OREANDA-NEWS. November 11, 2015.  Fitch Ratings has affirmed Tagus, STC S.A. Pelican Finance No.1's class A notes at 'Asf' with a Stable Outlook. The transaction also includes unrated class B and C notes.

The transaction is a revolving securitisation of consumer loans originated by Caixa Economica Montepio Geral (B+/Stable/B) and Montepio Credito (MC) in Portugal.

The affirmation takes into account a modification of the transaction documentation which extended the revolving period by two years until November 2017.

KEY RATING DRIVERS

Robust Performance
Current 30 days plus delinquencies stand at approximately 2% and cumulative defaults since closing (May 2014) amount to EUR2.4m, which represents around 0.8% of the initial balance. This performance data is better than Fitch's expectations when the initial rating was assigned and we have therefore revised the default lifetime base case to 8.6% from 9.4%.

Revolving Transaction
The transaction featured an 18-month revolving period, which has recently been extended for another two years. There are two early amortisation triggers in place according to which the principal deficiency ledger balance should be 0 and 90d+ delinquencies plus cumulative losses should be lower than 10% during the revolving phase. Fitch notes that the 10% performance trigger would only be breached in the event of substantial asset performance deterioration.

Low Recoveries
Low recoveries are expected under stress, given that the portfolio portion of unsecured consumer loans and of loans to finance used cars constitutes altogether 95% of the worst case portfolio, being the remaining 5% of loans to finance new cars. The weighted average base case recovery rate is 20.3%, while the recovery haircut was modelled at 39% in 'Asf' rating scenarios. Cumulative recoveries currently stand at approximately 5% of the defaulted balance, which is lower than the base case but is not representative enough given the limited elapsed time since the closing of the transaction.

Credit Enhancement
Credit enhancement (CE) is currently the same as at transaction closing and will remain so during the revolving period as per the early amortisation triggers. It is available to the class A notes through overcollateralisation (31% at closing) and through a non-amortising cash reserve (5% at closing). Excess spread has covered defaults so far and the cash reserve is fully funded.

RATING SENSITIVITIES
Fitch believes that considerable changes in the default rate could lead to negative rating action on the class A notes as follows:

Current Rating: 'Asf'
Increase base case default by 15%: 'A-sf'
Increase base case default by 30%: 'BBB+sf'
Decrease base case recovery by 15%: 'Asf'
Decrease base case recovery by 30%: 'Asf'
Increase base case default by 15%; reduce base case recovery by 15%: 'A-sf'
Increase base case default by 30%; reduce base case recovery by 30%: 'BBB+sf'

DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.

DATA ADEQUACY
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.

Prior to the transaction closing, Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, which indicated no adverse findings material to the rating analysis.

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 the European Data Warehouse as July 2015
- Transaction reporting provided by Deutsche Bank, Montepio and MC as of September 2015
- Servicer's procedures review as of October 2015

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 Tagus STC SA/Pelican Finance No. 1 - Appendix dated May 2014 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.