Fitch Upgrades Brazilian Securities' Master Servicer Rating to 'RMS1-'

SAO PAULO--(BUSINESS WIRE)-- Effective October 13, Fitch Ratings upgraded the Master Servicer Rating of Brazilian Securities Companhia de Securitizacao (BS) to 'RMS1-' from 'RMS2+'. The Rating Outlook is Stable.

KEY RATING DRIVERS

Management and Financial Strength: Brazilian Securities Companhia de Securitizacao (Long-term National Rating 'A+(bra)'/Stable Outlook) is one of the largest securitization companies in Brazil in terms of issuance volumes since 2009, in spite of a market share loss in 2015. Senior and middle management has substantial experience in master servicing activities related to real estate credit. The fact that BS became a business unit of Banco Pan S.A. (Pan; Long-term National Rating 'A+(bra)'/Stable Outlook) in 2012 has a positive impact on the company's capacity for sustaining or improving its performance, considering lower funding costs and some complementary activities.

Staffing and Training: BS' senior team has vast experience in the sector, and they have been part of the company for a long time. The personnel turnover remains relatively stable, although a decrease in terms of experience and average retention of professionals has taken place. The company's number of staff has decreased since 2014 mainly due to the fact that oversight of the collecting servicers and asset recovery activities were transferred to Pan. However, if the personnel directly involved with the management of BS' real estate credit portfolio are taken into account, the number of staff has actually risen and, according to Fitch, is adequate for the master servicing activities. The training of personnel has substantially improved since the rating was assigned. BS implemented specific training programs for each area.

Procedures and Controls: BS' risk management infrastructure benefits from its integration with Pan, which is responsible for the main oversight functions, especially internal audit. The audit programs have become more effective since the rating assignment. Procedures regarding the resolution of audit issues are sufficiently strict. The company presents well-documented procedures and policies that are readily available for all employees and are updated and validated on a regular basis. Procedures have continued to evolve in the last two years and are clearly above average in comparison with other securitization companies that operate as master servicers in Brazil. The automation of control of adherence to contractual provisions for securitizations has improved considerably. Currently, an automatic control system for triggers in RMBS Residential Mortgage Backed Securities) is under implementation.

Loan Administration and Servicing: Fitch considers the processes regarding acquisition of real estate financing portfolios, accounting, payment and supervision of primary servicers to be efficient. Primary servicers have many years of experience in their tasks and are connected with BS' credit management system. The investor reports, which are to a great extent automatically generated, have become more detailed. They could, however, offer more flexibility.

Non-performing Loan Management: In July, 2015, the supervision of third-party collection servicers, as well as the selling of repossessed properties, were transferred to Pan. BS is no longer involved in the day-to-day monitoring of the collection servicers. Nonetheless, the company continues following closely the performance of the credit portfolio and participates in the development of collection strategies. Pan is responsible for contracting the collection servicers. Data on overdue credits are automatically distributed to the chosen services. Pan continuously conducts performance analysis on a loan-by-loan basis and has own professionals allocated at the collection servicers. Furthermore, Pan organizes regular meetings with the management of these servicers in order to discuss collection progresses and tactics. Since Pan became responsible for the selling of repossessed housing units, the process gained scale and resources, which led to an improvement of results.

IT Systems: BS benefits from a relatively high integration of its IT systems. Improvements have been made in the last two years, including those related to the automation of investor reports and transaction controls. Currently, additional enhancements are under implementation.

RATING SENSITIVITIES

The servicer's rating may be upgraded:

--If BS' credit rating is upgraded;

--The average experience of the personnel increases;

--The reports for investors gain more flexibility;

--When the automatic control system for triggers related to RMBS is implemented.

A downgrade could take place:

--If BS' rating is downgraded, or if a rapid growth of the managed portfolio occurs and no adequate procedures and staff adjustment measures are taken.

Additional information is available at 'www.fitchratings.com'.

Additional Information at 'www.fitchratings.com' or 'www.fitchratings.com.br'.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016)

https://www.fitchratings.com/site/re/886006

Global Structured Finance Rating Criteria (pub. 27 Jun 2016)

https://www.fitchratings.com/site/re/883130

Rating Criteria for Structured Finance Servicers (pub. 01 Jul 2016)

https://www.fitchratings.com/site/re/884140

Additional Disclosures

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1013503

Endorsement Policy

https://www.fitchratings.com/regulatory

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Copyright© 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch's factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch's ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed.

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View source version on businesswire.com: http://www.businesswire.com/news/home/20161021005678/en/

Fitch Ratings
Primary Analyst
Robert Krause
Director, CFA
+55-11-4504-2211
Fitch Ratings Brasil Ltda.
Alameda Santos, 700 - 7 andar - Cerqueira Cesar
Sao Paulo - SP - CEP: 01418-100
or
Secondary Analyst
Juliana Ayoub
Senior Analyst
+55-11-4504-2200
or
Committee Chairperson
Roman Sanchez
Director
+52-81-8399-9119
or
Media Relations
Jaqueline Carvalho, Rio de Janeiro, +55 21 4503 2623
[email protected]
Elizabeth Fogerty, New York, +1 212-908-0526
[email protected]

Source: Fitch Ratings

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