DBRS Assigns Provisional Ratings to SAGRES - Sociedade de Titularização de Créditos, S.A. (Ulisses Finance No. 1)

DBRS Ratings Limited (DBRS) has today assigned the following provisional ratings to the notes to be issued by SAGRES - Sociedade de Titularização de Créditos, S.A. (Ulisses Finance No. 1) (the Issuer):

-- Class A Notes rated A (sf)
-- Class B Notes rated BBB (sf)
-- Class C Notes rated BB (low) (sf)

The ratings on the Class A, Class B and Class C Notes (the Notes) address the risk that the Issuer will fail to satisfy its financial obligations according to the terms under which the Notes have been issued. DBRS has not assigned provisional ratings to the Class D and Class E notes issued by Ulisses Finance No. 1.

These ratings are provisional. The ratings can be finalised upon receipt of an executed version of the governing transaction documents. To the extent that the documents and the information provided to DBRS as of this date differ from the executed version of the governing transaction documents, DBRS may assign a different final rating to the Notes.

The transaction represents the issuance of notes backed by a pool to be selected from an eligible pool of approximately EUR 141 million receivables related to auto loan contracts (the receivables or, collectively, the portfolio) granted by 321 Crédito - Instituição Financeira de Crédito, S.A. (321C or the Originator) to borrowers in the Republic of Portugal. The securitised portfolio will comprise receivables related to standard amortising, interest bearing loans granted to retail and commercial customers for the acquisition of either new or used vehicles. There is no exposure to loan contracts with balloon payments and there is no direct residual value risk.

The ratings are based on DBRS’s review of the following analytical considerations:

-- Transaction capital structure and form and sufficiency of available credit enhancement, enabling the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested.
-- Relevant credit enhancement in the form of subordination and a Cash Reserve fund.
-- Credit enhancement levels are sufficient to support the expected credit net loss assumptions projected under various stress scenarios at A (sf), BBB (sf) and BB (low) (sf) standards for the Class A, Class B and Class C Notes, respectively.
-- 321C capabilities with regard to originations, underwriting, servicing, their financial strength and trading history.
-- The credit quality of the collateral and the servicer’s ability to perform collection activities on the collateral.
-- The operational risk review conducted on 321C.
-- The transaction parties’ financial strength with regard to their respective roles.
-- The sovereign rating of the Republic of Portugal, currently at BBB (low).
-- The legal structure and presence of legal opinions addressing the true sale of assets to the Issuer and the consistency with DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

The transaction was modelled in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is: Rating European Consumer and Commercial Asset-Backed 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 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 data and information used for these ratings include performance and portfolio data relating to the auto loans originated by 321C. In particular, DBRS received dynamic and static default and recovery data on a loan by loan basis from January 2009 and up to February 2017. Origination balances and dynamic portfolio balances (including delinquencies and prepayments) were also provided, together with loan level data for the proposed pool and a set of stratification tables as at the end of February 2017 and as at the end of May 2017. All data was sourced by 321C through the transaction Arranger, Citigroup Global Markets Ltd.

DBRS did 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 considers the data and information available to it for the purposes of providing these ratings to be 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 newly issued financial instruments. These are the first DBRS ratings on these financial instruments.

Information regarding DBRS ratings, including definitions, policies and methodologies, is 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”):

-- Probability of Default (PD) Rates Used: PD Rate of 7.7% with a 25% and 50% increase on the base case PD.
-- Recovery Rate Used: 26.0%.
-- Loss Given Default (LGD) Used: Expected LGD of 74.0% with a 25% and 50% increase in the LGD.

DBRS concludes that for the Class A Notes:
-- A hypothetical increase of the base case PD by 25% or a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A Notes to BBB (high) (sf).
-- A hypothetical increase of the base case PD by 50%, ceteris paribus, would lead to a downgrade of the Class A Notes to BBB (low) (sf).
-- A hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A Notes to BBB (sf).
-- A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A Notes to BBB (low) (sf).
-- A hypothetical increase of the base case PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A Notes to BB (sf).
-- A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A Notes to BB (high) (sf).
-- A hypothetical increase of the base case PD by 50% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A Notes to BB (low) (sf).

DBRS concludes that for the Class B Notes:
-- A hypothetical increase of the base case PD by 25% or a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class B Notes to BB (high) (sf).
-- A hypothetical increase of the base case PD by 50%, ceteris paribus, would lead to a downgrade of the Class B Notes to BB (low) (sf).
-- A hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class B Notes to BB (low) (sf).
-- A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class B Notes to BB (low) (sf).
-- A hypothetical increase of the base case PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class B Notes to B (sf).
-- A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class B Notes to B (sf).
-- A hypothetical increase of the base case PD by 50% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class B Notes to below B (sf).

DBRS concludes that for the Class C Notes:
-- A hypothetical increase of the base case PD by 25% or a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class C Notes to below B (sf).
-- A hypothetical increase of the base case PD by 50%, ceteris paribus, would lead to a downgrade of the Class C Notes to below B (sf).
-- A hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class C Notes to below B (sf).
-- A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class C Notes to below B (sf).
-- A hypothetical increase of the base case PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class C Notes to below B (sf).
-- A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class C Notes to below B (sf).
-- A hypothetical increase of the base case PD by 50% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class C Notes to below B (sf).

For further information on DBRS historical default rates published by the European Securities and Markets Authority (“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.

Lead Analyst: Alexander Garrod, Senior Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 16 June 2017

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

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

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