DBRS Confirms Rating on Tagus - Sociedade de Titularização de Créditos, S.A (Pelican Finance No. 1)

DBRS Ratings Limited (DBRS) has today confirmed its rating of the Class A notes issued by Tagus - Sociedade de Titularização de Créditos, S.A. (Pelican Finance 1) (the Issuer) at A (sf).

The confirmation of the rating on the Class A notes is based upon the following analytical considerations, as described more fully below:
-- Portfolio performance, in terms of defaults and level of delinquencies, as of the March 2015 payment date.
-- Actual default rate, recovery rate and expected losses are within DBRS’s expectations.
-- Current available credit enhancement for the Class A notes to cover the expected losses at the A (sf) rating level.

Pelican Finance No. 1 is a securitisation of a portfolio of consumer and auto loan receivables originated and serviced by Caixa Económica Montepio Geral (Montepio) and Montepio Crédito – Instituição Financeira de Crédito, S.A. (Montepio Credito). The deal follows the Portuguese securitisation law and closed in May 2014. The structure includes an 18-month revolving period during which the Issuer can purchase additional portfolios. There are specific criteria and purchase termination events to mitigate the potential portfolio performance deterioration. To date, all of them have been satisfied.

The collateral has not showed substantial change during the revolving period. The pool comprises fixed loans (32.41%) and floating loans (67.59%) and consists of personal loans (54.47%), loans to buy new cars (1.40%) and used cars (41.88) and a small portion (2.25%) for other purposes.

The portfolio is performing in line with DBRS’s expectations. The 90+ delinquency ratio as a percentage of the performing balance of the portfolio increased steadily over the year, reaching 1.11% in March 2015. The gross cumulative default ratio as a percentage of the original portfolio increased over the year to 0.34%, but it is still below DBRS’s base case default rate of 16.56%.

Credit enhancement for the Class A notes consists of subordination of the Class B notes and non-amortising cash reserve. The credit enhancement for the Class A notes (as a percentage of the outstanding performing balance of the portfolio) has been stable at 36%. Class C notes were issued to fund the initial cash reserve of EUR 14.7 million. The cash reserve is available to pay senior items, interest and principal shortfall on the Class A notes.

Deutsche Bank AG/London serves as account bank for the transaction. The DBRS private rating of Deutsche Bank AG/London is above the Minimum Institution Rating given the rating assigned to the Class A notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is the “Master European Structured Finance Surveillance Methodology”. Other methodologies referenced in this transaction are listed at the end of this press release.

This may be found on www.dbrs.com at:
http://www.dbrs.com/about/methodologies

Due to the inclusion of a revolving period in the transaction, the collateral was initially modelled based on the worst-case replenishment criteria set forth in the transaction legal documents. These assumptions have not changed and consequently the cash flow analysis was not conducted.

The sources of information used for this rating include investor reports provided by Deutsche Bank AG and data from the European DataWarehouse. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

DBRS does not rely upon third-party due diligence in order to conduct its analysis; however, Agreed upon Procedures (AUP) are included in the requested documentation. DBRS was not supplied with AUP documents. Data checks were performed and DBRS did not apply additional cash flow stresses in its scenarios.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

The last rating action on this transaction took place on 16 May 2014, when DBRS assigned the rating on the Class A notes at A (sf).

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 to the parameters used to determine the rating (the Base Case):
-- DBRS expected a Base Case Probability of Default (PD) and Loss Given Default (LGD) for the pool based on a review of the transaction performance. 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 16.56% and 67.33%, respectively.
-- The Risk Sensitivity overview below illustrates the ratings expected for the Class A notes if the PD and LGD increase by a certain percentage over the Base Case assumption. For example, if the LGD increases by 50% the rating for the Class A notes would be expected to drop at B (high) (sf), all else being equal. If the PD increases by 50% the rating for the Class A notes would be expected to drop to B (high) (sf), all else being equal. If both the LGD and PD increase by 50%, the rating of the Class A notes would be expected to drop to CCC (sf), all else being equal.

Class A Risk Sensitivity:

• 25% increase in LGD, expected rating of BB (sf).
• 50% increase in LGD, expected rating of B (high) (sf).
• 25% increase in PD, expected rating of BB (sf).
• 50% increase in PD, expected rating of B (high) (sf).
• 25% increase in LGD and 25% increase in PD, expected rating of B (sf).
• 25% increase in LGD and 50% increase in PD, expected rating of B (low) (sf).
• 50% increase in LGD and 25% increase in PD, expected rating of B (low) (sf).
• 50% increase in LGD and 50% increase in PD, expected rating of CCC (sf).

For further information on DBRS 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: Alessio Pignataro
Initial Rating Date: 16 May 2014
Initial Rating Committee Chair: Chuck Weilamann

Lead Surveillance Analyst: Elisa Scalco
Rating Committee Chair: Diana Turner

DBRS Ratings Limited
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Registered in England and Wales: No. 7139960.

The rating methodologies and criteria used in the analysis of this transaction can be found at http://www.dbrs.com/about/methodologies and are as follows:

-- Legal Criteria for European Structured Finance Transactions.
-- Derivative Criteria for European Structured Finance Transactions.
-- Master European Structured Finance Surveillance Methodology.
-- Operational Risk Assessment for European Structured Finance Servicers.
-- Unified Interest Rate Model for European Securitisations.
-- Rating European Consumer and Commercial Asset-Backed Securitisations.