions on 13 European Structured Finance Transactions, Following Portugal Sovereign Rating Upgrade

DBRS Ratings Limited (DBRS) took rating actions on 16 tranches from 13 European Structured Finance transactions, upgrading five tranches and placing 11 Under Review with Positive Implications (UR-Pos.).

The rating actions reflect the Republic of Portugal’s (Portugal) Long-Term Foreign and Local Currency – Issuer Ratings being upgraded to BBB, with a Stable trend on 20 April 2018 (see DBRS’s press release entitled, “DBRS Upgrades Republic of Portugal to BBB, Stable Trend”) from BBB (low).

Following the rating action on the sovereign, the ratings of five tranches of four electricity tariff transactions (PT Electricity Tariff Transactions) have been upgraded by one notch, given the link between the performance of these transactions and the creditworthiness of the Portuguese sovereign.

At the same time, the ratings of a further 11 tranches from nine transactions have been placed UR-Pos. One of these transactions is an Auto ABS transaction and eight are RMBS transactions.

For all of them, DBRS is reviewing the impact of the reduced country risk in accordance with “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 complete list of ratings affected can be found at the end of this press release.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is the “Master European Structured Finance Surveillance Methodology”.

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

For transactions placed UR-Pos., DBRS is undertaking a review and will remove the rating from this status as soon as it is appropriate. The current UR-Pos. rating actions are event driven and, in DBRS’s opinion, the analysis does not warrant the application of the entire principal methodology and the analysis focused on the impact that the DBRS updated sovereign rating of Portugal could have on the ratings of these transactions.

A review of the transactions legal documents was not conducted as the legal documents have remained unchanged since the most recent rating actions for each transaction.

Other methodologies referenced in these transactions 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 the rating actions on the PT Electricity Tariff Transactions include information provided by Citibank N.A., London Branch for Volta IV Electricity Receivables Securitisation and by Deutsche Bank AG, London Branch (DB London) for the remaining three electricity tariff transactions.

All the rating actions taken include as a source of data and information the impact of the upgrade of the sovereign rating of Portugal, as envisaged in the rating action taken on 20 April 2018.

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 for Volta III Electricity Receivables Securitisation, Volta IV Electricity Receivables Securitisation, Tagus Sociedade de Titularização de Créditos, S.A. (EnergyOn No. 1), Tagus Sociedade de Titularização de Créditos, S.A. (EnergyOn No. 2), Atlantes Mortgages N º 2, Atlantes Mortgages N º 3, Atlantes Mortgages N º 4, Atlantes Mortgages N º 5, Atlantes Mortgages N º 7, Lusitano Mortgages No. 7 Limited and Sagres STC (Pelican Mortgages No. 6). However, this did not impact the rating analysis.

At the time of the initial rating, DBRS was supplied with third-party assessment for GAMMA - Sociedade de Titularização de Créditos, S.A. (Hipototta No. 13) and SAGRES - Sociedade de Titularização de Créditos, S.A. (Ulisses Finance No. 1). However, this did not impact the rating analysis.

DBRS considers the data and the information available to it for the purposes of providing these ratings 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 date for each transaction is listed further below in this press release, along with the sensitivity analysis and further analytical information used to take today’s rating actions for transactions that are not UR-Pos.

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

Some ratings listed below are UR-Pos. Generally, the conditions that lead to the assignment of reviews are resolved within a 90-day period.

For further information on DBRS historic 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.

DBRS Ratings Limited
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Registered in England and Wales: No. 7139960

The rating methodologies used in the analysis of these transactions can be found at
http://www.dbrs.com/about/methodologies.

-- Master European Structured Finance Surveillance Methodology
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Rating Portuguese Electricity Tariff Securitisations
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Legal Criteria for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators
-- Interest Rate Stresses for European Structured Finance Transactions

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.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.

Volta III Electricity Receivables Securitisation, Volta IV Electricity Receivables Securitisation, Tagus Sociedade de Titularização de Créditos, S.A. (EnergyOn No. 1) and Tagus Sociedade de Titularização de Créditos, S.A. (EnergyOn No. 2)

The upgrade to A (low) (sf) from BBB (high) (sf) on all DBRS-rated Series of Notes issued by the four aforementioned PT Electricity Tariff Transactions follow an entire review of the transactions and reflects DBRS’s sovereign upgrade on 20 April 2018 and the following analytical considerations:

-- The linkage between the performance of the sovereign and the performance of the securities issued by the PT Electricity Tariff Transactions.
-- No adverse change of the legal or regulatory framework is expected.
-- The transactions are not exposed to the credit risk of any specific entity.

PT Electricity Tariff Transactions are static securitisations of Portuguese electricity tariff receivables (Credit Rights) assigned to the Issuer (TAGUS Sociedade de Titularização de Créditos, S.A) by EDP – Serviço Universal, S.A. (EDP-SU). Pursuant to the Portuguese Decree-law 29/2006 (as subsequently amended and republished), EDP-SU has the right to recover any amounts arising from the difference between the costs of acquiring electricity under the special regime generation according to administrative prices and the sale price of the respective electricity valued according to market prices. The Credit Rights are paid by all Portuguese electricity consumers through their inclusion in the tariffs on a permanent basis as a component of the Global Use of System Tariff, or total rate per unit paid by end consumers.

Based on DBRS’s “Rating Portuguese Electricity Tariff Securitisations” methodology, the ratings on securities issued by the PT Electricity Tariff Transactions are limited to a two-notch increase above the current local currency sovereign rating of Portugal.

In addition, the Interest Rate Swap (IRS) payments to the Swap Counterparty of Tagus Sociedade de Titularização de Créditos, S.A. (EnergyOn No. 1) are senior to the Class A1 notes in the priority of payments. Based on DBRS’s “Rating Portuguese Electricity Tariff Securitisations” methodology, the rating of the IRS is also limited to a two-notch increase above the Portugal’s current local currency sovereign rating.

Citibank N.A., London Branch acts as Account Bank for the Volta IV Electricity Receivables Securitisation, while Deutsche Bank AG, London Branch (DB London) assumed this role for the remaining three PT Electricity Tariff Transactions. The DBRS private ratings of both entities are consistent with the Minimum Institution Rating, given the ratings assigned to the notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

DB London is the Swap Counterparty of Tagus Sociedade de Titularização de Créditos, S.A. (EnergyOn No. 1) and Banco Santander SA is the Swap Counterparty of Tagus Sociedade de Titularização de Créditos, S.A. (EnergyOn No. 2). The DBRS private rating of DB London and the DBRS Long-Term Critical Obligations Rating of Banco Santander SA at AA (low) are consistent with the First Rating Threshold defined in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology.

Last Rating Action Date: 30 January 2018

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 concludes that for all the rated notes:
-- A hypothetical downgrade of the sovereign rating of Portugal by one notch, ceteris paribus, would lead to a downgrade of the Series to BBB (high) (sf).
-- A hypothetical downgrade of the sovereign rating of Portugal by two notches, ceteris paribus, would lead to a downgrade of the Series to BBB (sf).

Lead Analyst: Joana Seara da Costa, Assistant Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director

Initial Rating Date - Tagus Sociedade de Titularização de Créditos, S.A. (EnergyOn No. 1): 8 April 2011
Initial Rating Date - Tagus Sociedade de Titularização de Créditos, S.A. (EnergyOn No. 2): 8 April 2011
Initial Rating Date - Volta III Electricity Receivables Securitisation: 9 March 2015
Initial Rating Date - Volta IV Electricity Receivables Securitisation: 18 July 2016

Atlantes Mortgage N º 2

Last Rating Action Date: 5 February 2018

Lead Analyst: Ilaria Maschietto, Senior Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 17 May 2012

Atlantes Mortgage N º 3

Last Rating Action Date: 5 February 2018

Lead Analyst: Ilaria Maschietto, Senior Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 17 May 2012

Atlantes Mortgage N º 4

Last Rating Action Date: 5 February 2018

Lead Analyst: Ilaria Maschietto, Senior Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 17 May 2012

Atlantes Mortgage N º 5

Last Rating Action Date: 5 February 2018

Lead Analyst: Ilaria Maschietto, Senior Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 17 May 2012

Atlantes Mortgage N º 7

Last Rating Action Date: 5 February 2018

Lead Analyst: Ilaria Maschietto, Senior Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 17 May 2012

GAMMA - Sociedade de Titularização de Créditos, S.A. (Hipototta No. 13)

This is the first rating action since the initial rating date on 9 January 2018.
The lead analyst responsibilities for this transaction have been transferred to Ilaria Maschietto.

Lead Analyst: Ilaria Maschietto, Senior Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 17 May 2012

Lusitano Mortgages No. 7 Limited

Last Rating Action Date: 29 March 2018

Lead Analyst: Clare Wootton, Senior Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 28 February 2011

SAGRES - Sociedade de Titularização de Créditos, S.A. (Ulisses Finance No. 1)

Last Rating Action Date: 10 July 2017
The lead analyst responsibilities for this transaction have been transferred to Joana Seara da Costa.

Lead Analyst: Joana Seara da Costa, Assistant Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 16 June 2017

Sagres STC (Pelican Mortgages No. 6)

Last Rating Action Date: 13 April 2018
The lead analyst responsibilities for this transaction have been transferred to Joana Seara da Costa.

Lead Analyst: Joana Seara da Costa, Assistant Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 5 March 2012