DBRS Confirms Ratings on Banco Popular Portugal Covered Bonds

DBRS Ratings Limited (DBRS) has today confirmed the BBB rating of EUR815 million covered bonds outstanding under Banco Popular Portugal (BPP) Covered Bonds Programme upon a full review of the rating.

The rating reflects the following analytical considerations:
• The senior unsecured Long-Term Debt and Deposit rating of BPP (the “Issuer”) of ‘BBB’ with Negative Trend confirmed on 31 July 2013.
• DBRS Legal and Structuring Framework (LSF) assessment of “Adequate”.
• BPE’s capabilities with respect to origination of the cover assets and servicing of the cover pool.

The Issuer was not able to provide a set of historical performance data sufficient for DBRS to form a view on the support provided by the cover pool in case of an assumed default of BPP. As a result, BPP Covered Bonds are rated at the same level of the issuer. DBRS recognises the dual recourse claim of covered bond holders in case of an issuer default; however, no uplift from the issuer rating can be granted at this stage to BPP Covered Bonds. DBRS keeps monitoring the rating and, should sufficient information be available in the future, these will be incorporated in the analysis.

All else equal, a downgrade of the Issuer rating by one notch would lead to a downgrade of the Covered Bonds by one notch.

As of 30 June 2013, the total outstanding amount of Covered Bonds is EUR815 million while the aggregate balance of mortgages in the pool is EUR1.06bn resulting in a Nominal Over-collateralization (OC) of 6.75%. This compares to the 5.26% minimum OC legally required. The cover pool is formed by residential (84.8%) and commercial (15.2%) mortgage loans. This is a 57-month seasoned cover pool that is geographically concentrated in Lisbon (53%), North of Portugal (22%) and in the center area of the country (15%).

Notes:
All figures are in Euros unless otherwise noted.

The principal methodologies applicable are:
• Rating European Covered Bonds
• Global Methodology for Rating Banks & Banking Organisations
• Legal Criteria for European Structured Finance Transactions
• Master European Residential Mortgage-Backed Securities Rating Methodology
• Master European Structured Finance Surveillance Methodology
• Operational Risk Assessment for European Structured Finance Servicers
• Swap Criteria for European Structured Finance Transactions
• Unified Interest Rate Model Methodology for European Securitisations

These can be found on dbrs.com under Methodologies. For a more detailed discussion of sovereign risk impact on Structured Finance ratings, please refer to DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area”.

The sources of information used for this rating include data related to the cover pool provided by BPP. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

The most recent rating action on this transaction took place on 27 September 2012, when DBRS assigned ratings to Series 4.

For additional information on this rating, please see the related linking document. The individual linking document for this transaction is located at http://www.dbrs.com/research/250534/linking-document-banco-popular-portugal-covered-bond-programme.pdf

For further information on DBRS’s historic default rates published by the European Securities and Markets Administration (“ESMA”) in a central repository see http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Initial Lead Analyst: Keith Gorman
Initial Rating Date: 31 August 2012
Rating Committee Chair: Claire Mezzanotte

Lead Analyst: Vito Natale
Rating Committee Chair: Claire Mezzanotte

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