DBRS Morningstar Upgrades and Confirms Ratings on Three Atlantes Mortgage Transactions

DBRS Ratings GmbH (DBRS Morningstar) took the following rating actions on the notes issued by GAMMA Sociedade de Titularização de Créditos, S.A. (the Issuer) with respect to three Atlantes Mortgage transactions, as follows:

Atlantes Mortgage N º 2 (AM2):
-- Class A Notes upgraded to AAA (sf) from AA (high) (sf)

Atlantes Mortgage N º 3 (AM3):
-- Class A Notes confirmed at AAA (sf)

Atlantes Mortgage N º 4 (AM4):
-- Class A Notes confirmed at AAA (sf)

All ratings address the timely payment of interest and the ultimate payment of principal on or before the respective final maturity dates.

The rating actions follow an annual review of the transactions and are based on the following analytical considerations:
-- Portfolio performances, in terms of delinquencies, defaults, and losses, as of the latest payment date for each transaction (August 2022 for AM3 and September 2022 for AM2 and AM4);
-- Updated portfolio default rate (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables; and
-- Current available credit enhancement to the Class A Notes to cover the expected losses at the AAA (sf) rating level.

The transactions are securitisations of Portuguese residential mortgage loans originated by Banco Internacional do Funchal S.A. (Banif). Banco Santander Totta S.A. (Santander Totta) services the mortgage portfolios and Banco BPI S.A. acts as backup servicer for AM3 and AM4 only. The transactions closed between March 2008 and February 2009 and are structured with separate interest and principal waterfalls, principal deficiency ledger (PDL) mechanisms, and several performance-based pro rata tests that, if breached, trigger the sequential amortisation of the notes.

PORTFOLIO PERFORMANCE
The three portfolios are performing within DBRS Morningstar’s expectations. Delinquencies are low, with 60 to 90day and 90+-day arrears ratios as follows:
-- AM2: 0.1% and 0.8%, respectively, as of August 2022 cut-off date,
-- AM3: 0.4% and 0.3%, respectively, as of July 2022 cut-off date, and
-- AM4: 0.2% and 0.3%, respectively, as of August 2022 cut-off date.

The gross cumulative principal write-offs as of the latest portfolio cut-off dates for each transaction are as follows:
-- AM2 5.2%, stable from the latest annual review of the transaction,
-- AM3: 4.8%, stable from the latest annual review of the transaction, and
-- AM4: 4.0%, stable from the latest annual review of the transaction.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of receivables and updated its base case annualised PD and LGD assumptions as follows:
-- AM2: 6.4% and 7.0%, respectively;
-- AM3: 6.5% and 6.3%, respectively;
-- AM4: 6.0% and 6.1%, respectively.

CREDIT ENHANCEMENT
Overcollateralisation of the outstanding collateral portfolios and the cash reserves provide credit enhancement to the Class A Notes across all transactions.

As of the latest payment date for each transaction, credit enhancement levels were as follows:
-- AM2: 25.4%, up from 25.1% as of the latest annual review of the transaction,
-- AM3: 35.4%, up from 35.3% as of the latest annual review of the transaction, and
-- AM4: 38.6%, up from 38.3% as of the latest annual review of the transaction.

The cash reserve of AM2 is available to cover senior fees and expenses, swap payments, and interest payments on the Class A, Class B, and Class C Notes as well as to clear the Class A, Class B, and Class C Notes’ PDL. As of September 2022, the cash reserve was at its target level of EUR 8.3 million.

The cash reserves of AM3 and AM4 are available to cover senior fees and expenses, swap payments, and interest payments on the Class A Notes as well as to clear the Class A Notes’ PDL, respectively. As of the respective last payment dates, the cash reserves of AM3 and AM4 were equal to their target levels of EUR 35.8 million and EUR 47.9 million, respectively.

HSBC Bank plc (HSBC) acts as the account bank for the transactions. Based on DBRS Morningstar’s private rating on the account bank, the downgrade provisions outlined in the transaction documents, and structural mitigants inherent in the transaction structures, DBRS Morningstar considers the risk arising from the exposure to the account bank to be consistent with the ratings assigned to the Class A Notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

NatWest Markets is the swap counterparty for the transactions. DBRS Morningstar gives no credit to the interest rate swaps in its analysis, as the swap documentations are not in line with DBRS Morningstar’s “Derivative Criteria for European Structured Finance Transactions” methodology.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors 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 (17 May 2022).

DBRS Morningstar analysed the transactions structures in Intex.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is the “Master European Structured Finance Surveillance Methodology” (19 May 2022).

Other methodologies referenced in these transactions 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 transactions in accordance with the principal methodology.

A review of the transactions’ legal documents was not conducted as the legal documents have remained unchanged since the most recent rating actions.

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/401817/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 investor reports provided by HSBC, additional performance information provided by Santander Totta, and loan-level data provided by the European DataWarehouse GmbH.

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

At the time of the initial ratings, DBRS Morningstar was not 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.

The last rating actions on these transactions took place on 28 October 2021, when DBRS Morningstar confirmed its ratings on the Class A Notes of AM2 at AA (high) (sf) and on the Class A Notes of AM3 and AM4 at AAA (sf).

The lead analyst responsibilities for these transactions have been transferred to Pascale Kallas.

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

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

-- DBRS Morningstar expected a lifetime base case PD and LGD for the pool based on a review of the current assets. 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 loans for the Issuers are as follows:
--AM2: 6.4% and 7.0%, respectively;
--AM3: 6.5% and 6.3%, respectively;
--AM4: 6.0% and 6.1%, respectively.

-- The risk sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base case assumption. Taking the Class A Notes of AM2 as an example, if the LGD increases by 50%, the rating on the Class A Notes would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Class A Notes would be expected to fall to AA (low) (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating on the Class A Notes would be expected to drop to A (sf).

AM2
Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AA (sf)
-- 50% increase in PD, expected rating of AA (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (sf)

AM3
Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AAA (sf)

AM4
Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AAA (sf)

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: Pascale Kallas, Senior Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 17 May 2012

DBRS Ratings GmbH
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60311 Frankfurt am Main - Deutschland
Tel. +49 (69) 8088 3500
Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

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

-- Master European Structured Finance Surveillance Methodology (19 May 2022), https://www.dbrsmorningstar.com/research/397033/master-european-structured-finance-surveillance-methodology.
-- Legal Criteria for European Structured Finance Transactions (22 July 2022), https://www.dbrsmorningstar.com/research/400166/legal-criteria-for-european-structured-finance-transactions.
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2022), https://www.dbrsmorningstar.com/research/402774/operational-risk-assessment-for-european-structured-finance-servicers.
-- Interest Rate Stresses for European Structured Finance Transactions (22 September 2022), https://www.dbrsmorningstar.com/research/402943/interest-rate-stresses-for-european-structured-finance-transactions.
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda (7 October 2022) and European RMBS Credit Model 1.0.0.0,
https://www.dbrsmorningstar.com/research/403744/master-european-residential-mortgage-backed-securities-rating-methodology-and-jurisdictional-addenda.
-- Derivative Criteria for European Structured Finance Transactions (20 September 2021), https://www.dbrsmorningstar.com/research/384624/derivative-criteria-for-european-structured-finance-transactions.
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (17 May 2022),
https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

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.