Fitch Affirms Bocage Mortgages Series; Outlook Stable
Bocage Mortgages No. 1 Plc:
Class A (ISIN XS0405821264): affirmed at 'A+sf'; Outlook Stable
Bocage Mortgages No. 2 Plc:
Class A (ISIN PTSSCAOM0004): affirmed at 'A+sf'; Outlook Stable
The Portuguese RMBS transactions comprise loans originated and serviced by Barclays Bank PLC (A/Stable/F1) through its Portuguese branch (Barclays Portugal).
KEY RATING DRIVERS
In Bocage Mortgages No.1, late stage arrears defined as loans with three months or more monthly instalments overdue have remained stable at 0.9% of the current portfolio balance throughout the past 12 months. In Bocage Mortgages No. 2, late stage arrears have increased to 1.0% from 0.8% of the current portfolio balance on the last interest payment date. Fitch did not receive any information on the reason for this increase. Nevertheless, these percentages are in line with the average levels among Fitch-rated Portuguese transactions (1.0%).
The pace of new defaults has not slowed in both transactions over the past 12 months. At July 2015, cumulative defaults stood at 3.7% and 3.4% of the original portfolio balances, up from 3.1% and 3.7%, respectively. The reserve fund in Bocage Mortgages No.1 was drawn on the October 2014 and January 2015 payment dates as a result of high period defaults, before increasing again to 86.8% of its target level on the most recent payment date. The reserve fund in Bocage Mortgages No.2 was drawn to 95.6% of its target level in the past 12 months, as a result of the increased provisioning.
Although the transactions have reported slightly deteriorating performance in recent payment dates, the credit enhancement in both transactions is still sufficient to warrant the affirmation.
Deterioration in asset performance may result from economic factors. A corresponding increase in new defaults and associated pressure on excess spread and reserve funds, beyond Fitch's assumptions, could result in negative rating actions.
The ratings are also sensitive to changes in Portugal's Country Ceiling (A+) and consequently changes to the highest achievable rating of Portuguese structured finance notes.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.
Fitch did not undertake a review of the information provided about the underlying asset pool ahead of the Bocage Mortgages No.1's initial closing. The subsequent performance of the transaction over the years is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable.
Prior to the closing of Bocage Mortgages No.2, Fitch did not review the results of a third party assessment conducted on the asset portfolio information.
Prior to the closing of Bocage Mortgages No.2, Fitch conducted a review of a small targeted sample of origination files and found the information to be adequately consistent with the originator's policies and procedures and the other information provided to the agency about the asset portfolio.
Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.
SOURCES OF INFORMATION
The information below was used in the analysis.
- Loan-by-loan data provided by European Data Warehouse as at 30 June 2015
- Transaction reporting provided by Citibank N.A. as at 30 June 2015
- Recovery information provided by Barclays Bank as at 13 October 2014
The EMEA RMBS Surveillance Model below was used in the analysis. Click on the link for a description of the model.
EMEA RMBS Surveillance Model EMEA RMBS Surveillance Model.
REPRESENTATIONS AND WARRANTIES
A comparison of the transaction's Representations, Warranties & Enforcement Mechanisms to those typical for the asset class is available by accessing the appendix that accompanies the initial new issue report (see Sagres STC, S.A/Bocage Mortgages No. 2 - Appendix, dated 1 October 2013 at www.fitchratings.com). In addition refer to the special report "Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions" dated 12 June 2015 available on the Fitch website.