DBRS Morningstar Comments on Structured Finance and Covered Bond Transactions Following Republic of Portugal Upgrade

DBRS Ratings GmbH (DBRS Morningstar) is currently undertaking a review of all the structured finance and covered bond transactions it rates that could be affected by DBRS Morningstar’s recent upgrade on the Republic of Portugal (Portugal) to “A” with a Stable trend on 21 July 2023 (please refer to https://www.dbrsmorningstar.com/research/417507/dbrs-morningstar-upgrades-portugal-to-a-stable-trend for more information).

DBRS Morningstar currently rates 19 Portuguese structured finance transactions and five covered bond programs. Structured finance transactions include several asset classes, such as nine transactions in residential mortgage-backed securities (RMBS), two transactions in nonperforming loans (NPLs), five transactions in auto and consumer loans, one transaction in credit cards, and two transactions in electricity tariffs. Please find the list of all the related rated notes at the end of this press release. DBRS Morningstar its conducting its review in accordance with the sovereign risk impact on structured finance ratings, as described in “Appendix C: The Impact of Sovereign Ratings on Other DBRS Morningstar Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrsmorningstar.com/research/401817/global-methodology-for-rating-sovereign-governments.

DBRS Morningstar anticipates some rating upgrades as a result of its upgrade on Portugal, but mainly on transactions with a strong link between the sovereign credit risk and the securities credit risk like the Portuguese electricity tariff transactions, while other asset classes like covered bonds, NPLs, or credit cards will not be affected. In fact, DBRS Morningstar currently expects most of the current ratings as listed below are unlikely to change.

For deals where there is a rating impact, DBRS Morningstar expects to publish the related rating actions within the next few weeks.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/416784/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-credit ratings (4 July 2023).

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

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

For more information on these credits or on these industries, visit www.dbrsmorningstar.com or contact us at [email protected].

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