Morningstar DBRS Upgrades and Confirms Credit Ratings on TAGUS - Sociedade de Titularização de Créditos, S.A. (RMBS Green Belém No.1)

DBRS Ratings GmbH (Morningstar DBRS) took the following credit rating actions on the Class A and B notes (the rated notes) issued by TAGUS - Sociedade de Titularização de Créditos, S.A. (RMBS Green Belém No.1) (the Issuer) as follows:

-- Class A notes confirmed at AAA (sf)
-- Class B notes upgraded to AAA (sf) from AA (high) (sf)

The credit ratings on the rated notes address the timely payment of interest and the ultimate repayment of principal on or before the legal final maturity date in March 2063.

CREDIT RATING RATIONALE
The credit rating actions follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults, and losses, as of the March 2024 payment date;
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables; and
-- Current available credit enhancement to the rated notes to cover the expected losses at the AAA (sf) rating level.

The transaction is a static securitisation of prime first-lien mortgages secured over owner-occupied residential properties in Portugal, originated and serviced by the Portuguese branch of Unión de Créditos Inmobiliarios S.A., EFC (UCI Portugal), a specialised Spanish company offering mortgage financial services in Spain and Portugal. UCI is a joint venture between Banco Santander SA (Santander) and BNP Paribas SA. The transaction closed on 30 April 2020 with an initial portfolio of EUR 385.0 million.

PORTFOLIO PERFORMANCE
As of the March 2024 payment date, loans 0 to 30 and 30 to 60 days delinquent represented 0.22% and 0.20% of the outstanding principal balance of the portfolio, respectively, with no loans 60 to 90 days in arrears. Loans more than 90 days in arrears represented 0.11% of the portfolio balance. There have been no reported defaults to date, defined in the transaction documents as loans that are 12 or more months in arrears.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
Morningstar DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and updated its base case PD and LGD assumptions to 1.1% and 8.0%, respectively.

CREDIT ENHANCEMENT
The subordination of the respective junior obligations is the sole source of credit enhancement to the rated notes. As of the March 2024 payment date, credit enhancement to the Class A notes increased to 36.9% from 25.3% at the time of the last annual review 12 months ago while credit enhancement to the Class B notes increased to 20.4% from 13.8%.

The transaction benefits from liquidity support provided by a cash reserve, which is available to cover senior expenses, interest payments on the Class A notes, and interest payments on the Class B notes (unless the interest deferral trigger is breached). As of the March 2024 payment date, the cash reserve was at its target balance of EUR 2.3 million, equal to the higher of 1.5% of the nondefaulted portfolio balance and the floor of EUR 1.9 million.

Citibank N.A./London Branch (Citibank London) acts as the account bank for the transaction. Based on Morningstar DBRS' private rating on Citibank London, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, Morningstar DBRS considers the risk arising from the exposure to the account bank to be consistent with the credit ratings assigned to the notes, as described in Morningstar DBRS' "Legal Criteria for European Structured Finance Transactions" methodology.

Santander acts as the cap counterparty for the transaction. The Morningstar DBRS public Long Term Critical Obligations Rating on Santander is AA (low), which is consistent with the first rating threshold as described in Morningstar DBRS' "Derivative Criteria for European Structured Finance Transactions" methodology.

Morningstar DBRS' credit ratings on the notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents.

Morningstar DBRS' credit ratings do not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.
 
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://dbrs.morningstar.com/research/427030.

Morningstar DBRS analysed the transaction structure in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the credit ratings is the "Master European Structured Finance Surveillance Methodology" (7 March 2024), https://dbrs.morningstar.com/research/429051.

Other methodologies referenced in this transaction are listed at the end of this press release.

Morningstar 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 legal documents was not conducted as the legal documents have remained unchanged since the most recent credit rating action.

For a more detailed discussion of the sovereign risk impact on Structured Finance credit ratings, please refer to "Appendix C: The Impact of Sovereign Ratings on Other DBRS Morningstar Credit Ratings" of the "Global Methodology for Rating Sovereign Governments" at: https://dbrs.morningstar.com/research/421590.

The sources of data and information used for these credit ratings include investor reports provided by Citibank London (as the transaction manager), servicer reports and additional information provided by UCI Portugal, and loan-level data provided by the European DataWarehouse GmbH.

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

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

Morningstar DBRS considers the data and information available to it for the purposes of providing these credit ratings to be of satisfactory quality.

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

The last credit rating action on this transaction took place on 17 April 2023, when Morningstar DBRS confirmed its credit rating on the Class A Notes at AAA (sf) and upgraded its credit rating on the Class B Notes to AA (high) (sf) from AA (low) (sf).

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

Sensitivity Analysis: To assess the impact of changing the transaction parameters on the credit ratings, Morningstar DBRS considered the following stress scenarios as compared with the parameters used to determine the credit ratings (the base case):

-- Morningstar DBRS expected a lifetime base-case PD and LGD for the pool based on a review of the current assets. Adverse changes to asset performance may cause stresses to base-case assumptions and therefore have a negative effect on credit ratings.
-- The base case PD and LGD of the current pool of loans for the Issuer are 1.1% and 8.0%, respectively.

Class A Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD, expected credit rating of AAA (sf)
-- 50% increase in PD, expected credit rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of AAA (sf)

Class B Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD, expected credit rating of AAA (sf)
-- 50% increase in PD, expected credit rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of AAA (sf)

For further information on Morningstar DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on Morningstar DBRS historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

These credit ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Daniel Rakhamimov, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 1 May 2020

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The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- Master European Structured Finance Surveillance Methodology (7 March 2024), https://dbrs.morningstar.com/research/429051
-- Legal Criteria for European Structured Finance Transactions (30 June 2023), https://dbrs.morningstar.com/research/416730
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2023), https://dbrs.morningstar.com/research/420572
-- Interest Rate Stresses for European Structured Finance Transactions (15 September 2023), https://dbrs.morningstar.com/research/420602
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (23 January 2024), https://dbrs.morningstar.com/research/427030
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda (13 September 2023) and European RMBS Credit Model v 1.0.0.0, https://dbrs.morningstar.com/research/420575
-- Derivative Criteria for European Structured Finance Transactions (18 September 2023), https://dbrs.morningstar.com/research/420754

A description of how Morningstar DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/278375.

For more information on this credit or on this industry, visit dbrs.morningstar.com or contact us at [email protected].