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TEXT-S&P lowers rtgs in Portuguese RMBS deal Atlantes Mortgage No.1

(The following statement was released by the rating agency)

Oct 04 - OVERVIEW

-- We have performed a credit and cash flow analysis on Atlantes Mortgage No.1.

-- We have lowered our ratings on the class A, B, C, and D notes for performance reasons.

-- Atlantes Mortgage No.1 PLC is backed by Portuguese first-ranking residential mortgage loans originated by BANIF Banco Internacional do Funchal.

Standard & Poor's Ratings Services today lowered its credit rating actions on Atlantes Mortgage No.1 PLC's class A, B, C, and D notes. At the same time, we have removed from CreditWatch negative our ratings on the class B, C, and D notes (see list below).

Today's rating actions follow our credit and cash flow analysis of the most recent transaction information that we have received for Atlantes Mortgages No.1.

On Jan. 13, 2012, we lowered our sovereign rating on Portugal to 'BB' from 'BBB-', due to our assessment of the ongoing systemic stresses in the eurozone (European Economic and Monetary Union) (see "Standard & Poor's Takes Various Rating Actions On 16 Eurozone Sovereign Governments").

On Jan. 23, 2012, we lowered our ratings on the class A and B notes to 'A- (sf)' from 'AA- (sf) and 'A (sf)' to reflect our criteria for nonsovereign ratings that exceed eurozone sovereign ratings (see "Various Rating Actions Taken On 340 European Structured Finance Tranches After Eurozone Sovereign Rating Actions," published on Jan. 23, 2012, and "Nonsovereign Ratings That Exceed EMU Sovereign Ratings: Methodology And Assumptions," published on June 14, 2011).

On March 7, 2012, we affirmed our 'A- (sf)' rating on the class A notes and placed our ratings on the other classes of notes on CreditWatch negative following our review of Portuguese country risk (see, "Various Rating Actions Taken On Portuguese RMBS And ABS Tranches Following Revised Assessment Of Portuguese Country Risk").

Since then, we have observed further deterioration of portfolio credit quality. In the past year, 90+ days arrears have slightly increased, excess spread has continued to rely on principal recoveries, and the reserve fund has declined to 97.47% of the target level.

Following several discussions we had with the trustee and the transaction servicer, we are revising our assumption regarding the deficiency ledger (PDL)mechanism. While we are still looking for further explanation from the transaction parties, at this stage, we have only limited and incomplete information regarding the PDL calculation performed by the transaction parties and therefore consider that the levels reported by the trustee may not incorporate all of the effective losses in the deal to date. As a consequence, we consider that the credit enhancement decreases for all of the rated notes because the deal is undercollateralized if the PDL includes all of the losses incurred in the collateral portfolio, in accordance with the transaction documents.

After applying our Portuguese residential mortgage-backed securities (RMBS) criteria, our credit analysis results show a decrease in the weighted-average foreclosure frequency (WAFF) for all rating levels since the last review. The weighted-average loss severity (WALS) for all rating levels increased, as a result of a decline in house prices in Portugal. These improving credit metrics cannot offset the weakening of the structural features due to the review of the PDL feature, in our opinion.

In our view, based on our PDL and undercollateralization assumptions, and due to the liquidity facility drawing conditions defined in the transaction documents, our cash flow analysis supports further downgrades on the notes. As a consequence, we have lowered our ratings on the class A notes to 'BBB-' from 'A- (sf)'. We have also lowered and removed from CreditWatch negative our ratings on the class B notes to 'B (sf)' from 'A- (sf)', on the class C notes to 'B- (sf)' from 'BBB (sf)', and on the class D notes to 'B-' from 'BB (sf)'.

Atlantes Mortgage No.1 is a Portuguese RMBS transaction, which closed in February 2003. It is backed by Portuguese first-ranking residential mortgage loans originated by BANIF Banco Internacional do Funchal.

RELATED CRITERIA AND RESEARCH

-- Portuguese RMBS Index Report Q2 2012: Defaults And Delinquencies Rise, But Remain Within Our Expectations, Aug. 15, 2012

-- Counterparty Risk Framework Methodology And Assumptions, May 31, 2012

-- Portuguese RMBS Index Report Q1 2012: Increased Country Risk Reflected In Declining Performance of Portuguese RMBS Transactions, May 9, 2012

-- European Structured Finance Scenario And Sensitivity Analysis: The Effects Of The Top Five Macroeconomic Factors, March. 14, 2012

-- Ratings List For Portuguese RMBS And ABS Rating Actions Following Revised Assessment Of Portuguese Country Risk, March 7, 2012

-- European Structured Finance Rating Actions Following Eurozone Sovereign Rating Actions, Jan. 23, 2012

-- Standard & Poor's Takes Various Rating Actions On 16 Eurozone Sovereign Governments, Jan. 13, 2012

-- Nonsovereign Ratings That Exceed EMU Sovereign Ratings: Methodology And Assumptions, June 14, 2011

-- Principles Of Credit Ratings, Feb. 16, 2011 -- Methodology: Credit Stability Criteria, May 3, 2010

-- Update To The Criteria For Rating Portuguese Residential Mortgage-Backed Securities, Jan. 6, 2009

-- Criteria For Rating Portuguese Residential Mortgage-Backed Securities, Aug. 6, 2002 RATINGS LIST Class Rating To From Atlantes Mortgages No.1 PLC EUR500 Million Mortgage-Backed Floating-Rate Notes Rating lowered A BBB- (sf) A- (sf) Ratings lowered And Removed From CreditWatch Negative B B (sf) A- (sf)/Watch Neg C B- (sf) BBB (sf)/Watch Neg D B- (sf) BB (sf)/Watch Neg

((Bangalore Ratings Team, Hotline: +91 80 4135 5898 satish.kb@thomsonreuters.com, Group id: BangaloreRatings@thomsonreuters.com, Reuters Messaging: satish.kb.thomsonreuters.com@reuters.net))