DBRS Ratings Limited (DBRS) assigned the following provisional ratings to the notes to be issued by Ares Lusitani STC, S.A. (Gaia) (the Issuer):
-- EUR 47,500,000 Class A Notes at BBB (low) (sf)
-- EUR 7,600,000 Class B Notes at CCC (sf)
The ratings can be finalised upon the receipt of an execution version of the governing transaction documents. To the extent that the final documents differ from the documents that were provided at the time of this rating, DBRS may assign different final ratings to the notes.
The notes are backed by a EUR 234 million portfolio by gross book value (GBV) consisting of unsecured and secured non-performing loans sold by Mimulus Finance DAC (the Seller) to Ares Lusitani SRC, S.A. (the Issuer or the SPV). The receivables were originated by Caixa Económica Montepio Geral and Caixa Económica Bancária, S.A. (Montepio). The majority of loans in the portfolio defaulted between 2011 and 2017 and are in various stages of resolution. The secured and unsecured loans are serviced by Proteus Asset Management, Unipessoal, Lda (Altamira or the Special Servicer).
Approximately 41.0% of the loans by GBV is secured of which 81.8% benefits from a first-ranking lien. The secured loans included in the portfolio are backed by properties distributed across Portugal, with concentrations in the judicial districts of Lisbon, Porto and Viseu.
Interest on the Class B Notes, which represent mezzanine debt, may be repaid prior to the principal of the Class A Notes unless certain performance-related triggers are breached.
The ratings are based on DBRS’s analysis of the projected recoveries of the underlying collateral, the historical performance and expertise of the Special Servicer, the available liquidity to fund interest shortfalls and special-purpose vehicle expenses, the cap agreement and the transaction’s legal and structural features. DBRS’s BBB (low) (sf) and CCC (sf) rating stresses assume a haircut of approximately 36.4% and 22.9%, respectively, to the Special Servicers’ business plan for the portfolio.
DBRS analysed the transaction structure using Intex DealMaker.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the ratings is: “Rating European Non-Performing Loans Securitisations”.
DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.
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/333487/rating-sovereign-governments.pdf.
The sources of data and information used for these ratings include the Originator and the Special Servicers.
DBRS did not rely upon third-party due diligence to conduct its analysis. DBRS was supplied with third-party assessments. DBRS applied an additional haircut to the vectors of collection following the results of third-party assessments.
DBRS considers the information available to it for the purposes of providing the ratings was of satisfactory quality.
DBRS does not audit or independently verify the data or information it receives in connection with
the rating process.
These ratings concern a newly issued financial instrument.
These are the first DBRS ratings on this financial instrument.
Information regarding DBRS ratings, including definitions, policies and methodologies are 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 with the parameters used to determine the rating (the Base Case):
-- Recovery Rates Used: Cumulative Base Case Recovery Amount of approximately EUR 67 million at the BBB (low) (sf) stress level, a 5% and 10% decrease of the Cumulative Base Case Recovery Rate.
-- DBRS concludes that a hypothetical decrease of the Recovery Rate by 5%, ceteris paribus, would lead to a downgrade of the Class A Notes to B (high) (sf).
-- DBRS concludes that a hypothetical decrease of the Recovery Rate by 10%, ceteris paribus, would lead to a downgrade of the Class A Notes to CCC (sf).
-- Recovery Rates Used: Cumulative Base Case Recovery Amount of approximately EUR 81 million at the CCC (sf) stress level, a 5% and 10% decrease of the Cumulative Base Case Recovery Rate.
-- DBRS concludes that a hypothetical decrease of the Recovery Rate by 5%, ceteris paribus, would lead to a downgrade of the Class B Notes to below CCC (sf).
-- DBRS concludes that a hypothetical decrease of the Recovery Rate by 10%, ceteris paribus, would lead to a downgrade of the Class B Notes to below CCC (sf).
For further information on DBRS historic default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see:
Ratings assigned by DBRS Ratings Limited are subject to EU and US regulations only.
Lead Analyst: Alessio Pignataro, Senior Vice President, Global Structured Finance
Initial Rating Date: 2 May 2019
Rating Committee Chair: Jerry van Koolbergen, Managing Director, Global Structured Finance
DBRS Ratings Limited
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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.
-- Rating European Non-Performing Loans Securitisations
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- European CMBS Rating and Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Servicers
-- Legal Criteria for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions
-- 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 firstname.lastname@example.org.