DBRS Ratings GmbH (DBRS) confirmed its AA (high) (sf) rating on the EUR 203,176,000 Class A Mortgage-Backed Floating Rate Notes (the Class A Notes) issued by Tagus – Sociedade de Titularização de Créditos, S.A. (Aqua Mortgage No. 1) (the Issuer).
The rating on the Class A Notes addresses the timely payment of interest and ultimate payment of principal payable on or before the Final Legal Maturity Date in December 2063.
The rating action follows an annual review of the transaction and is based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults and losses as of the March 2019 payment date;
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables;
-- Current available credit enhancement (CE) to the Class A Notes to cover expected losses at the AA (high) (sf) rating level.
The Issuer is a securitisation collateralised by a portfolio of Portuguese first-lien residential mortgage loans originated by Finibanco S.A. (acquired by Caixa Económica Montepio Geral (Montepio) in 2011) and currently serviced by Montepio. The Notes have been issued under the Sociedade de Titularização de Créditos regime. The transaction closed in December 2008 and DBRS assigned a rating in March 2011. The deal had a two-year revolving period which terminated in January 2011.
As of March 2019, the balance of the Class A Notes was EUR 72.3 million. The EUR 97.4 million securitised portfolio (excluding written-off receivables) consists of first-ranking loans over residential properties located mainly in Lisbon (19.8%), Porto (15.9%), Faro (15.8%), and Aveiro (13.6%).
As of the March 2019 payment date, delinquencies greater than 90 days represented 0.9% of the portfolio balance. Gross cumulative defaulted loans, as a percentage of the original portfolio and cumulative transferred receivables, were 12.0%, with cumulative recoveries of 72.0%.
DBRS conducted a loan-by-loan analysis on the remaining pool and updated its base case PD and LGD assumptions to 5.3% and 10.2%, respectively. At the AA (high) (sf) rating level, the PD and LGD assumptions including the sovereign adjustment are 24.8% and 24.1%, respectively.
As at the March 2019 payment date, the Class A Notes’ CE was 28.9%, up from 28.2% in March 2018. CE to the Class A Notes is provided by the subordination of the Class B Notes and the cash reserve. The transaction continues to deleverage, with the Class A and B Notes amortising on a pro rata basis on most payment dates.
An amortising cash reserve is available to cover senior expenses, missed interest payments on the Class A Notes and to cure the Class A principal deficiency ledger. This reserve was funded at closing with EUR 3.5 million through the proceeds from the Class C Notes issuance, and it currently stands at its target level of EUR 2.96 million. The cash reserve account required balance is equal to 3.0% of the portfolio balance, subject to a EUR 1.2 million floor.
Deutsche Bank AG, London Branch (DB London) acts as the account bank for the transaction. Based on the DBRS private rating of DB London and the mitigating factors inherent in the transaction structure, DBRS considers the risk arising from the exposure to the account bank to be consistent with the rating assigned to the Class A Notes, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology.
The transaction structure was analysed in Intex Calc, considering the default rates at which the rated notes did not return all specified cash flows.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the rating is the “Master European Structured Finance Surveillance Methodology”.
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 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:
The sources of data and information used for this rating include investor reports provided by DB London, servicer reports provided by Montepio and loan-by-loan 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 11 April 2018 when DBRS confirmed the rating on the Class A Notes at AA (high) (sf).
The lead analyst responsibilities for this transaction have been transferred to Daniel Rakhamimov.
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):
-- DBRS expected a base case PD and LGD for the portfolio 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 receivables are 5.3% and 10.2%, respectively. At the AA (high) (sf) rating level, the corresponding PD is 24.8% and the LGD is 24.1%.
-- The Risk Sensitivity below illustrates the ratings expected for the Class A Notes if the PD and LGD increase by a certain percentage over the base case assumptions. For example, if the LGD increases by 50%, the rating on the Class A Notes would be expected to remain at AA (high) (sf), all else being equal. If the PD increases by 50%, the rating of the Class A Notes would be expected to remain at AA (high) (sf), all else being equal. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected to remain at AA (high) (sf), all else being equal.
Class A Notes risk sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD, expected rating of AA (high) (sf)
-- 50% increase in PD, expected rating of AA (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (high) (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.xhtm.
Ratings assigned by DBRS Ratings GmbH are subject to EU and US regulations only.
Lead Analyst: Daniel Rakhamimov, Senior Financial Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 28 March 2011
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Geschäftsführer: Detlef Scholz
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The rating methodologies used in the analysis of this transaction 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
-- Legal Criteria for European Structured Finance Transactions
-- Interest Rate Stresses for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
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 email@example.com.