DBRS Confirms Rating on TAGUS – SOCIEDADE DE TITULARIZAÇÃO DE CRÉDITOS, S.A. (EnergyOn No. 2)

DBRS Ratings Limited (DBRS) has today confirmed its rating on the Class A notes of TAGUS SOCIEDADE DE TITULARIZAÇÃO DE CRÉDITOS, S.A. (EnergyOn No. 2) (the Issuer) at BBB (high) (sf).

Based on DBRS’s “Rating Portuguese Electricity Tariff Securitisations” methodology, the rating on the Class A notes is limited to a two-notch increase above the current local currency sovereign rating of the Republic of Portugal. DBRS’s Sovereign Group confirmed the Republic of Portugal’s Long-Term Foreign and Local Currency Issuer Ratings at BBB (low) with a Stable trend in April 2016 (see press release issued on 29 April 2016: “DBRS Confirms Republic of Portugal at BBB (low), Stable Trend”).

This is a static securitisation of Portuguese electricity tariff receivables assigned to the Issuer by EDP – Serviço Universal (EDP-SU). The transaction closed in December 2009.

Pursuant to the Portuguese Decree-law 29/2006, EDP-SU has the right to recover any amounts arising out of the difference between the costs of acquisition of electricity and the sale price of the respective electricity valued according to market prices. The source of funds for the payment of principal and interest on the Class A notes is the legally established right to receive, through the electricity tariffs, the amount of costs with the acquisition of electricity incurred by EDP-SU during 2009 that has not yet been reflected into the electricity tariffs, including accrued interest.

The Class A notes are supported by subordination of the Class B notes. Credit enhancement for the Class A notes has been stable over the last year and is, as of March 2016, at 1.55%. An Expenses Reserve funded with the proceeds of the Class B notes covers the transaction costs. The Expenses Reserve amounts to EUR 1.83 million.

At closing, the Issuer entered into a swap agreement with Banco Santander S.A. in order to mitigate its interest rate risk. Additionally, the swap agreement provides liquidity to the Issuer to pay interest due on the Class A1 notes for up to three consecutive interest periods.

The DBRS public rating of Banco Santander S.A. [“A” / R1- (low) Stb - COR A (high)/R-1 (middle)] is above the First Rating Threshold as described in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology.

Deutsche Bank AG, London Branch is the Account Bank for the transaction. The DBRS private rating of Deutsche Bank AG, London Branch complies with 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.

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 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.
This may be found on www.dbrs.com at:
http://www.dbrs.com/about/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” on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.

The sources of information used for this rating include investor reports provided by Deutsche Bank AG, London Branch and servicer reports provided by by Caixa - Banco de Investimento, S.A. 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.

DBRS was not supplied with third-party assessments. However, this did not impact the rating analysis.

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 28 May 2015, when the rating of the Class A notes was confirmed at BBB (high) (sf). The lead responsibilities for this transaction have been transferred to Vito Natale.

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.

To assess the impact of the changing of the transaction parameters on the rating, DBRS considered the following stress scenarios as compared with the parameters used to determine the rating:

DBRS concludes that for the Class A notes:
-- A hypothetical downgrade of the sovereign rating of the Republic of Portugal by one notch, ceteris paribus, would lead to a downgrade of the Class A notes to BBB (sf).
-- A hypothetical downgrade of the sovereign rating of the Republic of Portugal by two notches, ceteris paribus, would lead to a downgrade of the Class A notes to BBB (low) (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: Chuck Weilamann
Initial Rating Date: 8 April 2011
Initial Rating Committee Chair: Claire Mezzanotte

Lead Surveillance Analyst: Vito Natale, Senior Vice President
Rating Committee Chair: Diana Turner, Senior Vice President

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

-- Legal Criteria for European Structured Finance Transactions.
-- Rating Portuguese Electricity Tariff Securitisations.
-- Master European Structured Finance Surveillance Methodology.
-- Unified Interest Rate Model for European Securitisations.
-- Derivative Criteria 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.