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Rating Action:

Moody's assigns the following definitive long-term credit ratings to the Atlantes No.1 asset-backed notes issued by GAMMA - Sociedade de Titularizacao de Creditos, S.A.

21 Apr 2011

EUR 555 Million of debt securities rated

London, 21 April 2011 -- Moody's Investors Service has today assigned the following definitive long-term credit ratings to the Atlantes No. 1 asset-backed notes issued by GAMMA - Sociedade de Titularizacao de Creditos, S.A.:

....EUR 555,300,000 Class A Asset Backed Floating Rate Notes due 2042, Assigned Aa2 (sf)

RATINGS RATIONALE

The notes are backed by a static pool of term loans extended to small and medium sized enterprises (SMEs) located in Portugal. The loans were originated by Banco Internacional do Funchal S.A. (Baa3 / P-3 both on review for possible downgrade).

The ratings take into account the credit quality of the underlying pool of SME loans, from which Moody's derived the various model parameters, the transaction structure, legal risks, as well as the uncertainty associated with the strength of the Sovereign and the Portuguese financial system as described below.

Moody's assumed a default rate of 20% on the initial portfolio which has a WAL of 7.4 years. An implied asset correlation of approximately 9% was assumed for the portfolio which equates to a CoV of 42%. A stochastic recovery rate was assumed with a mean of 35% and standard deviation of 20%. Prepayment rates were assumed to be 10%.

The default rate assumptions above are derived using Moody's "Top-Down" approach (see "Refining the ABS SME Approach: Moody's Probability of Default Assumptions In The Rating Analysis of Granular Small and Mid-sized Enterprise portfolios in EMEA" published in March 2009), whereby an average through the cycle rating for Portuguese SMEs is determined by considering historical default and insolvency data. This rating is then adjusted on a loan by loan basis by considering various factors, including the borrower sector, the repayment profile and the broader economic environment.

Approximately 95% of the assets are linked to Euribor rates of varying tenors, with reset dates at varying times, whereas the liabilities pay 3 month Euribor, resetting in February, May, August and November. This exposes the transaction to a degree of basis risk, and Moody's has treated this by applying a haircut to the asset yield. This basis risk is negative for the transaction in scenarios of steeply rising interest rates, and therefore we have considered a base haircut of 100bps to the asset yield, as well as an additional haircut of 50 bps for the first two years of the transaction. This stress is the reverse of the steeply falling rates witnessed in the second half of 2009, but continued over four years.

Moody's also considered the losses that could arise due to disruption caused by the insolvency of the Servicer / Originator. This event was assumed to have a probability equivalent to Ba2, and the severity in these instances was the equivalent of two months of cash flows. This loss may result from commingling, or payment disruption due to failure to transfer servicing smoothly to the backup servicer.

Moody's ratings of the Portuguese government and Banco Internacional do Funchal ('Banif'), the originator and servicer in this transaction, are currently under review for possible downgrade. Due to the inherent uncertainties around asset performance in the event of a systemic crisis or servicer disruption, a degree of linkage exists between the ratings of the notes, the sovereign and Banif. The combination of uncertainty and linkage results in the maximum rating achievable for this transaction being limited to Aa2.

Moody's assigned a Composite V Score of M/H to this transaction based on Moody's V Score rating methodology as published in the report "V-Scores and Parameter Sensitivities in the EMEA Small-to-Medium Enterprises ABS Sector" in June 2009 on www.moodys.com.

V Scores are a relative assessment of the quality of available credit information and the potential variability around the various inputs in determining the rating. V Scores are intended to rank transactions by the potential for significant rating changes owing to uncertainty around the assumptions.

Moody's Parameter Sensitivities: Moody's principal portfolio model inputs are the mean default probability and the mean recovery value assumption. In the Parameter Sensitivity analysis, we assumed default probability scenarios ranging from 20% to 24% and mean recovery value scenarios ranging from 40% to 30%. The 20% / 35% scenario represents the base case used to assign the ratings. The parameter sensitivity of the ratings in the transaction ranges from Aa2 to Baa1 for the Class A Notes.

Moody's Parameter Sensitivities provide a quantitative/model-indicated calculation of the number of rating notches that a Moody's-rated structured finance security may vary if certain input parameters used in the initial rating process differed. The analysis assumes that the deal has not aged and is not intended to measure how the rating of the security might migrate over time, but rather how the initial rating of the security might have differed if key rating input parameters were varied. Parameter Sensitivities are calculated by stressing key variable inputs in Moody's primary rating model.

The principal methodology used in this rating was Moody's Approach to Rating the CDOs of SMEs in Europe published in February 2007.

Other methodologies used in this rating were: "Refining the ABS SME Approach: Moody's Probability of Default Assumptions In The Rating Analysis of Granular Small and Mid-sized Enterprise portfolios in EMEA" published in March 2009, "Moody's Approach to Rating Granular SME Transactions in Europe, Middle East and Africa" published in June 2007, "V Score and Parameter Sensitivities in the EMEA Small-to-Medium Enterprise ABS Sector" published in June 2009 and "Historical Default Data Analysis for ABS Transactions in EMEA" published in December 2005.

Moody's Investors Service received and took into account a third party due diligence report on the underlying assets or financial instruments in this transaction and the due diligence report had a neutral impact on the rating.

Moody's has used a normal inverse distribution to describe the default distribution of the portfolio. This distribution is parameterized as described above in order to derive the probability of the different default scenarios on the assets. In each default scenario, the asset side cash flows are generated and passed through the liability model to generate the losses on the various classes of notes. The expected loss on each class of notes is calculated by taking the average of the note losses in each such scenario, weighted by the probability of such a scenario occurring.

In addition to the defaults generated by the asset side loss distribution, further extreme loss scenarios are assumed to occur. These scenarios include a loss of 2 months of cash flow on the occurrence of a servicer disruption which is assumed to occur with a frequency equivalent to Ba2.

The rating addresses the expected loss posed to investors by the legal final maturity of the notes. In Moody's opinion, the structure allows for timely payment of interest and principal with respect to the notes by the legal final maturity.

Moody's ratings only address the credit risk associated with the transaction. Other non-credit risks have not been addressed, but may have a significant effect on yield to investors.

REGULATORY DISCLOSURES

The rating has been disclosed to the rated entity or its designated agents and issued with no amendment resulting from that disclosure.

Information sources used to prepare the credit rating are the following: parties involved in the ratings and public information.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of assigning a credit rating.

Moody's Investors Service may have provided Ancillary or Other Permissible Service(s) to the rated entity or its related third parties within the three years preceding the Credit Rating Action. Please see the ratings disclosure page www.moodys.com/disclosures on our website for further information.

Moody's adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

London
Igor Zelezetskii
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Frankfurt am Main
Thorsten Klotz
MD - Structured Finance
Structured Finance Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's assigns the following definitive long-term credit ratings to the Atlantes No.1 asset-backed notes issued by GAMMA - Sociedade de Titularizacao de Creditos, S.A.
No Related Data.
© 2018 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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