Press Release

DBRS Morningstar Takes Rating Actions on Provisional Ratings to be Issued by TAGUS - Sociedade de Titularização de Créditos, S.A. (Ulisses Finance No. 3)

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May 31, 2022

DBRS Ratings GmbH (DBRS Morningstar) took the following rating actions on the provisional ratings on the notes to be issued by TAGUS - Sociedade de Titularização de Créditos, S.A. (Ulisses Finance No. 3) (the Issuer):

-- Class A Notes confirmed at AA (sf)
-- Class B Notes confirmed at A (high) (sf)
-- Class C Notes confirmed at BBB (sf)
-- Class D Notes downgraded to BB (sf)
-- Class E Notes confirmed at B (sf)
-- Class F Notes confirmed at B (low) (sf)

DBRS Morningstar did not assign provisional ratings to the Class G Notes or Class Z Notes also expected to be issued in this transaction.

The rating actions follow the final pricing of the coupons on the notes, which resulted in an overall increase in costs of approximately 0.1% per annum to the transaction compared with the initial assumptions that DBRS Morningstar used in in its cash flow analysis at the time of assigning the initial provisional ratings.

The rating on the Class A Notes addresses the timely payment of scheduled interest and the ultimate repayment of principal by the legal final maturity date. The ratings on the Class B Notes, Class C Notes, Class D Notes, Class E Notes, and Class F Notes (together with the Class A Notes, the Rated Notes) address the ultimate payment of interest (timely when most senior) and the ultimate repayment of principal by the legal final maturity date.

The provisional ratings are based on information provided to DBRS Morningstar by the Issuer and its agents as of the date of this press release. These ratings will be finalised upon a review of the final version of the transaction documents and of the relevant opinions. If the information therein were substantially different, DBRS Morningstar may assign different final ratings to the Rated Notes.

DBRS Morningstar based its ratings on a review of the following analytical considerations:
-- The transaction’s capital structure, including form and sufficiency of available credit enhancement;
-- Relevant credit enhancement in the form of subordination, a cash reserve, and excess spread;
-- Credit enhancement levels that are sufficient to support DBRS Morningstar's projected cumulative net loss assumptions under various stressed cash flow assumptions for the Rated Notes;
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors of the Rated Notes according to the terms under which they have invested ;
-- 321C's capabilities with regard to originations, underwriting, and servicing;
-- The transaction parties’ financial strength with regard to their respective roles;
-- The credit quality of the collateral, and the historical and projected performance of the originator’s portfolio;
-- DBRS Morningstar's sovereign rating on the Republic of Portugal, currently at BBB (high) with a Positive trend; and
-- The expected consistency of the transaction's legal structure with DBRS Morningstar’s “Legal Criteria for European Structured Finance Transactions methodology” and the presence of legal opinions that are expected to address the true sale of the assets to the Issuer.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
General Considerations

Environmental (E) Factors
The initial portfolio has a high exposure to older petrol and diesel engine vehicles that are unlikely to be classified as Euro 6 (58.4% of receivables are related to vehicles registered prior to 2016). DBRS Morningstar considers that risks related to greenhouse gas emissions may be associated with future restrictions on these vehicle types, including bans and additional taxes. These risks may lead to changes in expected vehicle valuations and borrower behaviours that could subsequently influence future default, recovery, and prepayment activity. DBRS Morningstar considers that this exposure combined with the longer than typical contract tenors is a relevant environmental factor within its analysis.

There were no Social or Governance factor(s) 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/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

DBRS Morningstar analysed the transaction structure 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” (29 October 2021).

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found at: https://www.dbrsmorningstar.com/about/methodologies.

DBRS Morningstar has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

An asset and a cash flow analysis were both conducted. Due to the inclusion of a revolving period in the transaction, the analysis considers potential portfolio migration based on replenishment criteria set forth in the transaction legal documents.

For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to “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/381451/global-methodology-for-rating-sovereign-governments.

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.

The sources of data and information used for these ratings include 321C and Deutsche Bank AG acting in its capacity as arranger.

DBRS Morningstar received the following data and information presented on a total portfolio basis only:
-- Dynamic and static default and recovery data from Q1 2015 and up to Q4 2021;
-- Dynamic data (including originations, outstanding balances, delinquencies, and prepayments) from January 2015 and up to January 2022;
-- Loan-level data for the proposed pool and accompanying stratification tables as at the end of March 2022; and
-- A theoretical amortisation schedule as at the end of March 2022.

DBRS Morningstar did not rely upon third-party due diligence in order to conduct its analysis.

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

DBRS Morningstar considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.

DBRS Morningstar does not audit or independently verify the data or information it receives in connection with the rating process.

These ratings concern expected-to-be-issued new financial instruments. These are the first DBRS Morningstar ratings on these financial instruments.

This is the first rating action since the Initial Rating Date.

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available on www.dbrsmorningstar.com.

To assess the impact of changing the transaction parameters on the ratings, DBRS Morningstar considered the following stress scenarios, as compared with the parameters used to determine the ratings (the base case):

-- Expected default rate: 6.9%
-- Expected recovery rate: 46.1%.
-- Loss given default (LGD): 65.9% for the AA (sf) scenario, 63.1% for the A (sf) scenario, 60.4% for BBB (sf) scenario, 57.6% for the BB (sf) scenario, 54.8% for the B (sf) scenario.

Scenario 1: A 25% increase in the expected default.
Scenario 2: A 50% increase in the expected default.
Scenario 3: A 25% increase in LGD.
Scenario 4: A 50% increase in LGD.
Scenario 5: A 25% increase in both the expected default and LGD.
Scenario 6: A 25% increase in the expected default and 50% increase in LGD.
Scenario 7: A 50% increase in the expected default and 25% increase in LGD.
Scenario 8: A 50% increase in both the expected default and LGD.

DBRS Morningstar concludes that the expected ratings under the eight stress scenarios will be:
-- Class A Notes: A (high) (sf), A (high) (sf), A (high) (sf), A (low) (sf), BBB (high) (sf), BBB (high) (sf), BBB (sf), and BBB (low) (sf).
-- Class B Notes: A (low) (sf), BBB (high) (sf), BBB (high) (sf), BBB (sf), BBB (low) (sf), BBB (sf), BBB (low) (sf), and BB (sf).
-- Class C Notes: BB (high) (sf), BB (sf), BB (high) (sf), BB (low) (sf), B (sf), BB (low) (sf), B (sf), and Below B (low) (sf).
-- Class D Notes: B (high) (sf), B (low) (sf), B (sf), Below B (low) (sf), Below B (low) (sf), Below B (low) (sf), Below B (low) (sf), and Below B (low) (sf).
-- Class E Notes and Class F Notes: Below B (low) (sf) under all scenarios.

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage: https://www.fca.org.uk/firms/credit-rating-agencies.

These ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Guglielmo Panizza, Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 17 May 2022

DBRS Ratings GmbH
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The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

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.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.

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