Morningstar DBRS Confirms Credit Ratings on TAGUS - Sociedade de Titularização de Créditos, S.A. (RMBS Belém No.2)

DBRS Ratings GmbH (Morningstar DBRS) confirmed its credit ratings on the notes issued by TAGUS - Sociedade de Titularização de Créditos, S.A. (RMBS Belém No.2) (the Issuer), as follows:

-- Class A Notes at AAA (sf)
-- Class B Notes at A (high) (sf)

The credit rating on the Class A Notes addresses the timely payment of interest and the ultimate repayment of principal on or before the legal final maturity date in September 2064. The credit rating on the Class B Notes addresses the ultimate payment of interest and the ultimate repayment of principal by the final maturity date.

CREDIT RATING RATIONALE
The confirmations 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 June 2024 payment date;
-- Updated 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 their respective credit rating levels.

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 (UCI Portugal), a Spanish specialised company offering mortgage financial services in Spain and Portugal. UCI is a joint venture between Banco Santander SA and BNP Paribas SA. The transaction closed on 13 October 2022 with an initial portfolio of EUR 325.0 million.

PORTFOLIO PERFORMANCE
As of the May 2024 cut-off date, loans 0 to 30 days and 30 to 60 days delinquent represented 0.5% and 0.2% of the outstanding principal balance of the portfolio, respectively, with no loans 60 to 90 days delinquent. Loans that were more than 90 days in arrears represented 0.2%. There have been no 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 2.3% and 10.0%, respectively.

CREDIT ENHANCEMENT
The subordination of the respective junior obligations is the sole source of credit enhancement to the rated notes. As of the June 2024 payment date, credit enhancement to the Class A and Class B Notes increased to 36.0% and 14.8%, respectively, from 29.2% and 11.7% as of the September 2023 payment date.

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 June 2024 payment date, the cash reserve was at its target balance of EUR 4.0 million, equal to the higher of 1.9% of the nondefaulted portfolio balance and the floor of EUR 1.6 million.

Citibank Europe plc (Citibank Europe) acts as the account bank for the transaction. Based on Morningstar DBRS's private credit rating on Citibank Europe, the downgrade provisions outlined in the transaction documents, and structural mitigants inherent in the transaction structure, Morningstar DBRS considers the risk arising from the exposure to the account bank to be consistent with the credit rating assigned to the notes, as described in Morningstar DBRS's "Legal Criteria for European Structured Finance Transactions" methodology.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

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 Factors in Credit Ratings" at: https://dbrs.morningstar.com/research/437781.

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 (6 August 2024), https://dbrs.morningstar.com/research/437540.

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

The credit rating on the Class B Notes materially deviates from the higher credit rating implied by the quantitative model. Morningstar DBRS considers a material deviation to be a credit rating differential of three or more notches between the assigned credit rating and the credit rating implied by a quantitative model that is a substantial component of a rating methodology. In this case, the credit rating addresses the ultimate payment of interest and principal on or before the final maturity date as defined in the transaction legal documents. Morningstar DBRS typically expects bonds rated in the AA (sf) category to be able to pay interest on a timely basis at the time they are the most senior bond outstanding.

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 Credit Ratings on Other Morningstar DBRS Credit Ratings" of the "Global Methodology for Rating Sovereign Governments" at: https://dbrs.morningstar.com/research/436000.

The sources of data and information used for these credit ratings include investor reports provided by Citibank Europe, servicer reports 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 impact 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 13 October 2023, when Morningstar DBRS confirmed its credit ratings on the Class A and Class B Notes at AAA (sf) and A (high) (sf), respectively.

The lead analyst responsibilities for this transaction have been transferred to Alice Comastri.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on https://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 2.3% and 10.0%, respectively.

Class A Notes 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 Notes Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of A (high) (sf)
-- 50% increase in LGD, expected credit rating of A (high) (sf)
-- 25% increase in PD, expected credit rating of A (high) (sf)
-- 50% increase in PD, expected credit rating of A (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of A (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of A (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of A (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of A (high) (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: Alice Comastri, Senior Analyst
Rating Committee Chair: Alfonso Candelas, Associate Managing Director
Initial Rating Date: 13 October 2022

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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 (6 August 2024),
https://dbrs.morningstar.com/research/437540
-- Legal Criteria for European Structured Finance Transactions (28 June 2024),
https://dbrs.morningstar.com/research/435165
-- Interest Rate Stresses for European Structured Finance Transactions (28 June 2024),
https://dbrs.morningstar.com/research/435278
-- Operational Risk Assessment for European Structured Finance Originators and Servicers (18 September 2024), https://dbrs.morningstar.com/research/439571
-- European RMBS Insight Methodology (18 September 2024) and European RMBS Insight model v 10.0.0.0,
https://dbrs.morningstar.com/research/439573
-- European RMBS Insight: Portuguese Addendum (19 April 2024),
https://dbrs.morningstar.com/research/431376
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August 2024), https://dbrs.morningstar.com/research/437781

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 https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.