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CASTILHO MORTGAGES NO. 1
(Article 62 Asset Identification Code 201309TGSDBASXXN0066)
€ 1,132,800,000 Class A Mortgage Backed Securitisation Notes due October 2058
€ 199,900,000 Class B Mortgage Backed Securitisation Notes due October 2058
€ 40,500,000 Class C Notes due October 2058
€ 1 Variable Funding Note due October 2058
Issue Price: 100.00 per cent.
Admission to trading of Class A Notes
Issued by
Tagus - Sociedade de Titularização de Créditos, S.A.
(Incorporated in Portugal with limited liability under sole commercial registration and tax payer number 507 130 820 with the
share capital of €250,000.00 and head office at Rua Castilho, no. 20, Lisbon, Portugal)
The €1,132,800,000 Class A Mortgage Backed Securitisation Notes due October 2058 (the “Class A Notes”), the €199,900,000 Class B Mortgage
Backed Securitisation Notes due October 2058 (the “Class B Notes”), together, the (“Mortgage Backed Notes”), the €40,500,000 Class C Notes due
October 2058 (the “Class C Notes”) and the €1 Variable Funding Note due October 2058 (the “VFN”) of Tagus – Sociedade de Titularização de
Créditos, S.A. (the “Issuer”) are together with the Mortgage Backed Notes and Class C Notes referred to hereafter as the “Notes”. The Notes will be
issued on 25 September 2013 (the “Closing Date”). The issue price of the Mortgage Backed Notes and VFN will be 100.00 per cent. of their principal
amount. The issue price of Class C Notes will be 100 per cent. of their principal amount.
Interest on the Mortgage Backed Notes and the Class C Return Amount (if any) is payable quarterly in arrear on the 22nd day of January, April, July
and October in each year. Interest on the Mortgage Backed Notes is payable in respect of each successive Interest Period from the Closing Date at an
annual rate equal to 3 month EURIBOR plus a margin of 0.30 per cent. per annum in relation to the Class A Notes and 0.50 per cent. per annum in
relation to the Class B Notes. The Class C Notes will carry interest equating to the Class C Return Amount to the extent that the Issuer has sufficient
funds available for the purpose and under the relevant Payments Priorities. The VFN shall not bear interest.
Payments on the Notes will be made in euro after any Tax Deduction. The Notes will not provide for additional payments by way of gross-up in the
case that interest payable under the Mortgage Backed Notes or the Class C Return Amount payable under the Class C Notes is or becomes subject to
income taxes (including withholding taxes) or other taxes. See “Principal Features of the Notes – Taxes”.
The Notes will be redeemed at their Principal Amount Outstanding on the Final Legal Maturity Date to the extent not previously redeemed. The
Mortgage Backed Notes will be subject to mandatory redemption in whole or in part on each Interest Payment Date on which the Issuer has an
Available Principal Distribution Amount available for redeeming the Notes in such class. The Class C Notes will be subject to mandatory redemption
in whole or in part on each Interest Payment Date on which the Issuer has an Available Interest Distribution Amount available for redeeming the Class
C Notes (see “Principal Features of the Notes”).
Prior to the delivery of an Enforcement Notice, payments of principal on the Class A Notes and Class B Notes will be made sequentially by
redeeming all principal due on the Class A Notes and thereafter by redeeming all principal due on the Class B Notes. After the delivery of an
Enforcement Notice, payments of principal on the Notes on an Interest Payment Date will be made sequentially by redeeming all principal due on the
Class A Notes and thereafter by redeeming all principal due on the Class B Notes and thereafter by redeeming all principal due on the Class C Notes
and thereafter by redeeming all principal due on the VFN.
The Notes will be subject to optional redemption (in whole but not in part) at their Principal Amount Outstanding together with accrued interest at the
option of the Issuer on any Interest Payment Date: (a) following the occurrence of certain tax changes concerning, inter alia, the Issuer, the Mortgage
Assets and/or the Notes; (b) following the Quarterly Collection Date on which the Aggregate Principal Outstanding Balance of the Mortgage Assets is
equal to or less than 10 per cent. of the Aggregate Principal Outstanding Balance of the Mortgage Assets as at the Collateral Determination Date or (c)
following a sole Noteholder resolution for the redemption in whole of the Notes.
The main source of funds for the payment of principal and interest and other amounts due on the Notes will be the right of the Issuer to receive
payments in respect of receivables arising under a portfolio of Portuguese residential mortgages sold to it by the Originator.
This Prospectus (the “Prospectus”) comprises a prospectus for the purposes of Directive 2003/71/EC, as amended, which includes the amendments
introduced by Directive 2010/73/EU to the extent that such amendments have been implemented in the relevant member state (the “Prospectus
Directive”). The Prospectus has been approved by the Portuguese Securities Market Commission (Comissão do Mercado de Valores Mobiliários or
the “CMVM”) (the “Financial Regulator”), as competent authority under the Prospectus Directive. The Financial Regulator only approves this
Prospectus as meeting the requirements imposed under Portuguese and EU law pursuant to the Prospectus Directive. Application has been made to the
Euronext Lisbon – Sociedade Gestora de Mercados Regulamentados, S.A. for the Class A Notes to be admitted to trading on its main market Euronext
Lisbon (the “Stock Exchange”). The Class B Notes, Class C Notes and the VFN will not be listed.
The approval of this Prospectus by the CMVM as competent authority under the Prospectus Directive does not imply any guarantee as to the
information contained herein, the financial situation of the Issuer or as to the opportunity of the issue or the quality of the Notes. No application will
be made to list the Class A Notes on any other stock exchange. Particulars of the dates of, parties to and general nature of each document to which the
Issuer is a party are set out in various sections of this Prospectus.
The Class A Notes are expected to be rated by DBRS Ratings Ltd. (“DBRS”) and Fitch Rating, Ltd. (“Fitch”) (together, the “Rating Agencies”),
while the Class B Notes, Class C Notes and the VFN are expected to be unrated. It is a condition to the issuance of the Notes that the Notes receive
the ratings set out below:
DBRS Fitch
Class A Notes A (high) (sf) Asf/Outlook Negative
A credit rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by the
Rating Agencies. See “Ratings” herein. In general, European regulated investors are restricted from using a rating for regulatory purposes if such rating is not
issued by a credit rating agency established in the European Union and registered under the Regulation (EC) No. 1060/2009 of the European Parliament and of
the Council of 16 September 2009 on credit rating agencies, as amended by regulation (EC) No. 513/2011 of the European Parliament and of the Council of 11
May 2011 and by Directive 2011/61/UE of the European Parliament and of the Council of 8 June 2011 (“CRA Regulation”). DBRS and Fitch are established in
the European Union and registered under CRA Regulation. The list of registered and certified rating agencies is published by the European Securities and
Markets Authority (“ESMA”) on its website (http://www.esma.europa.eu/) in accordance with the CRA Regulation.
For a discussion of certain significant factors affecting investments in the Notes, see “Risk Factors” herein.
The date of this Prospectus is 20 September 2013.
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CONTENTS
Page
RISK FACTORS ........................................................................................................................... 2
RESPONSIBILITY STATEMENTS .......................................................................................... 20
THE PARTIES ............................................................................................................................ 23
PRINCIPAL FEATURES OF THE NOTES .............................................................................. 25
OVERVIEW OF THE TRANSACTION ................................................................................... 31
STRUCTURE DIAGRAM OF TRANSACTION ...................................................................... 41
DOCUMENTS INCORPORATED BY REFERENCE .............................................................. 42
OVERVIEW OF CERTAIN TRANSACTION DOCUMENTS ................................................ 43
USE OF PROCEEDS .................................................................................................................. 63
CHARACTERISTICS OF THE MORTGAGE ASSETS ........................................................... 64
THE ISSUER .............................................................................................................................. 69
THE ORIGINATOR ................................................................................................................... 74
ORIGINATOR'S STANDARD BUSINESS PRACTICES, SERVICING AND CREDIT
ASSESSMENT ........................................................................................................................... 79
THE ACCOUNTS BANK .......................................................................................................... 81
SELECTED ASPECTS OF LAWS OF PORTUGAL RELEVANT TO THE MORTGAGE
ASSETS AND THE TRANSFER OF THE MORTGAGE ASSETS ......................................... 82
SUMMARY OF PROVISIONS RELATING TO THE NOTES CLEARED THROUGH
INTERBOLSA ............................................................................................................................ 87
TERMS AND CONDITIONS OF THE NOTES ........................................................................ 89
TAXATION .............................................................................................................................. 125
SUBSCRIPTION AND SALE .................................................................................................. 130
GENERAL INFORMATION ................................................................................................... 135
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RISK FACTORS
RISKS SPECIFIC TO THE NOTES
Suitability
Prior to making an investment decision, prospective purchasers of the Notes should consider carefully, in
light of the circumstances and their investment objectives, the information contained in this entire
Prospectus and reach their own views prior to making any investment decision. Prospective purchasers
should nevertheless consider, among other things, the risk factors set out below.
Interest rate risk
The Mortgage Backed Notes will entitle its holder with interest payments from the Closing Date at a rate
equal to EURIBOR, plus a certain spread, which may vary from time to time. A decline of such index rate
(EURIBOR) may adversely impact the price and yield of the Mortgage Backed Notes. Accordingly,
investment in the Mortgage Backed Notes involves the risk that subsequent changes in market interest
rates may adversely affect the investors’ return. The Issuer cannot predict the evolution of the interest
rates and its impact. Additionally, as the Issuer has not entered into any interest rate swap or other
hedging arrangement, it is subject to the risk that the contractual interest rates agreed between the
Originator and the Borrowers under the Mortgage Asset Agreements might be lower than those required
by the Issuer in order to meet its payment obligations under the Notes.
Absence of a Secondary Market
There is currently no market for the Notes. There can be no assurance that a secondary market for any of
the Notes will develop or, if a secondary market does develop, that it will provide the holders of such
Notes with liquidity of investment or that it will continue for the entire life of the Notes. Consequently,
any purchaser of the Notes must be prepared to hold the Notes until final redemption. The market price of
the capital in the Notes could be subject to fluctuation in response to, among other things, variations in
the value of the Mortgage Assets (and, consequently, of the Notes), the market for similar securities,
prevailing interest rates, changes in regulation and general market and economic conditions. Application
has been made to Euronext for the Class A Notes to be admitted to trading on Euronext Lisbon and to be
listed therein.
In addition, Noteholders should be aware of the prevailing and widely reported global credit market
conditions referred to as the “credit crunch” (which continue at the date hereof), whereby there is a
general lack of liquidity in the secondary market for instruments similar to the Notes. The Issuer cannot
predict when these circumstances will change and if and when they do whether conditions of general
market illiquidity for the Notes and instruments similar to the Notes will return in the future.
Moreover, the current liquidity crisis has stalled the primary market for a number of financial products
including instruments similar to the Notes. While it is possible that the current liquidity crisis may soon
alleviate for certain sectors of the global credit markets, there can be no assurance that the market for
securities similar to the Notes will recover at the same time or to the same degree as such other recovering
global credit market sectors.
Eligibility of the Class A Notes for Eurosystem Monetary Policy
The Class A Notes are intended to be held in a manner which will allow Eurosystem eligibility. This only
means that the Class A Notes were upon issue registered with the centralised system (sistema
centralizado) and settled through the Portuguese securities settlement system (Central de Valores
Mobiliários) operated by Interbolsa – Sociedade Gestora de Sistemas de Liquidação e de Sistemas
Centralizados de Valores Mobiliários, S.A. and does not necessarily mean that the Class A Notes will be
recognised as eligible collateral for Eurosystem monetary policy and intra-day credit operations by the
Eurosystem (“Eurosystem Eligible Collateral”) either upon issue, or at any or all times during their life.
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Such recognition will depend upon satisfaction of the Eurosystem eligibility criteria as specified by the
European Central Bank (“ECB”). If the Class A Notes do not satisfy the criteria specified by the ECB,
there is a risk that the Class A Notes will not be Eurosystem Eligible Collateral. The Issuer gives no
representation, warranty, confirmation or guarantee to any investor in the Class A Notes that the Class A
Notes will, either upon issue, or at any or all times during their life, satisfy all or any requirements for
Eurosystem eligibility and be recognised as Eurosystem Eligible Collateral. Any potential investors in the
Class A Notes should make their own determinations and seek their own advice with respect to whether
or not the Notes constitute Eurosystem Eligible Collateral. In particular, please note the guideline of the
ECB dated 20 September 2011 (ECB/2011/14) which states, inter alia, that asset-backed securities issued
on or after 1 March 2011 will require 2 (two) ratings of an “AAA”/“Aaa” level at issuance. However, the
guideline of the ECB dated 2 August 2012 (ECB/2012/18) establishes that when an asset-backed security
does not comply with such rating criteria, it shall be eligible as Eurosystem Eligible Collateral as well
provided that such asset-backed security has, inter alia, two ratings of, at least, “BBB”/“Bbb” level at
issuance and at any time subsequently and satisfies all the requirements set out in article 3 of the such
guideline.
Restrictions on Transfer
The Notes have not been, and will not be, registered under the Securities Act or with any securities
regulatory authority of any state or other jurisdiction of the United States. The offering of the Notes will
be made pursuant to exemptions from the registration provisions under Regulation S of the Securities Act
and from any U.S. state securities laws. No person is obliged or intends to register the Notes under the
Securities Act or any applicable U.S. state securities laws. Accordingly, offers and sales of the Notes are
subject to the restrictions described under “Subscription and Sale”.
Limited Recourse Nature of the Notes
The Notes will be direct limited recourse obligations solely of the Issuer and therefore the Noteholders
will have a claim under the Notes against the Issuer only to the extent of the cashflows generated by the
Mortgage Asset Portfolio and any other amounts paid to the Issuer pursuant to the Transaction
Documents, subject to the payment of amounts ranking in priority to payment of amounts due in respect
of the Notes. If there are insufficient funds available to the Issuer to pay in full all principal, interest and
other amounts due in respect of the Notes at the Final Legal Maturity Date or upon acceleration
following delivery of an Enforcement Notice or upon mandatory early redemption in part or in whole as
permitted under the Conditions, then the Noteholders will have no further claim against the Issuer in
respect of any such unpaid amounts. No recourse may be had for any amount due in respect of any Notes
or any other obligations of the Issuer against any officer, member, director, employee, security holder or
incorporator of the Issuer or their respective successors or assigns.
None of the Transaction Parties (other than the Issuer) or any other person has assumed any obligation in
the event that the Issuer fails to make a payment due under any of the Notes.
Ratings are Not Recommendations
There is no obligation on the part of any of the Transaction Parties under the Notes or the Transaction
Documents to maintain any rating for itself or the Notes. A securities rating is not a recommendation to
buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by the
assigning rating organisation. Each securities rating should be evaluated independently of any other
securities rating. In the event that the rating initially assigned to the Notes is subsequently lowered,
withdrawn or qualified for any reason, no person will be obliged to provide any credit facilities or credit
enhancement to the Issuer for the original rating to be restored. Any such downgrade, withdrawal or
qualification of a rating may have an adverse effect on the liquidity and market price of the Notes.
The rating of the Class A Notes addresses the likelihood that holders of such Notes will receive timely
payments of interest and ultimate repayment of principal. The rating of “A (high) (sf)”, attributed to Class
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A Notes, is the fifth highest rating that DBRS assigns to structured notes. The rating of “A”, attributed to
Class A Notes, is the sixth highest rating that Fitch assigns to structured notes.
The ratings take into consideration the characteristics of the Mortgage Assets and the structural, legal and
tax aspects associated with the Class A Notes. However, the ratings assigned to the Class A Notes do not
represent any assessment of the likelihood or rate of principal prepayments. The ratings do not address the
possibility that the holders of the Class A Notes might suffer a lower than expected yield due to
prepayments.
The ratings address the expected loss or the default probability posed to investors by the Final Legal
Maturity Date. The Issuer has not requested a rating of the Class A Notes by any rating agency other than
the Rating Agencies; there can be no assurance, however, as to whether any other rating agency will rate
the Class A Notes or, if it does, what rating would be assigned by such other rating agency. The rating
assigned by such other rating agency to the Class A Notes could be lower than the respective ratings
assigned by the Rating Agencies.
No Gross up for Taxes
Should any withholding or deduction for or on account of any taxes, duties, assessments or governmental
charges of whatsoever nature imposed, levied, collected, withheld or assessed by any government or state
with authority to tax or any political subdivision or any authority thereof or therein having power to tax
be required to be made from any payment in respect of the Notes (see “Taxation” below), neither the
Issuer, the Common Representative nor the Paying Agent will be obliged to make any additional
payments to Noteholders to compensate them for the reduction in the amounts that they will receive as a
result of such withholding or deduction. If payments made by any party under the Mortgage Servicing
Agreement are subject to a Tax Deduction required by law, there will be no obligation on such party to
increase the payment to leave an amount equal to the payment which would have been due if no Tax
Deduction would have been required.
Compliance with Article 122a of the CRD and Bank of Portugal Notice 9/2010
Article 122a of the Capital Requirements Directive (comprising Directive 2006/48/EC and Directive
2006/49/EC, formally adopted by the Council and the European Parliament on 14 June 2006, as may be
amended or superseded from time to time, “CRD”) and Bank of Portugal Notice 9/2010 (“Notice
9/2010”) place an obligation on a credit institution that is subject to the CRD (a “CRD Credit
Institution”) to assume exposure to the credit risk of a securitisation (as defined in Article 4(36) of
Directive 2006/48/EC) to ensure that the originator, sponsor or original lender has explicitly disclosed
that it will fulfil its retention obligation referred to below, and to have a thorough understanding of all
structural features of a securitisation transaction that would materially impact the performance of their
exposures to the transaction. The Originator, which is an originator for the purposes of Article 4(41) of
Directive 2006/48/EC, will undertake in the Mortgage Sale Agreement to retain, on an ongoing basis, a
material net economic interest of not less than 5 per cent. of the nominal amount of the securitised
exposures (the “Retained Interest”). Therefore, the Originator will retain Notes in accordance with
paragraph 3 (iv) of Bank of Portugal Notice 9/2010 and article 122a, paragraph 1 (d) of CRD and such
retention equals in total at least 5 per cent. of the Mortgage Asset Portfolio and will undertake not to
hedge, sell or in any other way mitigate its credit risk in relation to such retained exposures. The retained
exposures may be reduced over time by, amongst other things, amortisation, allocation of losses or
defaults on the underlying Mortgage Assets. The Investor Report will also provide quarterly confirmation
as to the Originator’s continued holding of the original retained exposures. It should be noted that there is
no certainty that references to the Originator’s retention obligation of the Retained Interest in this
Prospectus or the undertakings in the Mortgage Sale Agreement will constitute explicit disclosure (on the
part of the Originator) or adequate due diligence (on the part of the Noteholders) for the purposes of
Article 122a and Notice 9/2010 there can be no certainty that the Originator will comply with its
undertakings set out in the Mortgage Sale Agreement.
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The Issuer does not warrant or represent to the Noteholders the compliance of such rules by the
Originator and if the Originator does not comply with its undertakings set out in the Mortgage Sale
Agreement the ability of the Noteholders to sell, and/or the price investors receive for, the Notes in the
secondary market may be adversely affected.
Article 122a of the CRD and Notice 9/2010 also place an obligation on CRD Credit Institutions, before
investing in a securitisation and thereafter, to analyse, understand and stress test their securitisation
positions, and monitor on an ongoing basis and in a timely manner performance information on the
exposures underlying their securitisation positions. The Originator has undertaken to provide, or procure
that the Servicer shall provide to the Issuer, the Common Representative and the Transaction Manager
such information as may be reasonably required by the Noteholders to be included in the Investor Report
to enable such Noteholders to comply with their obligations pursuant to the CRD and Notice 9/2010.
Where the relevant requirements of Article 122a of the CRD are not complied with in any material
respect and there is negligence or omission in the fulfilment of its due diligence obligations on the part of
a CRD Credit Institution that is investing in the Notes, a proportionate additional risk weight of no less
than 250 per cent. of the risk weight (with the total risk weight capped at 1250 per cent.) which would
otherwise apply to the relevant securitisation position shall be imposed on such credit institution,
progressively increasing with each subsequent infringement of the due diligence provisions. Noteholders
should make themselves aware of the provisions of the CRD and make their own investigation and
analysis as to the impact of the CRD on any holding of Notes.
The provisions of Article 122a of the CRD and Notice 9/2010 came into force on 31 December 2010. To
date there is limited guidance, and no regulatory or judicial determination, on the interpretation and
application of these provisions. Until additional guidance is available and such determinations are made,
there will be uncertainty about the interpretation and application of these provisions. Noteholders should
take their own advice on compliance with, and the application of, the provisions of Article 122a and
Notice 9/2010.
Estimated Weighted Average Lives of the Notes
The yield to maturity of the Notes will depend on, among other things, the amount and timing of payment
of principal (including prepayments, sale proceeds arising from the enforcement of a Mortgage Asset
Agreement and repurchases due to breaches of representations and warranties) on the Mortgage Assets
and the price paid by the holders of the Notes. Prepayment of Mortgage Assets and of Notes may reduce
the life of the Notes and returns on the investment or cause a new risk of reinvestment. Upon any early
payment by the Borrowers in respect of the Mortgage Assets the principal repayment of the Notes may be
earlier than expected and, therefore, the yield on the Notes may be adversely affected by a higher or lower
than anticipated rate of prepayment of the Mortgage Assets. The rate of prepayment of the Mortgage
Assets cannot be predicted and is influenced by a wide variety of economic and other factors, including
prevailing interest rates, the buoyancy of the residential property market, the availability of alternative
financing and local and regional economic conditions. With effect from 6 April 2007 (following the
publication of Decree-Law no. 51/2007, of 7 March) the ability of banks operating in Portugal to levy
prepayment charges on borrowers is limited. It is not yet possible to ascertain the effect, if any, that this
will have upon the rate of prepayment of the Mortgage Assets by the Borrowers. As a result of these
factors, no assurance can be given as to the level of prepayment that the Mortgage Asset Portfolio will
experience.
Additionally, it cannot be foreseen the extent in which Additional Mortgage AssetS will actually be
purchased by the Issuer during the Revolving Period, which may have an impact on the principal amounts
available to repay the Notes. As a result of these factors no assurance can be given as to the level of
prepayment that Mortgage Asset Portfolio will experience. Upon any early payment by the Borrowers in
respect of the purchased Mortgage Assets and, during the Revolving Period, in the absence of the moneys
available for such purchase being applied in the further purchase of Additional Mortgage Asset, the
6
principal repayment of the Notes may be earlier than expected and, therefore, the yield on the Notes may
be lower.
The Securitisation Law
The Securitisation Law was enacted in Portugal by Decree-Law no. 453/99, of 5 November 1999 as
amended by Decree-Law no. 82/2002, of 5 April 2002, by Decree-Law no. 303/2003, of 5 December
2003, by Decree-Law no. 52/2006, of 15 March 2006 and by Decree-Law no. 211-A/2008, of 3
November 2008 (the “Securitisation Law”). The Securitisation Tax Law was enacted by Decree-Law
no. 219/2001, of 4 August 2001, as amended by Law no. 109-B/2001, of 27 December 2001, by Decree-
Law no. 303/2003, of 5 December 2003, by Law no. 107-B/2003, of 31 December 2003 and by Law no.
53-A/2006, of 29 December 2006 (the “Securitisation Tax Law”). As at the date of this Prospectus the
application of the Securitisation Law by the Portuguese Courts and the interpretation of its application by
any Portuguese governmental or regulatory authority has been limited to a few cases, namely regarding
effectiveness of the assignment of banking credits towards debtors, despite the absence of debtor
notification and format of the assignment agreement. The Securitisation Tax Law has not been
considered by any Portuguese Court and no interpretation of its application has been issued by any
Portuguese governmental or regulatory authority. Consequently, it is possible that such authorities may
issue further regulations relating to the Securitisation Law and the Securitisation Tax Law or the
interpretation thereof, the impact of which cannot be predicted by the Issuer as at the date of this
Prospectus.
In November 2006, the CMVM submitted to public consultation a draft of a decree-law amending the
Securitisation Law. The public consultation period ended on 4 December 2006, but the consultation
paper can still be consulted at www.cmvm.pt. Notwithstanding the amendments inserted by Decree-Law
no. 211-A/2008, of 3 November, it is expected that the Securitisation Law will be subject to more
substantial amendments in the future, although the exact terms of such amendments and the relevant
enactment time cannot be ascertained.
Change of Law
The structure of the transaction and, inter alia, the issue of the Notes and ratings assigned to the Class A
Notes are based on law, tax rules, rates, procedures and administrative practice in effect at the date
hereof, and having due regard to the expected tax treatment of all relevant entities under such law and
practice. No assurance can be given that law, tax rules, rates, procedures or administration practice will
not change after the date of this Prospectus or that such change will not adversely impact the structure of
the transaction and the treatment of the Notes including the expected payments of interest and repayment
of principal in respect of the Notes.
RISKS SPECIFIC TO THE ISSUER
Liability under the Notes
The Notes are limited recourse obligations of the Issuer only and do not establish any liability or other
obligation of any other person mentioned in this Prospectus including but not limited to the Transaction
Parties. None of the foregoing or any other person has assumed any obligation in case the Issuer fails to
make a payment due under any of the Notes.
No holder of any Notes will be entitled to proceed directly or indirectly against the Transaction Parties.
No Transaction Party (other than the Issuer) or any other person has assumed any obligation in case the
Issuer fails to make a payment due under any of the Notes.
Limited Resources of the Issuer
The Notes will not be obligations or responsibilities of any of the parties to the Transaction Documents
other than the Issuer and shall be limited to the segregated portfolio of Mortgage Assets corresponding to
7
this transaction (as identified by the corresponding asset code awarded by the CMVM pursuant to article
62 of the Securitisation Law) and such other Mortgage Assets.
The obligations of the Issuer under the Notes are without recourse to any other assets of the Issuer
pertaining to other issuances of securitisation notes by the Issuer or to the Issuer’s own funds or to the
Issuer’s directors, officers, employees, managers or shareholders. None of such persons or entities has
assumed or will accept any liability whatsoever in respect of any failure by the Issuer to make any
payment of any amount due on or in respect of the Notes.
The Issuer will not have any assets available for the purpose of meeting its payment obligations under the
Notes other than the Mortgage Assets, the Collections, its rights pursuant to the Transaction Documents
and amounts standing to the credit of certain of the Transaction Accounts. The Issuer’s ability to meet its
obligations in respect of the Notes, its operating expenses and its administrative expenses is wholly
dependent upon:
(i) Collections and recoveries made from the Mortgage Asset Portfolio by the Servicer;
(ii) the Transaction Accounts arrangements; and
(iii) the performance by all of the parties to the Transaction Documents (other than the Issuer) of their
respective obligations under the Transaction Documents.
The Issuer will not have any other funds available to it to meet its obligations under the Notes or any
other payments ranking in priority to, or pari passu with, the Notes. There is no assurance that there will
be sufficient funds to enable the Issuer to pay interest on any class of Notes or, on the redemption date of
any class of Notes (whether on the Final Legal Maturity Date, upon acceleration following the delivery of
an Enforcement Notice or upon early redemption in part or in whole as permitted under the Conditions)
that there will be sufficient funds to enable the Issuer to repay principal in respect of such class of Notes
in whole or in part.
Liquidity and Credit Risk for the Issuer
The Issuer will be subject to the risk of delays in the receipt, or risk of defaults in the making, of
payments due from Borrowers in respect of the Mortgage Assets. There can be no assurance that the
levels or timeliness of payments of Collections and recoveries received from the Mortgage Assets will be
adequate to ensure the fulfilment of the Issuer’s obligations in respect of the Notes on each Interest
Payment Date or on the Final Legal Maturity Date.
To mitigate this risk, the Issuer will be entitled to use amounts credited to the Cash Reserve Account.
Credit Risk on the Transaction Parties
The ability of the Issuer to meet its payment obligations in respect of the Notes depends partially on the
full and timely payments by the Transaction Parties (other than the Issuer) of the amounts due to be paid
thereby. If any of the Transaction Parties fails to meet its payment obligations, there is no assurance that
the ability of the Issuer to meet its payment obligations under the Notes will not be adversely affected.
Counterparty and Rating Trigger Risk
The Issuer faces the possibility that a counterparty will be unable to honour its contractual obligations to
it. These parties may default on their obligations to the Issuer due to insolvency, lack of liquidity,
operational failure or other reasons. This risk may arise, for example, from entering into swap or other
derivative contracts under which counterparties have obligations to make payments to the Issuer,
executing currency or other trades that fail to settle at the required time due to non-delivery by the
counterparty or systems failure by clearing agents, exchanges, clearing houses or other financial
intermediaries. While certain Transaction Documents provide for rating triggers to address the insolvency
risk of counterparties, such rating triggers may be ineffective in certain situations. Rating triggers may
require counterparties, inter alia, to provide for collateral or to arrange for a new counterparty to become
8
a party to the relevant Transaction Document upon a rating downgrade or withdrawal of the original
counterparty. It may, however, occur that a counterparty having a requisite rating becomes insolvent
before a rating downgrade or withdrawal occurs or that insolvency occurs immediately upon such rating
downgrade or withdrawal or that the relevant counterparty does not have sufficient liquidity for
implementing the measures required upon a rating downgrade or withdrawal.
Ranking of Claims of Transaction Creditors and Noteholders
Both before and after an Event of Default or an Insolvency Event in relation to the Issuer, amounts
deriving from the Mortgage Assets will be available for the purposes of satisfying the Issuer Obligations
to the Transaction Creditors and Noteholders and to pay third party expenses in priority to the Issuer’s
obligations to any other creditor.
In addition, pursuant to the Common Representative Appointment Agreement, the Transaction
Management Agreement and the Conditions, the claims of certain Transaction Creditors and of third
party expenses creditors will rank senior to the claims of the Noteholders in accordance with the relevant
Payment Priorities (see “Overview of Certain Transaction Documents” – “Pre-Enforcement Interest
Payment Priorities” and “Post-Enforcement Payment Priorities”).
Both before and after an Event of Default or an Insolvency Event in relation to the Issuer, amounts
deriving from the assets of the Issuer other than the Mortgage Assets will not be available for satisfying
the Issuer’s obligations to the Noteholders and the other Transaction Creditors as they are legally
segregated from the Mortgage Assets.
Authorised Investments
The Issuer has the right to make certain interim investments of money standing to the credit of the Issuer
Account, Cash Reserve Account and the Liquidity Account. The investments must have appropriate
ratings depending on the term of the investment and the term of the investment instrument and must
comply with the provisions of article 3 paragraph 2 of CMVM Regulation no. 12/2002. However, it may
be that, irrespective of any such rating, such investments will be irrecoverable due to insolvency of the
debtor under the investment or of a financial institution involved or due to the loss of an investment
amount during the transfer thereof. Additionally, the return on an investment may not be sufficient to
cover fully interest payment obligations due from the investing entity in respect of its corresponding
payment obligations. In this case, the Issuer may not be able to meet all its payment obligations. None of
the Transaction Parties other than the Issuer will be responsible for any such loss or shortfall.
Common Representative’s rights under the Transaction Documents
The Common Representative has entered into the Common Representative Appointment Agreement in
order to exercise, following the occurrence of an Event of Default, certain rights on behalf of the Issuer
and the Transaction Creditors in accordance with the terms of the Transaction Documents for the benefit
of the Noteholders and the Transaction Creditors and to give certain directions and make certain requests
in accordance with the terms and subject to the conditions of the Transaction Documents and the
Securitisation Law.
The Common Representative will not be granted the benefit of any contractual rights or any
representations, warranties or covenants by the Originator or the Servicer under the Mortgage Sale
Agreement or the Mortgage Servicing Agreement but will acquire the benefit of such rights from the
Issuer through the Co-ordination Agreement. Accordingly, although the Common Representative may
give certain directions and make certain requests to the Originator and the Servicer on behalf of the
Issuer under the terms of the Mortgage Sale Agreement and the Mortgage Servicing Agreement, the
exercise of any action by the Originator and the Servicer in response to any such directions and requests
will be made to and with the Issuer only and not with the Common Representative.
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Therefore, if an Event of Default or an Insolvency Event has occurred in relation to the Issuer, the
Common Representative may not be able to circumvent the involvement of the Issuer in the transaction
by, for example, pursuing actions directly against the Originator or the Servicer under the Mortgage Sale
Agreement or the Mortgage Servicing Agreement. Although the Notes have the benefit of the
segregation provided for by the Securitisation Law, the above may impair the ability of the Noteholders
and the Transaction Creditors to be repaid amounts due to them in respect of the Notes and under the
Transaction Documents.
Enforcement of Issuer’s Obligations
The terms of the Notes provide that, after the delivery of an Enforcement Notice, payments will rank in
order of priority set out under the heading “Overview of Certain Transaction Documents – Post-
Enforcement Payment Priorities”. In the event that the Issuer’s obligations are enforced, no amount will
be paid in respect of any class of Notes until all amounts owing in respect of any class of Notes ranking
in priority to such Notes (if any) and any other amounts ranking in priority to payments in respect of such
Notes have been paid in full.
Centre of Main Interests
The Issuer has its registered office in Portugal. As a result there is a rebuttable presumption that its centre
of main interests (“COMI”) is in Portugal and consequently that any main insolvency proceedings
applicable to it would be governed by Portuguese law. In the decision by the European Court of Justice
(“ECJ”) in relation to Eurofood IFSC Limited, the ECJ restated the presumption in Council Regulation
(EC) no. 1346/2000 of 29 May 2000 on Insolvency Proceedings (as amended), that the place of a
company’s registered office is presumed to be the company’s COMI and stated that the presumption can
only be rebutted if “factors which are both objective and ascertainable by third parties enable it to be
established that an actual situation exists which is different from that which locating it at the registered
office is deemed to reflect”. As the Issuer has its registered office in Portugal, has Portuguese directors
and is registered for tax in Portugal, the Issuer does not believe that factors exist that would rebut this
presumption, although this would ultimately be a matter for the relevant court to decide, based on the
circumstances existing at the time when it was asked to make that decision. If the Issuer’s COMI is not
located in Portugal, and is held to be in a different jurisdiction within the European Union, Portuguese
Insolvency proceedings would not be applicable to the Issuer.
Limited Provision of Information
The Issuer will not be under any obligation to disclose to the Noteholders any financial or other
information received by it in relation to the Mortgage Asset Portfolio or to notify them of the contents of
any notice received by it in respect of the Mortgage Asset Portfolio. In particular it will have no
obligation to keep any Noteholder or any other person informed as to matters arising in relation to the
Mortgage Asset Portfolio, except for the information provided in the quarterly investor report concerning
the Mortgage Asset Portfolio and the Notes which will be made available to the Paying Agent on or
about each Interest Payment Date.
Projections, Forecasts and Estimates
Forward looking statements, including estimates, and any other projections in this document are forecasts
necessarily speculative in nature and some or all of the assumptions underlying the forward looking
statements may not materialise or may vary significantly from actual results.
Potential Conflict of Interest
Each of the Transaction Parties (other than the Issuer) and their affiliates in the course of each of their
respective businesses may provide services to other Transaction Parties and to third parties and in the
course of the provision of such services it is possible that conflicts of interest may arise between such
Transaction Parties and their affiliates or between such Transaction Parties and their affiliates and third
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parties. Each of the Transaction Parties (other than the Issuer) and their affiliates may provide such
services and enter into arrangements with any person without regard to or constraint as a result of any
such conflicts of interest arising as a result of it being a Transaction Party.
RISKS SPECIFIC TO THE MORTGAGE ASSET PORTFOLIO
Portuguese Economic Situation
The correction of the current macro-economic imbalances within the Portuguese economy and
increasingly demanding financial market conditions may have a negative impact on the value of
Mortgage Asset Portfolio. Following the stabilisation programme agreed in May 2011 by the Portuguese
government with the European Union (“EU”) and the International Monetary Fund (“IMF”) (the
“Stabilisation Programme”), the Portuguese economy has undergone significant change. Despite the
upshot of rising exports, dwindling public and private demand, there has been a 3.2 per cent. fall in the
Portuguese Gross Domestic Product (“GDP”), according to the European Economic Forecast for 2012.
In the 1st quarter of 2013, the financing capacity of the Portuguese economy has broadened to 1.2 per
cent. of GDP (0.3 per cent. in 2012). This development was due largely to the improvement of the Trade
Balance and Primary Balance.
The savings rate of families increased to 12.9 per cent. in the first quarter of 2013 (11.6 per cent. in
2012), variation determined by the 1.0 per cent. reduction in consumption and the increase in the
disposable income of families (range 0.5 per cent. in the first quarter of 2013). The financing capacity of
families reached 7.7 per cent. of GDP in the first quarter of 2013 (up by 1.2 percentage points from the
previous quarter).
Balances of Non-Financial Corporations and Financial Corporations stood at -2.8 per cent. and 3.4 per
cent. of GDP in the year completed in the 1st quarter of 2013, respectively.
The need for government financing increased from 6.4 per cent. in 2012 to 7.1 per cent. of GDP year
over the 1st quarter of 2013. This performance primarily reflected increases in social benefits and greater
extent, capital transfers. Referring quarterly and year values not over the quarter, the balance of the AP
stood at -10.6 per cent. of GDP in the first quarter of 2013 (-7.9 per cent. of GDP in the same quarter of
the previous year).
The Gross National Income continued to decline less pronounced (changes of -0.5 per cent. in both
cases) than that of the GDP (-0.8 per cent.).
Labor costs per unit of output maintained the downward trend although with less intensity in largely as a
result of the impact on the average wage of the economy of changes in the payment of subsidies
compared with that in 2012.
Portuguese unemployment levels have increased significantly, bringing the 2012 annual average
unemployment rate to 15.7 per cent.. This reflects the economic recession caused by austerity measures
implemented under the Stabilisation Programme.
As a result of efforts to stabilise the economy and due to the effect of negative cyclical patterns, the
public finances have deteriorated significantly. The inevitable consolidation route means that fiscal
policy will remain tight for several years to come. Furthermore, if economic activity becomes weaker
than expected additional fiscal measures may need to be implemented. Hence, there is a risk that fiscal
policy will hinder activity levels over the medium term, thus affecting, directly and indirectly, banks’
earnings and the financial condition of their customers.
Competition in the Portuguese Residential Mortgage Market
The Issuer is, among other things, subject to the risk of the contractual interest rates on the Mortgage
Loans being reduced, which may result in the Issuer having insufficient funds available to meet the
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Issuer’s commitment under the Notes and its other obligations. There are a number of competitors in the
Portuguese residential mortgage market and competition may result in lower interest rates on offer in such
market. In the event of lower interest rates, Borrowers under Mortgage Loans may seek to repay such
Mortgage Loans early, with the result that the Mortgage Asset Portfolio may not continue to generate
sufficient cashflows and ultimately the Issuer may not be able to meet its commitments under the Notes.
Current situation of construction sector in Portugal and Real Estate Prices
The Portuguese State is dealing with an economic adjustment process in the form of a reduction of the
fiscal deficit and gradual deleveraging of the private sector. This process is leading to an economic
contraction and the construction sector is one of the most evident sectors suffering with this. There is an
excess of construction in Portugal and, therefore, there is an increase of construction offer and a decrease
of demand in the construction sector. Furthermore, the general increases of taxes in Portugal and the
increase of loan spreads offered by the Portuguese banks also contribute to the contraction of the real
estate sector. This scenario impacts adversely on the prices of the real estate in Portugal. The Issuer
cannot predict the impact of such devaluation on the Mortgage Asset Portfolio.
Increase of interest rate risk
The mortgage asset loans have an interest rate equal to EURIBOR plus a certain spread which has been
agreed between each borrower and the originator, on a case by case basis. EURIBOR rate has fallen to a
historic minimum rate and an increase of such rate is now predictable. In case of increase of EURIBOR,
there is a risk of increase of payment default by borrowers which may impact the amount of the
collections and, therefore, have an adverse effect on the instruments. At this time, the issuer cannot
predict the impact of this situation to the Noteholders.
Set-off Risk
The assignment of the Mortgage Asset Portfolio to the Issuer under the Securitisation Law is not
dependent upon the awareness or acceptance of the relevant Borrowers or notice to them by the
Originator, the Issuer or the Servicer to become effective. Therefore the assignment of the Mortgage
Assets becomes effective, from a legal point of view, both between the parties and towards the
Borrowers as from the moment on which it is effective between the Originator and the Issuer, i.e., at the
moment of execution of the Mortgage Sale Agreement.
Set-off issues in relation to Mortgage Assets are essentially those associated with the possibility of a
Borrower to set off against the Issuer any amounts owed to such Borrower by the Originator on the date
of the assignment of the relevant Mortgage Loan to the Issuer. Such set-off issues will not arise where
the Originator had no obligations due and payable to the relevant Borrower at the time of the assignment
of the relevant Mortgage Asset to the Issuer which were not met in full at a later date given that the
Originator is under an obligation to transfer to the Issuer any sums which the Originator holds or receives
from any Borrower in relation to a Mortgage Asset, including sums in the possession of the Originator
and Servicer arising from set-off effected by a Borrower. The Securitisation Law does not contain any
direct provisions in respect of set-off (which therefore continues to be regulated by the Portuguese Civil
Code’s general legal provisions on this matter (see “Selected Aspects of Laws of Portugal relevant to
the Mortgage Assets and the transfer of the Mortgage Assets”).
Under the Mortgage Sale Agreement, the Originator is required to indemnify the Issuer for the amounts
set-off by the Borrowers. In the event of an insolvency of the Originator, where there are amounts due by
the Originator to the Issuer in result of such set-off by the Borrowers, there is a risk that the payments of
said amounts are delayed or become impossible. If the Servicer ceases to be rated with the Minimum
Rating, the Issuer will be required to increase the nominal value of the VFN in an amount corresponding
to the Set-off Amount, such increase to be subscribed by the VFN Noteholder, provided that the Issuer
will not be required to increase the nominal value of the VFN to the extent such increase does not
comply with the required level of the Issuer’s own funds as provided for in the Securitisation Law. The
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proceeds of the VFN will be credited to the Liquidity Account. Therefore, if an Insolvency Event has
occurred and is continuing with respect to the Originator, the Issuer will be entitled to use amounts
deposited in the Liquidity Account to mitigate the risk of the Originator failing to indemnify the Issuer
accordingly.
Commingling Risk
In accordance with the Securitisation Law, in the event of the Servicer becoming insolvent, all the
amounts which the Servicer may then hold in respect of the Mortgage Assets assigned by the Originator
to the Issuer will not form part of the Servicer’s insolvent estate and the replacement of Servicer
provisions in the Mortgage Servicing Agreement will then apply.
Notwithstanding the above, if an Insolvency Event has occurred and is continuing with respect to the
Servicer, there may be an operational risk that Collections may temporarily be, from an operational point
of view, commingled with other monies within the insolvency estate of the Servicer.
Payment Interruption Risk
In the event of the Servicer becoming insolvent, it cannot be excluded that cash transfers to the Issuer
Account may be interrupted immediately thereafter while alternative payment arrangements are made, the
effect of which could be a short-term lack of liquidity that may lead to an interruption of payments to the
Noteholders.
Interest Rate Reset Risk
Under some Mortgage Asset Agreements, the relevant Borrowers may have the right, under certain
conditions, to reset the interest rate during the life of the Mortgage Loan, including to change the
underlying index or to change a variable interest rate to a fixed interest rate and vice-versa.
Originator is Branch of a Foreign Credit Institution
The Originator and Servicer is Deutsche Bank Aktiengesellschaft, acting through its Portuguese branch.
Even though this is not the first Portuguese securitisation having as originator a Portuguese branch of a
credit institution incorporated and licensed in another EU Member State, most of the Portuguese
securitisations are entered into with Portuguese credit institutions as originators and servicers.
Accordingly, prospective investors should note that certain matters, which may be relevant to the
Originator and Servicer and its business, which in other Portuguese securitisations are governed by
Portuguese law, will be governed by German law. The treatment awarded by German law to such matters
may be more detrimental to investors than if such matters were governed by Portuguese law.
Originator’s Lending Criteria
Under the Mortgage Sale Agreement, the Originator will warrant that, as at the Closing Date, each
borrower in relation to a Mortgage Asset Agreement comprised in the Mortgage Asset Portfolio meets the
Originator’s Lending Criteria for new business in force at the time such borrower entered into the relevant
Mortgage Asset Agreement. The Lending Criteria considers, among other things, a borrower’s credit
history, employment history and status, repayment ability, debt-to-income ratio and the need for
guarantees or other collateral (see “Originator’s Standard Business Practices, Servicing and Credit
Assessment”). No assurance can be given that the Originator will not change the characteristics of its
Lending Criteria in the future and that such change would not have an adverse effect on the cash-flows
generated by any Substitute Mortgage Asset to ultimately repay the principal and interest due on the
Notes. See the description of the limited circumstances when substitute Mortgage Assets may form part
of the Mortgage Asset Portfolio in “Overview of certain Transaction Documents - Mortgage Sale
Agreement”.
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Insurance
The Originator will transfer in accordance with the Mortgage Sale Agreement to the Issuer on the
Closing Date its right, title, interest and benefit (if any) in the insurance policies connected with the
mortgaged properties and the Issuer’s interest therein will form part of the property of the Issuer.
However, as the insurance policies may not, in each case, refer to assignees in title of the Originator,
such an assignment may not provide the Issuer with an insurable interest under the relevant policies and
the ability of the Issuer to make a claim under such a policy is not certain. Further, the Originator does
not intend to notify each individual insurer of the assignment of the insurance policies to the Issuer. The
Issuer may, pursuant to a power of attorney granted to them by the Originator (on or about the Closing
Date), effect the relevant notification of the relevant insurers after the occurrence of certain events.
No Independent Investigation in relation to the Mortgage Assets
None of the Transaction Parties (other than the Originator) has undertaken or will undertake any
investigations, searches or other actions in respect of any Borrower, Mortgage Asset or any historical
information relating to the Mortgage Assets and each will rely instead on the representations and
warranties made by the Originator in relation thereto set out in the Mortgage Sale Agreement.
Reliance on the Originator’s Representations and Warranties
If any of the Mortgage Assets fails to comply with any of the Mortgage Asset Warranties, which could
have a material adverse effect on (i) the relevant Mortgage Asset Agreement, (ii) the relevant Mortgage
Asset or (iii) the Receivables, the Originator is obliged to hold the Issuer harmless against any losses
which the Issuer may suffer as a result of such failure. The Originator may discharge this liability either
by, at its option, repurchasing or procuring a third party to repurchase such Mortgage Asset from the
Issuer for an amount equal to the then Principal Outstanding Balance of such Mortgage Asset plus
accrued interest or making an indemnity payment equal to such amount or, in certain circumstances,
substituting or procuring the substitution of a similar loan and security in replacement for any Mortgage
Asset in respect of which any Mortgage Asset Warranty is breached, provided that this shall not limit any
other remedies available to the Issuer if the Originator fails to discharge such liability. The Originator is
also liable for any losses or damages suffered by the Issuer as a result of any breach or inaccuracy of the
representations and warranties given by the Originator in relation to the Originator or the entering into by
the Originator of any of the Transaction Documents. The Issuer’s rights arising out of breach or
inaccuracy of the representations and warranties are however unsecured and, consequently, a risk of loss
exists if a Mortgage Asset Warranty is breached and the Originator is unable to repurchase or cause a
third party to purchase or substitute the relevant Mortgage Asset or indemnify the Issuer.
Limited Liquidity of the Mortgage Assets on Liquidation of Issuer
In the event of occurrence of an Event of Default and the delivery of an Enforcement Notice to the Issuer
by the Common Representative, the disposal of the Mortgage Assets of the Issuer (including its rights in
respect of the Mortgage Assets) is restricted by Portuguese law in that any such disposal will be
restricted to a disposal to the Originator or to another STC or FTC established under Portuguese law. In
such circumstances, the Originator has no obligation to repurchase the Receivables from the Issuer under
the Transaction Documents and there can be no certainty that any other purchaser could be found as there
is not, at present, and the Issuer believes it is unlikely to develop, an active and liquid secondary market
for receivables of this type in Portugal.
In addition, even if a purchaser could be found for the Mortgage Assets, the amount realised by the Issuer
in respect of their disposal to such purchaser in such circumstances may not be sufficient to redeem all of
the Notes in full at their then Principal Amount Outstanding together with accrued interest.
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Reliance on Performance by Servicer
The Issuer has engaged the Servicer to administer the Mortgage Asset Portfolio pursuant to the Mortgage
Servicing Agreement. While the Servicer is under contract to perform certain services under the Mortgage
Servicing Agreement, there can be no assurance that it will be willing or able to perform such services in
the future. In the event the appointment of the Servicer is terminated by reason of the occurrence of any
of the events specified in Clause 14 (Servicer Events) of the Mortgage Servicing Agreement (each a
“Servicer Event”) the occurrence of a Servicer Event, there can be no assurance that the transition of
servicing will occur without adverse effect on investors or that an equivalent level of performance on
collections and administration of the Mortgage Assets can be maintained by a successor servicer after any
replacement of the Servicer, as many of the servicing and collections techniques currently employed were
developed by the Servicer.
If the appointment of the Servicer is terminated, the Issuer shall endeavour to appoint a substitute
servicer. No assurances can be made as to the availability of, and the time necessary to engage, such a
substitute servicer.
The Servicer may not resign its appointment as Servicer without a justified reason and furthermore
pursuant to the Mortgage Servicing Agreement, such resignation shall only be effective if the Issuer has
appointed a substitute servicer. The appointment of a substitute servicer may not result in the downgrade
of the rating of the Class A Notes, as provided for under the Mortgage Servicing Agreement, and is
subject to the prior approval of the CMVM. Notice of the appointment of the substitute servicer shall be
delivered by the Issuer to the Rating Agencies, the CMVM, the Bank of Portugal and each of the other
Transaction Parties.
Change of Counterparties
The parties to the Transaction Documents who receive and hold monies pursuant to the terms of such
documents (such as the Accounts Bank and Collections Account Bank) are required to satisfy certain
criteria in order to continue to receive and hold such monies.
These criteria include requirements in relation to the short-term and the long-term, unguaranteed and
unsecured ratings ascribed to such party by the Rating Agencies. If the party concerned ceases to satisfy
the applicable criteria, including such ratings criteria, then the rights and obligations of that party are
required to be transferred to another entity which does satisfy the applicable criteria, except if the relevant
counterparty obtains a guarantee from an appropriately rated guarantor which complies with such criteria.
In the circumstances where the rights and obligations of the party concerned are transferred to another
entity, the terms agreed with the replacement entity may not be as favourable as those agreed with the
original party pursuant to the Transaction Documents.
In addition, should the applicable criteria cease to be satisfied, then the parties to the relevant Transaction
Document may agree to amend or waive certain of the terms of such document, including the applicable
criteria, in order to avoid the need for a replacement entity to be appointed. The consent of Noteholders
may not be required in relation to such amendments and/or waivers.
Geographical Concentration of the Mortgage Assets
The security for the Notes may be affected by, among other things a decline in real estate values. No
assurance can be given that values of the Properties have remained or will remain at their levels on the
dates of origination of the related Mortgage Loans. The residential real estate market in Portugal in
general, or in any particular region may from time to time experience a decline in economic conditions
and housing markets and, consequently, may experience higher rates of loss and delinquency on mortgage
loans generally. Although the Borrowers are located throughout Portugal, the Borrowers may be
concentrated in certain locations, such as densely populated areas (see “Characteristics of the Mortgage
Assets - Geographic Region”). Any deterioration in the economic condition of the areas in which the
15
Borrowers are located, or any deterioration in the economic condition of other areas that causes an
adverse effect on the ability of the Borrowers to repay the Mortgage Assets could increase the risk of
losses on the Mortgage Assets. A concentration of Borrowers in such areas may therefore result in a
greater risk of loss than would be the case if such concentration had not been present. Such losses, if they
occur, could have an adverse effect on the yield to maturity of the Notes as well as on the repayment of
principal and interest due on the Notes.
Consumer Protection
Portuguese law (namely the Portuguese Constitution, the Código Civil enacted by Decree-Law no. 47344,
of 25 November 1966 (as amended) (the Portuguese Civil Code) and the Lei de Defesa do Consumidor
enacted by Law no. 24/96, of 31 July 1996 (as amended) (the Law for Consumer Protection)) contains
general provisions in relation to consumer protection. These provisions cover general principles of
information disclosure, information transparency (contractual clauses must be clear, precise and legible)
and a general duty of diligence, neutrality and good faith in the negotiation of contracts.
Decree-Law no. 446/85, of 25 October 1985, as amended by Decree-Law no. 220/95, of 31 August 1995,
Decree-Law no. 249/99, of 7 July 1999 (which implemented Directive 93/13/CEE, of 5 April 1993) and
Decree-Law no. 323/2001, of 17 December 2001 known as the Lei das Cláusulas Contratuais Gerais (the
Law of General Contractual Clauses) prohibits, in general terms, the introduction of abusive clauses in
contracts entered into with consumers. Pursuant to this law, a clause is in general deemed to be abusive if
such clause has not been specifically negotiated by the parties and leads to an unbalanced situation insofar
as the rights and obligations of the consumer (regarded as the weaker party) and the rights and obligations
of the counterparty (regarded as the stronger party) are concerned in violation of contractual good faith.
The introduction of clauses that are prohibited will cause such clauses to be considered null and void.
Decree-Law no. 359/91, of 21 September 1991 (as amended) which is applicable to loan agreements
entered into prior to 1 July 2009, as well as Decree-Law no. 133/2009, of 2 June 2009, which has
replaced Decree-Law no. 359/91 as of 1 July 2009, set forth relevant regulations for consumer protection
by providing that a contract may be null and void if inter alia (i) it does not establish the annual global
costs rate (the Taxa Anual de Encargos Efectiva Global) related to the loan in question. Decree-Law no.
359/91 provided for a cancellation period provision pursuant to which a contract is not effective until 7
(seven) business days from signing thus allowing the consumer to cancel the contract during such period.
Decree-Law no. 133/2009 has extended such period to 14 (fourteen) calendar days, with effect from 1
July 2009 onwards. Regarding early termination fees and provided the early termination occurs during a
fixed rate interest period, Decree-Law no. 133/2009 stipulates, inter alia, that restrictions on the early
termination fee payable cannot be greater than the interest amount that would be payable by the relevant
obligor from the early termination date to the date on which the fixed rate would cease to apply.
The foregoing should not be viewed as an exhaustive description of the provisions which could be
invoked in respect of consumer protection. Although the Originator has represented and warranted to the
Issuer that the Mortgage Assets comply with all applicable Portuguese laws, there can be no assurance
that a court in Portugal would not apply the relevant consumer protection laws to vary the terms of a loan
or to relieve a Borrower of its obligations thereunder.
On the same basis, Decree-Law no. 240/2006, of 22 December, and Decree-Law no. 51/2007, of 7 March
(as amended), established the rounding criteria that must be applied to interest rates established for
mortgage loans granted by credit institutions to their clients as well as the maximum penalties that may be
applied in situations of early repayment of such mortgage loans.
Borrowers
The Mortgage Loans in the Mortgage Asset Portfolio were originated in accordance with the Lending
Criteria set out in “Originator’s Standard Business Practices, Servicing and Credit Assessment”.
General economic conditions and other factors (which may or may not affect property values), such as
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losses of subsidies or interest rate rises, may have an impact on the ability of Borrowers to meet their
repayment obligations under the Mortgage Loans. Loss of earnings, illness, divorce and other similar
factors may lead to an increase in delinquencies and insolvency filings by Borrowers, which may lead to
a reduction in payments by such Borrowers on their Mortgage Loans and could reduce the Issuer’s ability
to service payments on the Notes.
However, such criteria take into account, inter alia, a potential borrower’s credit history, employment
history and status, repayment ability and debt-to-income ratio and are utilised with a view, in part, to
mitigate the risks in lending to borrowers.
Segregation of Mortgage Assets and the Issuer Obligations
The Notes and the obligations owing to the Transaction Creditors will have the benefit of the segregation
provided for in the Securitisation Law. Accordingly, the Issuer Obligations are limited, in accordance
with the Securitisation Law, solely to the assets of the Issuer which collateralise the Notes, specifically
the Mortgage Assets.
Both before and after any Event of Default or Insolvency Event in relation to the Issuer, the Mortgage
Assets will be available for satisfying the obligations of the Issuer to the Noteholders in respect of the
Notes and to the Transaction Creditors pursuant to the Transaction Documents.
The Mortgage Assets and all amounts deriving therefrom will not be available to creditors of the Issuer
other than the Noteholders and the Transaction Creditors and to pay third party expenses and may only
be used by the Noteholders and the Transaction Creditors in accordance with the terms of the Transaction
Documents including the relevant Payment Priorities.
Equivalent provisions, as required by the Securitisation Law, will apply in relation to any other series of
notes issued by the Issuer.
Assignment of Mortgage Asset Portfolio not affected by Originator Insolvency
Pursuant to paragraph 4 of article 6 of the Securitisation Law, and considering that the Originator is a
credit institution, the assignment of the Mortgage Asset Portfolio to the Issuer under the Securitisation
Law is not dependent upon the awareness or acceptance of the relevant Borrowers or notice to them by
the Originator, the Issuer or the Servicer to become effective. Therefore the assignment of the Mortgage
Loans (but not the security under the Mortgages (see “Selected Aspects of Laws of Portugal relevant
to the Mortgage Assets and the transfer of the Mortgage Assets”)) becomes effective, from a legal
point of view, both between the parties and towards the Borrowers as from the moment on which it is
effective between the Originator and the Issuer.
In the event of the Originator becoming insolvent, the Mortgage Sale Agreement, and the sale of the
Mortgage Asset Portfolio conducted pursuant to it, will not be affected and therefore will neither be
terminated nor will such Mortgage Asset Portfolio form part of the Originator’s insolvent estate, save if a
liquidator appointed to the Originator or any of the Originator’s creditors produces evidence that the sale
of the Mortgage Asset Portfolio under the Mortgage Sale Agreement was prejudicial to the insolvency
estate and that the Originator and the Issuer have entered into and executed such agreement in bad faith,
that is, with the intention of defrauding creditors.
The sale of the Ancillary Rights capable of registration with a public registry will only be enforceable
against a third party acting in good faith upon registration of the act at the relevant registry. No such
registration will take place prior to a Notification Event.
Variations of the terms of each Mortgage Asset Agreement under the Law
On 12 November 2012, Laws 58/2012 and 59/2012, of 9 November 2012 entered into force creating a
special regime applicable to borrowers of credit institutions which are in a very difficult financial
position.
17
Under such Law 58/2012 if (i) a borrower fails to comply with any of its obligations under a loan
agreement to finance the acquisition or construction of a permanent house of the members of family
aggregate; (ii) there is a mortgage over such property; (iii) the family aggregate is in a very difficult
financial position and (iv) the value of the property does not exceed the amounts provided for in law,
credit institutions will be required to renegotiate such loan agreements and apply one of the recovery
procedures expressly foreseen including reducing applicable interest rates and extending maturities up to
a maximum of fifty years.
Law 59/2012, of 9 November 2012 amends Decree-Law 349/98, of 11 November on granting of credit to
finance acquisition or construction of house, creating a special regime on credit mortgages and
limitations on the resolution of the credit agreements in case of default.
On 1 January 2013, Decree-Law no. 227/2012, of 25 October, also entered into force, under which a set
of measures that aim at the prevention of default (default risk management by credit institutions) were
created, as well as non-judicial regularization procedures for defaulted cases.
The procedures imposed by Decree-Law 227/2012 are designated by PARI and PERSI. The PARI stands
for “Plan of Action for the Risk of Delinquency” which encompasses a set of procedures and fast
reaction measures to attempt the prevention of the default in credit to private households. The PERSI on
the other hand stands for Procedure for the Extrajudicial Settlement of Cases in Delinquency and aims to
promote renegotiations with clients in order to solve cases in early delinquency (31-60 dpd) through a
standard process including assessing the financial situation of the clients and any client’s proposals
appropriate to their financial situation.
Considering that the bank already performed and was open to renegotiate loans with clients either to
solve delinquency (during Collections management of client) or to avoid it in the future (during front-
office management of client), the impact of this new law in the Credit Process is very small and the
change is assessed as insignificant. Consequently, only small differences related to timelines and
reporting to BoP have been imposed.
The most significant impositions made by Decree-Law 227/2012 have to do with the obligation to
proactively trying to renegotiate loans in order to either avoid future default of have an extrajudicial
settlement. As these impositions were already part of DBAG Portugal client management process, in
reality the main changes that have been made are:
Under the PARI the implementation of an alarm system for private clients and the requirement to
communicate with clients flagged by it (done by front-office)
The impossibility to terminate a contract before the client has gone through an unsuccessful
PERSI irrespective of the fact that the client might have already been in and out of a PERSI
previously
Such rules are mandatory for lending credit institutions and at this time, it is not possible to
anticipate the impact that such rules will have in the mortgage loan agreements market and, in
particular, in mortgage loan securitisation transactions. The Transaction Documents set certain
limitations on the ability of the Servicer to make variations to the Mortgage Assets which, if exceeded,
will require the Originator to repurchase or substitute the relevant Mortgage Assets.
Changes to the Basel Capital Accord
The original Basel Accord was agreed in 1988 by the Basel Committee on Banking Supervision (the
“Committee”). The 1988 Accord, now referred to as Basel I, helped to strengthen the soundness and
stability of the international banking system as a result of the higher capital ratios that it required. The
Committee published the text of the new capital accord under the title: “Basel II; International
18
Convergence on Capital Measurement and Capital Standards: a revised framework” (the “framework”)
in June 2004. In November 2005, the Committee issued an updated version of the framework. On 4 July
2006, the Committee issued a comprehensive version of the framework. This framework places enhanced
emphasis on market discipline and sensitivity to risk and serves as a basis for national and supra-national
rule-making and approval processes for banking organisations. The framework was put into effect for
credit institutions in Europe via the recasting of a number of prior directives. This consolidating directive
is referred to as the EU Capital Requirements Directive (“CRD”). Member states were required to
transpose, and the financial services industry to apply, the CRD by 1 January 2007.
Given that the framework is not self-implementing, implementation dates in participating countries are
dependent on the relevant national implementation process in those countries.
In April 2008, the Basel Committee announced its intention to strengthen certain aspects of the
framework. It has published proposals for significant changes and there have been calls from various
regulators for further revisions. The European Commission has also proposed changes to the CRD and
amendments were put forward to the European Parliament and the Council of Ministers for consideration
in October 2008.
This information includes, but is not limited to, general information in respect of the supplier and the
financial service; contractual terms and conditions; and whether or not there is a right of cancellation.
The framework will affect risk weighting of the Notes for investors subject to the new framework
following implementation (whether via the CRD or otherwise by non-EU regulators). Consequently,
Noteholders should consult their own advisers as to the consequences to and effect on them of the
application of the framework, as implemented by their own regulator, to their holding of Notes. The
Issuer is not responsible for informing Noteholders of the effects of the changes to risk weighting which
will result for investors from the adoption by their own regulator of the framework (whether or not
implemented by them in its current form or otherwise).
Additionally, the Committee has been developing a comprehensive set of reform measures known as
“Basel III” in order to further strengthen the regulation, supervision and risk management of the banking
sector. These measures aim, notably, at improving the banking sector’s ability to absorb shocks arising
from financial and economic stress, improving risk management and governance and strengthening
banks’ transparency and disclosures.
The Committee’s oversight body – the Group of Central Bank Governors and Heads of Supervision
(“GHOS”) – agreed on the broad framework of Basel III in September 2009 and the Committee set out
concrete proposals in December 2009. These consultation documents formed the basis of the
Committee’s response to the financial crisis and are part of the global initiatives to strengthen the
financial regulatory system that have been endorsed by the G20 leaders. The GHOS subsequently agreed
on key design elements of the reform package at its July 2010 meeting and on the calibration and
transition to implement the measures at its September 2010 meeting. On 12 November 2010, leaders of
the G20 countries endorsed the agreement proposed by the Committee.
In 12 September 2010, the GHOS announced a substantial strengthening of existing capital requirements.
The Committee’s package of reforms will increase the minimum common equity requirement from 2 per
cent. to 4.5 per cent.. In addition, banks will be required to hold a capital conservation buffer of 2.5 per
cent. to withstand future periods of stress bringing the total common equity requirements to 7 per cent..
This reinforces the stronger definition of capital agreed by Governors and Heads of Supervision in July
that year and the higher capital requirements for trading, derivative and securitisation activities to be
introduced at the end of 2011.
The new capital reserve rules are expected to be implemented in stages, between 1 January 2014 and 1
January 2019 (and subsequently transposed into the national laws), with a phase-in period beginning in
2014, the common equity requirements coming into force in 2015; the completing measures in 2019.
19
On 26 October 2011, the European Banking Authority issued a Methodological Note, in accordance with
which, by June 2012, the Core Tier 1 capital ratio shall be assessed after the removal of the prudential
filters on sovereign assets in the Available-for-Sale portfolio and prudent valuation of the exposure to
sovereign debt, reflecting current market prices.
No predictions can be made as to the precise effects of such matters on the Originator and Servicer and,
therefore, at this stage, it is not possible to predict if such changes will impact on the Mortgage Asset
Portfolio.
The Issuer believes that the risks described above are certain of the principal risks inherent in the
transaction for Noteholders but the inability of the Issuer to pay interest or repay principal on the
Notes may occur for other reasons and, accordingly, the Issuer does not represent that the above
statements of the risks of holding the Notes are comprehensive. While the various structural elements
described in this Prospectus are intended to lessen some of these risks for Noteholders, there can be no
assurance that these measures will be sufficient or effective to ensure payment to the Noteholders of
interest or principal on such Notes on a timely basis or at all.
20
RESPONSIBILITY STATEMENTS
The Issuer, Mr. Bernardo Luís de Lima Mascarenhas Meyrelles do Souto, Mr. José Francisco
Gonçalves de Arantes e Oliveira and Jerome David Beadle, in their capacities as directors of the Issuer
are responsible for the information contained in this document. To the best of the knowledge and belief of
the Issuer and of the aforementioned individuals, the information contained in this document is in
accordance with the facts and does not omit anything likely to affect the import of such information. This
statement is without prejudice to any liability which may arise under Portuguese law. The Issuer further
confirms that this Prospectus contains all information which is material in the context of the issue of the
Notes, that such information contained in this Prospectus is true and accurate in all material respects and
is not misleading, that the opinions and the intentions expressed in it are honestly held by it and that there
are no other facts the omission of which makes this Prospectus as a whole or any of such information or
the expression of any such opinions or intentions misleading in any material respect and all proper
enquiries have been made to ascertain and to verify the foregoing.
To the extent such responsibility is imposed by law, Mr. Joaquim António Furtado Baptista, who
resigned its office as director of the Issuer with effects, under the law, from the end of June 2013, is
responsible for the accuracy of the financial statements of the Issuer, contained in this document, required
by law or regulation to be prepared up to the date of effectiveness of his resignation.
DBAG Portugal, in its capacity as the Originator and the Servicer accepts responsibility for the
information in this document relating to itself, the description of its rights and obligations in respect of,
and all information relating to the Mortgage Assets, the Mortgage Sale Agreement, the Mortgage
Servicing Agreement and all information relating to the Mortgage Asset Portfolio in the sections headed
“Characteristics of the Mortgage Assets”, “Originator's Standard Business Practices, Servicing and
Credit Assessment” and “The Originator”, all information relating to the Mortgage Assets in any
Quarterly Servicing Report (together the “Originator Information“) and to the best of its knowledge and
belief, such Originator Information is in accordance with the facts and does not omit anything likely to
affect the import of such information. No representation, warranty or undertaking, express or implied, is
made and no responsibility or liability is accepted by the Originator as to the accuracy or completeness of
any information contained in this Prospectus (other than the Originator Information) or any other
information supplied in connection with the Notes or their distribution.
DBAG Portugal, in its capacity as the Accounts Bank accepts responsibility for the information in this
document relating to itself in this regard in the section headed “The Accounts Bank” (the “Accounts
Bank Information“) and to the best of its knowledge and belief, such Accounts Bank Information is in
accordance with the facts and does not omit anything likely to affect the import of such information. No
representation, warranty or undertaking, express or implied, is made and no responsibility or liability is
accepted by the Accounts Bank as to the accuracy or completeness of any information contained in this
Prospectus (other than the Accounts Bank Information) or any other information supplied in connection
with the Notes or their distribution.
The members of the supervisory board of the Issuer, Mr. Manuel Corrêa de Barros de Lancastre, Mr.
João Alexandre Marques De Castro Moutinho Barbosa, Ms. Maria da Conceição Romão Teixeira
Carrapeta in their capacities as members of the supervisory board of the Issuer are responsible for the
accuracy of the financial statements of the Issuer required by law or regulation to be prepared as from the
date on which begun their term of office following their appointment as members of the supervisory
board of the Issuer. To the best of the knowledge and belief of the supervisory board of the Issuer and of
all the aforementioned individuals, the financial statements contained in this document are in accordance
with the facts and do not omit anything likely to affect the import of such information. No representation,
warranty or undertaking, express or implied, is made and no responsibility or liability is accepted by Mr.
Manuel Corrêa de Barros de Lancastre, Mr. João Alexandre Marques De Castro Moutinho Barbosa or
Ms. Maria da Conceição Romão Teixeira Carrapeta as to the accuracy or completeness of any
21
information contained in this Prospectus (other than the aforementioned financial information) or any
other information supplied in connection with the Notes or their offering.
KPMG & Associados – SROC, S.A., hereby represented by Ms. Inês Maria Bastos Viegas Clare
Neves Girão de Almeida and Vítor Manuel da Cunha Ribeirinho, in their capacity as representative
of the independent auditor of the Issuer for the years 2011 and 2012, respectively, within the terms of the
Código das Sociedades Comerciais, is responsible for the independent auditors’ reports issued in
connection with the audited financial statements prepared in accordance with the International Financial
Reporting Standards (“IAS/IFRS”) as adopted by the European Union (“EU”) for the years ended on 31
December 2011 and 31 December 2012, which are incorporated by reference herein and confirms that the
financial information relating to the Issuer in the section headed “Documents Incorporated by
Reference” including the independent auditor’s report, the balance sheet and profit and loss information
and accompanying notes (incorporated by reference) has been, where applicable, accurately extracted
from the audited financial statements for the relevant years. To the best of the knowledge and belief of the
independent auditor, the audited financial statements incorporated by reference herein are in accordance
with the facts and do not omit anything likely to affect the import of such information. No representation,
warranty or undertaking, express or implied, is made and no responsibility or liability is accepted by
KPMG & Associados – SROC, S.A. as to the accuracy or completeness of any information contained in
this Prospectus or any other information supplied in connection with the Notes or their offering, other
than the independent auditors’ reports issued in connection with the audited financial statements for the
years ended on 31 December 2011 and 31 December 2012.
Vieira de Almeida & Associados - Sociedade de Advogados, RL, as legal advisors to the Originator as to
Portuguese law, accepts responsibility for the Portuguese legal matters included in the chapter “Selected
Aspects of Portuguese Law Relevant to the Mortgage Assets and the Transfer of Mortgage Assets”
Further to subparagraph b) of article 243 of the Portuguese Securities Code, the right to compensation
based on the aforementioned responsibility statements is to be exercised within 6 (six) months following
the knowledge of a shortcoming in the contents of the Prospectus and ceases, in any case, 2 (two) years
following (i) disclosure of the admission to trading Prospectus (which contains a shortcoming) or (ii)
amendment that contains the defective information or forecast.
The Notes will be obligations solely of the Issuer and will not be obligations of, and will not be
guaranteed by, and will not be the responsibility of, any other entity. In particular, the Notes will not be
the obligations of, and will not be guaranteed by the Originator, the Servicer, the Accounts Bank, the
Common Representative, the Transaction Manager, the Paying Agent, the Agent Bank or the Arranger
(together with the Issuer, the “Transaction Parties“).
Selling Restrictions Summary
This Prospectus does not constitute an offer of, or an invitation by or on behalf of any of the Transaction
Parties to subscribe for or purchase any of the Notes and this document may not be used for or in
connection with an offer to, or a solicitation of an offer by, anyone in any jurisdiction or in any
circumstances in which such offer or solicitation is not authorised or is unlawful.
The distribution of this Prospectus and the offering, sale and delivery of the Notes in certain jurisdictions
is restricted by law. Persons into whose possession this Prospectus comes are required by the Issuer and
the Arranger to inform themselves about and to observe any such restrictions. For a description of certain
restrictions on offers, sales and deliveries of the Notes and on distribution of this Prospectus and other
offering material relating to the Notes, see “Subscription and Sale” herein.
Representations about the Notes
No person has been authorised to give any information or to make any representations, other than those
contained in this Prospectus, in connection with the issue and sale of the Notes and, if given or made,
22
such information or representations must not be relied upon as having been authorised by any of the
Transaction Parties. Neither the delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that the information herein is correct as of any time subsequent to
the date hereof.
Other than the approval of this Prospectus by the Financial Regulator, no action has been taken by the
Issuer or the Arranger other than as set out in this Prospectus that would permit a public offer of the Notes
in any country or jurisdiction where action for that purpose is required. Accordingly, no Notes may be
offered or sold, directly or indirectly, and neither this Prospectus (nor any part hereof) nor any prospectus,
form of application, advertisement or other offering materials may be issued, distributed or published in
any country or jurisdiction except in circumstances that will result in compliance with applicable laws,
orders, rules and regulations, and the Issuer and the Arranger have represented that all offers and sales by
them have been made on such terms.
Each person receiving this Prospectus shall be deemed to acknowledge that (a) such person has not relied
on the Arranger or any person affiliated with the Arranger in connection with its investigation of the
accuracy of such information or its investment decision, and (b) no person has been authorised to give
any information or to make any representation concerning the Notes offered hereby except as contained in
this Prospectus, and, if given or made, such other information or representation should not be relied upon
as having been authorised by the Issuer or the Arranger.
If you are in any doubt about the contents of this document you should consult your stockbroker, bank
manager, solicitor, accountant or other financial adviser.
It should be remembered that the price of securities and the income from them can go down as well as up.
Currency
In this Prospectus, unless otherwise specified, references to “€“, “EUR“ or “euro“ are to the lawful
currency of member states of the European Union that adopt the single currency introduced in accordance
with the Treaty.
Certain figures included in this Prospectus have been subject to rounding adjustments; accordingly,
figures shown for the same category presented in different tables may vary slightly and figures shown as
totals in certain tables may not be an arithmetic aggregation of the figures which precede them.
Interpretation
Capitalised terms used in this Prospectus, unless otherwise indicated, have the meanings set out in this
Prospectus and, in particular in the Conditions. A reference to a “Condition“ or the “Conditions“ is a
reference to a numbered Condition or Conditions set out in the “Terms and Conditions of the Notes”
below.
The language of the Prospectus is English. Certain legislative references and technical terms have been
cited in their original language in order that the correct technical meaning may be ascribed to them under
applicable law.
23
THE PARTIES
Issuer: Tagus – Sociedade de Titularização de Créditos,
S.A., a special purpose vehicle incorporated under
the laws of Portugal for the issue of asset backed
securities, wih head office at Rua Castilho, no. 20,
Lisbon, Portugal, resgistered with the Commercial
Registry Office of Lisbon under the sole registration
and tax payer number 507 130 820 and with a share
capital of 250,000.00.
The Issuer’s share capital is fully owned by
Deutsche Bank Aktiengesellschaft.
Originator: Deutsche Bank Aktiengesellschaft, a corporation
duly organised and existing under the laws of
Germany and having its principal place of business
in the City of Frankfurt (Main) and operating in
Portugal under branch (Deutsche Bank
Aktiengesellschaft – Sucursal em Portugal) number
43 and registration and taxpayer number 980 459
079 having its registered office at Rua Castilho, no.
20, in Lisbon, Portugal (“DBAG Portugal”).
Servicer:
DBAG Portugal, in its capacity as servicer of the
Mortgage Assets pursuant to the Securisation Law
and in accordance with the terms of the Mortgage
Servicing Agreement, or any successor thereof
appointed in accordance with the provisisions of the
Mortgage Servicing Agreement.
Common Representative:
The Law Debenture Trust Corporation plc., a
company incorporated under the laws of England
and Wales, with registered number 1675231, having
its registered office at Fifth Floor, 100 Wood Street,
London EC2V 7EX, United Kingdom, in its capacity
as initial representative of the Noteholders pursuant
to article 65 of the Securitisation Law and in
accordance with the terms and conditions of the
Common Representative Appointment Agreement.
The Common Representative is an entity authorized
to represent investors in the United Kingdom and
Northern Ireland and is not in a group (grupo) or
control (domínio) relationship with the Issuer or the
Originator, as required by article 65.1 of the
Securitization Law.
Collection Account Bank: DBAG Portugal, in its capacity as the bank at which
the Collection Account is held, or any successor
appointed in accordance with the provisions of the
Mortgage Servicing Agreement.
Transaction Manager: Deutsche Bank Aktiengesellschaft, acting through its
24
London office at Winchester House, 1 Great
Winchester Street, London EC2N 2DB, United
Kingdom (“DBAG London”), in its capacity as
transaction manager to the Issuer in accordance with
the terms of the Transaction Management
Agreement through its office at Winchester House, 1
Great Winchester Street, London EC2N 2DB,
United Kingdom.
Paying Agent:
DBAG Portugal, in its capacity as paying agent in
respect of the Notes in accordance with the terms of
the Paying Agency Agreement.
Agent Bank: DBAG London, in its capacity as the agent bank
(who will calculate the rate of interest applicable to
the Mortgage Backed Notes and the relevant Interest
Amount, in accordance with Conditions 5.5 and 5.6)
in respect of the Notes in accordance with the terms
of the Paying Agency Agreement through its office
at Winchester House, 1 Great Winchester Street,
London EC2N 2DB, United Kingdom.
Accounts Bank: DBAG Portugal, in its capacity as the bank at which
the Issuer Account, the Cash Reserve Account and
the Liquidity Account are held in accordance with
the terms of the Accounts Agreement through its
office at Rua Castilho, no. 20, in Lisbon, Portugal.
Central Securities Depositary: INTERBOLSA – Sociedade Gestora de Sistemas de
Liquidação e de Sistemas Centralizados de Valores
Mobiliários, S.A., having its registered office at
Avenida da Boavista, 3433, 4100-138 Porto,
Portugal (“Interbolsa”).
Listing: Euronext Lisbon.
Rating Agencies DBRS and Fitch.
25
PRINCIPAL FEATURES OF THE NOTES
Notes: € 1,132,800,000 Class A Mortgage Backed Securitisation
Notes due October 2058 (“Class A Notes”);
€ 199,900,000 Class B Mortgage Backed Securitisation
Notes due October 2058 (“Class B Notes” and together
with the Class A Notes, the “Mortgage Backed Notes”);
€ 40,500,000 Class C Notes due October 2058 (“Class C
Notes”); and
€ 1 Variable Funding Note due October 2058 (“VFN”),
to be issued in accordance with the terms of the Common
Representative Appointment Agreement and on the terms
of and subject to the Conditions. The issue price of Class A
Notes, Class B Notes and VFN will be 100 per cent.. The
issue price of Class C Notes will be 100 per cent..
The Class A Notes, the Class B Notes, the Class C Notes
and the VFN together are referred to as the “Notes”.
Form and Denomination: The Notes will be in book-entry (forma escritural) and
registered form (nominativas) and in denominations of
€100,000 (with the exception of the VFN) and will be
registered with Interbolsa and held through the accounts of
affiliate members of Interbolsa, as operator and manager of
the Central de Valores Mobiliários (the “CVM”).
Status of the Notes: The Notes will constitute direct, limited recourse
obligations of the Issuer and will benefit from the statutory
segregation provided by the Portuguese securitisation law.
The Mortgage Backed Notes and the Class C Notes
represent the right to receive interest (or a return amount)
and principal payments or other amounts from the Issuer in
accordance with the Conditions and the Common
Representative Appointment Agreement. The VFN is a
non-interest bearing variable funding note.
Prior to the delivery of an Enforcement Notice, payments
of principal on the Mortgage Backed Notes on an Interest
Payment Date will be made sequentially by redeeming all
principal due on the Class A Notes and thereafter by
redeeming all principal due on the Class B Notes.
After the delivery of an Enforcement Notice, payments of
principal on the Notes will be made sequentially by
redeeming all principal due on the Class A Notes and
thereafter by redeeming all principal due on the Class B
Notes and thereafter by redeeming all principal due on the
Class C Notes and thereafter by redeeming all principal due
on the VFN.
26
All payments of interest due on the Class A Notes will rank
in priority to payments of interest due on the Class B Notes,
payments of principal due on the Class C Notes and the
payment of the Class C Return Amount and payment of
principal due on the VFN. All payments of interest due on
the Class B Notes will rank in priority to payments of
principal due on the Class C Notes and the payment of the
Class C Return Amount and payments of principal on the
VFN. All payments of principal due on the Class C Notes
will rank in priority to the payment of the Class C Return
Amount and payments of principal on the VFN. Payments
of principal on the VFN will rank in priority to payment of
the Class C Return Amount.
Prior to the delivery of an Enforcement Notice, all
payments of principal due on the Class C Notes and
payments of principal due on the VFN will be paid from the
Available Interest Distribution Amount and will rank in
priority to payment of the Class C Return Amount provided
that the Principal Amount Outstanding of the Class C Notes
may not be reduced to less than the Cash Reserve Account
Required Balance in respect of such Interest Payment Date.
After the delivery of an Enforcement Notice all payments
of principal due on the Class C Notes and payments of
principal due on the VFN will rank in priority to payment
of the Class C Return Amount.
Use of Proceeds: The Issuer will apply the proceeds of the issue of the
Mortgage Backed Notes solely towards the purchase of the
Mortgage Assets pursuant to the Mortgage Sale Agreement.
The proceeds of the Class C Notes will be used to establish
the Cash Reserve Account and to pay the part of the
purchase price of the Mortgage Assets not paid from the
proceeds of the issue of the Mortgage Backed Notes.
The proceeds of the VFN, once issued, will be initially
credited to the Liquidity Account and will be used to
protect the Issuer against the materialisation of any Set-Off
Amount through the exercise by a Borrower of any set-off
or deduction from any amount payable by such Borrower
under a Mortgage Asset in respect of claims that such
Borrower has against the Originator and the potential
failure of such Originator to indemnify the Issuer. The
Issuer may increase the nominal amount of the VFN up to
the Maximum Limit.
If the Servicer ceases to be rated the Minimum Rating, the
Issuer will be required to increase the nominal value of the
VFN in an amount corresponding to the Set-off Amount,
such increase to be subscribed by the VFN Noteholder,
provided that the Issuer will not be required to increase the
nominal value of the VFN to the extent such increase does
27
not comply with the required level of the Issuer’s own
funds as provided for in the Securitisation Law. Otherwise,
if the Servicer ceases to be rated the Minimum Rating and
the increase of the nominal amount of the VFN is not
requested by the Issuer (when permitted), it shall inform the
Issuer in writing and specify any upper and/or lower limits
with respect to such increase. The proceeds of the VFN will
be credited to the Liquidity Account.
“Set-off Amount” means an amount calculated as of the
immediately preceding Calculation Date equal to the
Aggregate Principal Outstanding Balance of the Mortgage
Assets in respect of which a Set-off Right has been
identified by the Originator on the relevant date of
assignment to the Issuer, excluding the Mortgage Assets
that have ceased to be held by the Issuer before such
Calculation Date; and
“Set-off Right” means the Borrower’s right to set-off
against the Issuer in relation to a Mortgage Loan any
amounts owed to such Borrower by the Originator on or
prior to the date of assignment of the relevant Mortgage
Loan to the Issuer.
Statutory Segregation for the Notes,
right of recourse and Issuer
Obligations:
The Notes will have the benefit of the statutory segregation
provided for by Article 62 of the Securitisation Law which
provides that the assets and liabilities (património
autónomo) of the Issuer in respect of each transaction
entered into by the Issuer are completely segregated from
the other assets and liabilities of the Issuer.
In accordance with the terms of Article 61 and the
subsequent articles of the Portuguese Securitisation Law
the right of recourse of the Noteholders is limited to the
specific pool of assets, including the Mortgage Assets, the
Collections, the Transaction Accounts, the Issuer's rights in
respect of the Transaction Documents and any other right
and/or benefit, either contractual or statutory, relating
thereto, purchased or received by the Issuer in connection
with the Notes. Accordingly, the obligations of the Issuer in
relation to the Notes under the Transaction Documents are
limited, in recourse in accordance with the Securitisation
Law, to the Transaction Assets.
Rate of Interest on Mortgage Backed
Notes:
The Mortgage Backed Notes of each class will represent
entitlements to payment of interest in respect of each
successive Interest Period from the Closing Date at an
annual rate in respect of each Class equal to 3 month
EURIBOR plus the following percentages:
Class A Notes 0.30 per cent.
Class B Notes 0.50 per cent.
28
Class C Return Amount: In respect of any Interest Payment Date, the Class C Notes
will carry interest equating to the Class C Return Amount
in the amount calculated by the Transaction Manager to be
paid from the Available Interest Distribution Amount on
such Interest Payment Date. This amount will only be
payable to the extent that the Issuer has sufficient funds
available for the purpose under the relevant Payments
Priorities.
VFN: The VFN will be issued in an initial amount of €1, which
may be increased in accordance with the terms herein and
will not bear interest.
Interest Accrual Period: Interest on the Mortgage Backed Notes and the Class C
Return Amount (if any) will be paid quarterly in arrear.
Interest will accrue from, and including, the immediately
preceding Interest Payment Date (or, in the case of the first
Interest Payment Date, the Closing Date) to, but excluding,
the relevant Interest Payment Date.
Interest Payment Date: Interest on the Mortgage Backed Notes and the Class C
Return Amount (if any) is payable quarterly in arrear on the
22nd
day of January, April, July and October in each year
(or, if such day is not a Business Day, the next succeeding
Business Day unless such day would fall into the next
calendar month in which case, it will be brought forward to
the immediately preceding Business Day).
Business Day: A TARGET Settlement Day or, if such TARGET
Settlement Day is not a day on which banks are open for
business in London and in Lisbon, the next succeeding
TARGET Settlement Day on which banks are open for
business in London and in Lisbon.
Lisbon Business Day: Any TARGET Settlement Day on which banks are open for
business in Lisbon.
TARGET Settlement Days: Any day on which TARGET2 is open for the settlement of
payments in euro.
Final Redemption: Unless the Notes have previously been redeemed in full as
described in Condition 6 (Final Redemption, Mandatory
Redemption in part and Optional Redemption), the Notes
will be redeemed by the Issuer on the Final Legal Maturity
Date at their Principal Amount Outstanding.
Final Legal Maturity Date: The Interest Payment Date falling on 22 October 2058.
Authorised Investments: The Issuer has the right to make Authorised Investments
using amounts standing to the credit of the Issuer Account,
the Cash Reserve Account and the Liquidity Account. Such
Authorised Investments must comply with article 3
paragraph 2 of CMVM Regulation no. 12/2002.
Taxes: Payments of interest and principal and other amounts due
under the Notes will be subject to income taxes, including
29
applicable withholding taxes (if any) and other taxes (if
any) and neither the Issuer nor any other person will be
obliged to pay additional amounts in relation thereto.
Rating: The Class A Notes are expected on issue to be assigned a
“A (high) (sf)” rating by DBRS and a “Asf/Outlook
Negative” rating by Fitch.
A credit rating is not a recommendation to buy, sell or hold
securities and may be subject to revision, suspension or
withdrawal at any time by any of the Rating Agencies.
Optional Redemption in Whole: The Issuer may redeem all (but not some only) of the Notes
in each class at their Principal Amount Outstanding
together with accrued interest on any Interest Payment
Date:
(i) after a Quarterly Collection Date on which the
Aggregate Principal Outstanding Balance of the Mortgage
Assets is equal to or less than 10 per cent. of the Aggregate
Principal Outstanding Balance of the Mortgage Assets as at
the Collateral Determination Date; or
(ii) after the date on which, by virtue of a change in Tax
law of the Issuer's Jurisdiction (or the application or official
interpretation of such Tax law), the Issuer would be
required to make a Tax Deduction from any payment in
respect of the Notes (other than by reason of the relevant
Noteholder having some connection with the Republic of
Portugal, other than the holding of the Notes); or
(iii) after the date on which, by virtue of a change in Tax
law of the Issuer's Jurisdiction (or the application or official
interpretation of such Tax law), the Issuer would not be
entitled to relief for the purposes of such Tax law for any
material amount which it is obliged to pay, or the Issuer
would be treated as receiving for the purposes of such Tax
law any material amount which it is not entitled to receive,
in each case under the Transaction Documents; or
(iv) after the date of a change in the Tax law of the
Issuer's Jurisdiction (or the application or official
interpretation of such Tax law) which would cause the total
amount payable in respect of any Notes to cease to be
receivable by the Noteholders including as a result of any
of the Borrowers being obliged to make a Tax Deduction in
respect of any payment in relation to any Mortgage Asset
or the Issuer being obliged to make a Tax Deduction in
respect of any payment in relation to any of the Notes.
(v) provided certain conditions are met, if the Originator
holding all Notes outstanding at the relevant time,
following an Extraordinary Resolution, gives not less than
15 (fifteen) days’ notice to the Issuer that it has decided to
30
have all of the Notes redeemed at their Principal Amount
Outstanding together with all accrued interest on the date
specified in such notice.
Paying Agent: The Issuer will appoint the Paying Agent with respect to
payments due under the Notes. The Issuer will procure that,
for so long as any Notes are outstanding, there will always
be a Paying Agent to perform the functions assigned to it.
The Issuer may at any time, by giving not less than 30
days’ notice, replace any the Paying Agent by one or more
banks or other financial institutions which will assume such
functions. As consideration for performance of the paying
agency services, the Issuer will pay the Paying Agent a fee.
Transfers of Notes: Transfers of Notes will require appropriate entries in
securities accounts, in accordance with the applicable
procedures of Interbolsa.
Listing: Application has been made to the Stock Exchange for the
Class A Notes to be admitted to trading on its regulated
market.
No assurance can be given that the Notes will be listed on
the Stock Exchange, or if listed, will continue to be listed
for the term of the Notes.
Settlement: Settlement of the Notes is expected to be made on or about
the Closing Date.
Governing Law: Each Transaction Document and all non-contractual
obligations arising from or connected with that Transaction
Document shall be governed by Portuguese law.
31
OVERVIEW OF THE TRANSACTION
Purchase of Initial Mortgage Asset
Portfolio:
Under the terms of the Mortgage Sale Agreement the
Originator (as seller) will assign to the Issuer (as
purchaser) and the Issuer will, subject to satisfaction of
certain conditions precedent, purchase from the
Originator, certain Mortgage Assets, on the Closing Date.
Consideration for Purchase of Initial the
Mortgage Asset Portfolio:
In consideration for the assignment of the Mortgage
Assets on the Closing Date, the Issuer will pay the
Purchase Price to the Originator on the Closing Date.
Purchase of Additional Mortgage Asset
Portfolios:
During the Revolving Period, the Originator may sell and
assign to the Issuer and the Issuer will, subject to
satisfaction of certain conditions precedent, purchase at
par from the Originator, certain Mortgage Assets.
Revolving Period: “Revolving Period” means the period commencing on the
Closing Date and ending on the earlier of:
(i) the Interest Payment Date following the third
anniversary of the Closing Date;
(ii) the date on which a Notification Event occurs; or
(iii) the Calculation Date on which the Principal
Outstanding Balance of the Mortgage Loans in the
Mortgage Asset Portfolio in arrears by not less than
90 days (less the sum of all Net Provisioned
Amounts) is more than 4 per cent. of the Principal
Outstanding Balance of the Mortgage Loans in the
Mortgage Asset Portfolio as at the Initial Collateral
Determination Date;
(iv) the date on which the Originator informs the Issuer,
the Common Representative and the Transaction
Manager that it wishes to end the Revolving
Period;
(v) the Calculation Date on which the Principal
Outstanding Balance of the Defaulted Mortgage
Assets in the Mortgage Asset Portfolio (less the
sum of all Net Provisioned Amounts) is more than
4 per cent. of the Principal Outstanding Balance of
the Mortgage Assets in the Mortgage Asset
Portfolio as at the Initial Collateral Determination
Date;
(vi) the date on which a breach of the Originator’s
representations and warranties has occurred, if such
breach is not capable of being remedied or, if such
breach is capable of being remedied and has not
been so remedied on or prior to the next succeeding
32
Interest Payment Date, the Business Day
immediately following such Interest Payment Date
where the breach was not remedied;
(vii) the date on which the Originator has been
downgraded below investment grade and has not
provided to the Issuer a certificate of non-
insolvency proceedings issued by the competent
commerce court;
(viii) the date on which the Cash Reserve is not capable
of being replenished on the immediately
succeeding Interest Payment Date with an amount
necessary to maintain the Cash Reserve Account
Required Balance; or
(ix) when an entry is recorded in the Principal
Deficiency Ledgers and is not reduced to zero on
or prior to the succeeding Interest Payment Date,
on that succeeding Interest Payment Date.
"Net Provisioned Amounts" means all amounts used for
the reduction of the debit balance on the Principal
Deficiency Ledgers pursuant to paragraphs (v) and (viii)
of the Pre-Enforcement Interest Payments Priorities,
including, without limitation, amounts provisioned and
accounted for.
Consideration for Purchase of
Additional Mortgage Assets:
In consideration for the assignment of Additional
Mortgage Assets on an Additional Purchase Date, the
Issuer will pay to the Originator on such Additional
Purchase Date the Additional Purchase Price.
Servicing of the Mortgage Assets: Pursuant to the terms of the Mortgage Servicing
Agreement, the Servicer will agree to administer and
service the Mortgage Assets assigned by the Originator to
the Issuer on behalf of the Issuer and, in particular, to:
(i) collect the Receivables due in respect thereof;
(ii) set interest rates applicable to the Mortgage Loans;
(iii) administer relationships with the Borrowers; and
undertake enforcement proceedings in respect of any
Borrower who has defaulted on his or her obligations
under the relevant Mortgage Assets.
Servicer Reporting: The Servicer is required no later than seven Lisbon
Business Days after the end of each relevant Collection
Period to deliver to the Issuer and the Transaction
Manager a report in a form reasonably acceptable to the
Transaction Manager (the “Quarterly Servicing
Report”) relating to such Collection Period.
The Quarterly Servicing Report will form part of an
investor report to be in a form acceptable to the Issuer, the
33
Transaction Manager and the Common Representative and
which shall be made available to the Noteholders by the
Transaction Manager in its website
(https://tss.sfs.db.com/investpublic) and by the Issuer in
the CMVM’s website (www.cmvm.pt) (the “Investor
Report”) and to be delivered by the Transaction Manager
to, inter alios, the Common Representative, the Paying
Agent and the Rating Agencies not less than six Business
Days prior to each Interest Payment Date.
Collection Account: All Collections received by the Servicer from a Borrower
in respect of a Mortgage Asset will be credited by the
Servicer to the Collection Account on a daily basis. The
Collection Account will be operated by the Servicer in
accordance with the terms of the Mortgage Servicing
Agreement.
While the Servicer maintains the Minimum Rating, the
Servicer will direct the Collection Account Bank to
transfer to the Issuer Account, at least once a month, any
cleared funds standing to the credit of the Collection
Account, except that the Servicer shall not, in respect of
the Collection Account, give any such direction if it would
cause the Collection Account to become overdrawn. If the
Servicer ceases to comply with the Minimum Rating, the
Servicer will direct the Collection Account Bank to
transfer to the Issuer Account on a daily basis any cleared
funds standing to the credit of the Collection Account.
Issuer Account: The Issuer will establish the Issuer Account at the
Accounts Bank. The Issuer Account will be operated by
the Transaction Manager in accordance with the terms of
the Accounts Agreement.
Payments from the Issuer Account on
each Business Day:
On each Business Day, funds standing to the credit of the
Issuer Account will be applied by the Issuer in or towards
payment of (i) an amount equal to any Incorrect Payment
to the Originator due on such Business Day and (ii) other
amounts, including Tax payments and Third Party
Expenses.
Cash Reserve Account: On or about the Closing Date, the Cash Reserve Account
will be established with the Accounts Bank in the name of
the Issuer into which an amount equal to € 39,981,000 will
be transferred from the proceeds of the issue of the Class
C Notes.
Funds will be debited and credited to the Cash Reserve
Account in accordance with the payment instructions of
the Transaction Manager, on behalf of the Issuer, in
accordance with the terms of the Transaction Management
Agreement and the Accounts Agreement.
Replenishment of the Cash Reserve On each Interest Payment Date, to the extent that monies
34
Account: are available for the purpose, amounts will be credited to
the Cash Reserve Account in accordance with the Pre-
Enforcement Interest Payments Priorities until the amount
standing to the credit thereof equals the Cash Reserve
Account Required Balance on such Interest Payment Date.
Liquidity Account: Any proceeds arising for the subscription of the VFN will
be credited to the Liquidity Account and applied in
accordance with the provisions of the Accounts
Agreement and Transaction Management Agreement.
The Liquidity Account will be opened and maintained by
the Issuer with the Accounts Bank, or such other bank to
which the Liquidity Account may be transferred, in the
name of the Issuer;
Use of Issuer's funds to reduce or
eliminate a Payment Shortfall:
If, in respect of an Interest Payment Date, the Transaction
Manager determines as at the Quarterly Collection Date
immediately preceding such Interest Payment Date that a
Payment Shortfall will exist on such Interest Payment
Date, the Transaction Manager will ensure that an amount
equal to the Principal Draw Amount is deducted from the
Available Principal Distribution Amount on or prior to
such Interest Payment Date and such amount is added to
the Available Interest Distribution Amount to reduce or,
as applicable, eliminate such Payment Shortfall.
“Payment Shortfall” means, as at any Interest Payment
Date, an amount equal to the greater of:
(i) zero; and
(ii) the aggregate of the amounts required to pay or
provide in full on such Interest Payment Date for
the items falling in (i) to (iv) (or, following the
redemption in full of the Class A Notes, items (i) to
(vii)) of the Pre-Enforcement Interest Payment
Priorities less the amount of the Available Interest
Distribution Amount calculated in respect of such
Interest Period but before taking into account any
Principal Draw Amount.
Principal Draw Amount: In relation to any Interest Payment Date the amount (if
any) (the “Principal Draw Amount”) of the Available
Principal Distribution Amount which is to be utilised by
the Issuer to reduce or eliminate any Payment Shortfall on
such Interest Payment Date being the aggregate amount
determined on the related Quarterly Collection Date of:
(i) the amount by which the Issuer would be unable to
make payment in full of items (i) to (iv) of the Pre-
Enforcement Interest Payments Priorities; and
(ii) following the redemption in full of the Class A
Notes, the amount by which the Issuer would be
35
unable to make payment in full of items (i) to (vii)
of the Pre-Enforcement Interest Payments
Priorities.
Available Interest Distribution
Amounts:
In respect of any Interest Payment Date, the amount
calculated by the Transaction Manager as at the Quarterly
Collection Date immediately preceding such Interest
Payment Date equal to the sum of:
(i) the amount of the Interest Component (less the
amount of the Third Party Expenses and any
Incorrect Payments made which are attributable to
interest, in each case to the extent paid prior to such
Interest Payment Date) to be received by the Issuer
during the Collection Period immediately preceding
such Interest Payment Date;
(ii) where the proceeds or estimated proceeds of
disposal or, on maturity, the maturity proceeds of
any Authorised Investment received in relation to
the relevant Collection Period exceeds the original
cost of such Authorised Investment, the amount of
such excess together with interest thereon;
(iii) all amounts standing to the credit of the Cash
Reserve Account on such Interest Payment Date;
(iv) in the event of any shortfall in interest payments
resulting from exercise of Set-off Rights by any
Borrower, on the Final Legal Maturity Date or other
earlier date on which the Notes are redeemed, any
portion of amounts standing to the credit of the
Liquidity Account available to be used on such
Interest Payment Date required to cover such
shortfall in interest payments;
(v) interest accrued and credited to the Issuer Account
and the Cash Reserve Account during the Collection
Period ending on such Quarterly Collection Date;
(vi) the amount of any Principal Draw Amount to cover
any Payment Shortfall in respect of such Interest
Payment Date;
(vii) in respect of the First Interest Payment Date only, all
other amounts received by the Issuer on or about the
Closing Date from the proceeds of the issue of the
Notes standing to the credit of the Issuer Account on
such Interest Payment Date not to be otherwise
applied; and
(viii) the Available Principal Distribution Amount
remaining after all payments under items (i) and (ii)
of the Pre-Enforcement Principal Payments
Priorities that fall due to be paid on such Interest
36
Payment Date have been made in full.
Available Principal Distribution
Amounts:
Available Principal Distribution Amount means, in respect
of any Interest Payment Date, the amount calculated by the
Transaction Manager as at the Quarterly Collection Date
immediately preceding such Interest Payment Date as being
equal to the sum of:
(i) the amount of the Principal Component (less the
amount of the Third Party Expenses in excess of the
amount of the Interest Component (if any) and any
Incorrect Payments made which are attributable to
principal in each case) to be received by the Issuer
during the Collection Period immediately preceding
such Interest Payment Date;
(ii) the amount of the Available Interest Distribution
Amount as is credited to the Issuer Account and
which is applied by the Transaction Manager on
such Interest Payment Date in reducing the debit
balance on the Principal Deficiency Ledgers;
(iii) in the event of any shortfall in principal payments
resulting from exercise of Set-off Rights by any
Borrower, any portion of amounts standing to the
credit of the Liquidity Account available to be used
on such Interest Payment Date required to cover
such shortfall in principal payments;
less
(iv) the amount of any Principal Draw Amount to be
made on such Interest Payment Date plus the
amounts standing to the credit of the Principal
Accumulation Ledger, provided that after the
Revolving Period any such amounts standing to the
credit of the Principal Accumulation Ledger shall be
added to item (i) above.
Principal Deficiency Ledgers and
Principal Accumulation Ledger:
The Transaction Manager acting on behalf of the Issuer will
establish in the books of the Issuer, the “Class A Principal
Deficiency Ledger” and the “Class B Principal Deficiency
Ledger” and together the “Principal Deficiency Ledgers”
and, on each Interest Payment Date, the Transaction
Manager shall record any Principal Draw Amounts and any
Realised Losses in relation to the Mortgage Assets that have
occurred in the Collection Period ending on the Quarterly
Collection Date immediately preceding such Interest
Payment Date (the “Principal Deficiency“) by debiting the
Principal Deficiency Ledgers.
Any Principal Deficiency will first be debited to the Class B
Principal Deficiency Ledger so long as the debit balance on
the Class B Principal Deficiency Ledger is not greater than
the Principal Amount Outstanding of the Class B Notes.
37
Thereafter, any Principal Deficiency will be debited to the
Class A Principal Deficiency Ledger.
The Transaction Manager acting on behalf of the Issuer will
establish in the books of the Issuer Account the “Principal
Accumulation Ledger” and, on each Interest Payment Date
during the Revolving Period, the Transaction Manager shall
record to the Principal Accumulation Ledger any amounts
not used towards purchasing at par Additional Mortgage
Assets, in accordance with the Pre-Enforcement Principal
Payments Priorities, in the Collection Period ending on the
Quarterly Collection Date immediately preceding such
Interest Payment Date.
Pre-Enforcement Interest Payments
Priorities:
Prior to the delivery of an Enforcement Notice, the
Available Interest Distribution Amount determined in
respect of each Interest Payment Date will be applied by the
Issuer or the Transaction Manager or (if applicable) the
Paying Agent (in both cases on behalf of the Issuer) on such
Interest Payment Date in making the following payments or
provisions in the following order of priority but in each case
only to the extent that all payments or provisions of a higher
priority that fall due to be paid or provided for on such
Interest Payment Date have been made in full:
(i) first, in or towards payment or provision of the
Issuer's liability to tax in relation to this transaction
(including for the avoidance of doubt any value
added tax payable by the Issuer on a reverse charge
basis), if any;
(ii) second, in or towards payment of the fees payable
by the Issuer to the Common Representative in
accordance with the Common Representative
Appointment Agreement and any Liabilities due and
payable by the Issuer to the Common Representative
in accordance with the terms of the Common
Representative Appointment Agreement together
with interest accrued (including any Tax thereon)
due and payable in accordance with the terms of the
Common Representative Appointment Agreement in
the immediately preceding Collection Period;
(iii) third, in or towards payment pari passu on a pro
rata basis of any Issuer Expenses in relation to this
transaction (excluding the Issuer’s liability to tax,
paid under item (i) above);
(iv) fourth, in or towards payment pari passu on a pro
rata basis of the Interest Amount due and payable on
such Interest Payment Date in respect of the Class A
Notes;
38
(v) fifth, prior to the Class A Notes being redeemed in
full, in or towards reduction of the debit balance on
the Class A Principal Deficiency Ledger to zero;
(vi) sixth, prior to the Class A Notes being redeemed in
full, other than on a redemption in whole of the
Mortgage Backed Notes, in or towards crediting to
the Cash Reserve Account an amount up to the Cash
Reserve Account Required Balance;
(vii) seventh, in or towards payment of the Interest
Amount and any Deferred Interest Amount Arrears
due and payable on such Interest Payment Date in
respect of the Class B Notes pari passu on a pro rata
basis but so that such Interest Amount will be paid
prior to such Deferred Interest Amount Arrears in
accordance with Condition 5.14 (Priority of
Payment of Interest and Deferred Interest);
(viii) eight, in or towards reduction of the debit balance on
the Class B Principal Deficiency Ledger to zero;
(ix) ninth, following redemption in full of the Class A
Notes, other than on a redemption in whole of the
Mortgage Backed Notes, in or towards crediting to
the Cash Reserve Account an amount up to the Cash
Reserve Account Required Balance;
(x) tenth, in or towards payment pari passu on a pro
rata basis of the Principal Amount Outstanding of
the Class C Notes provided that the Principal
Amount Outstanding of the Class C Notes may not
be reduced to less than the Cash Reserve Account
Required Balance in respect of such Interest
Payment Date;
(xi) eleventh, in or towards payment of the Principal
Amount Outstanding of the VFN; and
(xii) twelfth, in or towards payment of any Class C
Return Amount.
Pre-Enforcement Principal Payments
Priorities:
Prior to the delivery of an Enforcement Notice and during
the Revolving Period, the Available Principal Distribution
Amount determined by the Transaction Manager in respect
of the Collection Period immediately preceding each
Interest Payment Date will be applied by the Issuer or the
Transaction Manager or (if applicable) the Paying Agent (in
both cases on behalf of the Issuer) on each Interest Payment
Date, in or towards purchasing at par Additional Mortgage
Assets or deposited in the Principal Accumulation Ledger
up to the Maximum Principal Accumulation Balance. Any
amount not so applied by the Transaction Manager shall be
39
applied towards payment pari passu on a pro rata basis of
the Principal Amount Outstanding of the Class A Notes.
Prior to the delivery of an Enforcement Notice and after the
end of the Revolving Period, the Available Principal
Distribution Amount determined by the Transaction
Manager in respect of the Collection Period immediately
preceding each Interest Payment Date will be applied by the
Transaction Manager (on behalf of the Issuer) on each
Interest Payment Date in making the following payments in
the following order of priority but in each case only to the
extent that all payments of a higher priority that fall due to
be paid on such Interest Payment Date have been made in
full:
(i) first, in or towards payment pari passu on a pro rata
basis of the Principal Amount Outstanding of the
Class A Notes until all the Class A Notes have been
redeemed in full;
(ii) second, in or towards payment pari passu on a pro
rata basis of the Principal Amount Outstanding of
the Class B Notes until all the Class B Notes have
been redeemed in full; and
(iii) third, in or towards payment of the amount to be
included in the Available Interest Distribution
Amount.
“Maximum Principal Accumulation Balance” means the
amount equal to 10 per cent. of the Principal Amount
Outstanding of the Mortgage Loans calculated as of the
Closing Date.
Post-Enforcement Payments Priorities: Following the delivery of an Enforcement Notice, all
amounts received or recovered by the Issuer and/or the
Common Representative (including all amounts standing to
the credit of the Cash Reserve Account) will be applied by
the Common Representative or the Transaction Manager or
(if applicable) the Paying Agent (in both cases on behalf of
the Common Representative) in making the following
payments in the following order of priority but in each case
only to the extent that all payments of a higher priority have
been made in full:
(i) first, in or towards payment pari passu on a pro rata
basis of (i) any remuneration then due and payable
to any Receiver and all costs, expenses and charges
incurred by such Receiver and (ii) the fees payable
by the Issuer to the Common Representative in
accordance with the Common Representative
Appointment Agreement and any Liabilities due and
payable by the Issuer to the Common Representative
in accordance with the terms of the Common
40
Representative Appointment Agreement together
with interest accrued (including any Tax thereon)
due and payable in accordance with the terms of the
Common Representative Appointment Agreement in
the immediately preceding Collection Period;
(ii) second, in or towards payment pari passu on a pro
rata basis of the Issuer Expenses to the extent not
paid under (i) above;
(iii) third, in or towards payment pari passu on a pro
rata basis of accrued interest on the Class A Notes
but so that current interest will be paid before
interest that is past due;
(iv) fourth, in or towards payment pari passu on a pro
rata basis of the Principal Amount Outstanding on
the Class A Notes until all the Class A Notes have
been redeemed in full;
(v) fifth, in or towards payment of accrued interest on
the Class B Notes pari passu on a pro rata basis but
so that current interest will be paid before interest
that is past due;
(vi) sixth, in or towards payment pari passu on a pro rata
basis of the Principal Amount Outstanding on the
Class B Notes until all the Class B Notes have been
redeemed in full;
(vii) seventh in or towards payment pari passu on a pro
rata basis of the Principal Amount Outstanding on
the Class C Notes until all the Class C Notes have
been redeemed in full;
(viii) eighth, in or towards payment of the Principal
Amount Outstanding of the VFN; and
(ix) ninth, in or towards payment of any Class C Return
Amount.
Written-off Mortgage Asset “Written-off Mortgage Asset” means on any day, a
Mortgage Asset:
(i) which is a Defaulted Mortgage Asset; or
(ii) in respect of which the Liquidation Proceeds have
been realised.
Defaulted Mortgage Asset “Defaulted Mortgage Asset” means on any day of
determination, any Mortgage Asset which is not a Written-
off Mortgage Asset under item (ii) of such definition and in
respect of which twelve or more monthly instalments have
not been paid by the respective Instalment Due Dates
relating thereto and which remain outstanding on such day
of determination.
- 41 -
STRUCTURE DIAGRAM OF TRANSACTION
Borrowers
Deutsche Bank
Aktiengesellschaft –
acting through its
Portuguese branch “Originator”
Tagus – Sociedade
de Titularização de
Créditos, S.A. “Issuer”
Class A Notes
Class B Notes
Class C Notes
VFN
Cash Reserve
Account Liquidity Account
Interest and Principal Payments
Purchase Price
Mortgage Assets
Issue Proceeds
- 42 -
DOCUMENTS INCORPORATED BY REFERENCE
The following information has been filed with the CMVM and shall be deemed to be incorporated in and
to form part of this Prospectus:
(i) The audited financial statements for the year ended 31 December 2011 of the Issuer, as well as the
corresponding Auditor’s Report;
(ii) The audited financial statements for the year ended 31 December 2012 of the Issuer, as well as the
corresponding Auditor’s Report.
(iii) The unaudited financial statements for the first semester of 2013, ended 30 June 2013, of
the Issuer.
- 43 -
OVERVIEW OF CERTAIN TRANSACTION DOCUMENTS
The description of certain Transaction Documents set out below is a summary of certain features of such
documents and is qualified by reference to the detailed provisions thereof. Prospective Noteholders may
inspect a copy of the documents described below upon request at the specified office of the Common
Representative and the Paying Agent.
Mortgage Sale Agreement
Assignment of Initial Mortgage Asset Portfolio
Under the terms of the Mortgage Sale Agreement the Originator will assign to the Issuer and the Issuer
will, subject to satisfaction of certain conditions precedent, purchase from the Originator the Initial
Mortgage Asset Portfolio on the Closing Date.
Consideration for Purchase of the Initial Mortgage Asset Portfolio
In consideration for the assignment of the Initial Mortgage Asset Portfolio on the Closing Date, the Issuer
will pay a sum to the Originator equal to the Principal Outstanding Balance of the Mortgage Assets in the
Initial Mortgage Asset Portfolio to be assigned to the Issuer on the Closing Date, as calculated at the
Collateral Determination Date, plus accrued interest in relation to the Mortgage Loans as at the Collateral
Determination Date, plus an amount agreed between the Originator and the Issuer as representing the
notional cost of funding the Mortgage Assets between the Collateral Determination Date and the Closing
Date (the “Initial Purchase Price”)
Assignment of Additional Mortgage Asset Portfolio
Under the terms of the Mortgage Sale Agreement, during the Revolving Period, the Originator may offer
to sell/assign to the Issuer and the Issuer will, subject to satisfaction of certain conditions precedent,
purchase at par from the Originator certain designated Mortgage Assets included in each Additional
Mortgage Asset Portfolio and the related Ancillary Rights in each Additional Mortgage Assets Portfolio,
being the Additional Purchase Available Amount available to the Issuer for the purpose of making further
purchases of Mortgage Assets (each of these being an “Additional Purchase”) on each Interest Payment
Date falling within the Revolving Period (each such date being an “Additional Purchase Date”).
The Mortgage Assets which will be the subject of each Additional Purchase shall have substantially the
same characteristics as the Mortgage Assets in the Initial Mortgage Asset Portfolio purchased on the
Closing Date and shall comply with the Replenishment Criteria described below.
Consideration for Purchase of the Additional Mortgage Asset Portfolio
In consideration for the assignment of each Additional Mortgage Asset Portfolio on any Additional
Purchase Date, the Issuer will pay a sum to the Originator equal to the Additional Purchase Available
Amount (the “Additional Purchase Price”).
Effectiveness of the Assignment
The assignment of the Mortgage Asset Portfolio by the Originator to the Issuer will be governed by the
Securitisation Law (See “Selected Aspects of Laws of Portugal Relevant to the Mortgage Assets and the
Transfer of the Mortgage Assets”). Paragraph 4 of Article 6 of the Securitisation Law facilitates the
process of transferring receivables by introducing an amendment to the general principles, provided by
Article 583 of the Portuguese Civil Code, on the effectiveness of the transfer of receivables, inter alia, by
a credit institution (which is also acting as the servicer) whereby the assignment becomes effective at the
time of execution of the Mortgage Sale Agreement, both between the parties thereto and against the
Borrowers. No notice to Borrowers is required to give effect to the assignment of the Mortgage Loans to
the Issuer, however, for the assignment of the security constituted by the Mortgages to be effective
- 44 -
against the Borrowers it must be registered with the relevant Portuguese Real Estate Registry Office (see
“Notification Event” below).
Each assignment of the Initial Mortgage Asset Portfolio and each Additional Mortgage Asset Portfolio by
the Originator to the Issuer in accordance with the terms of the Mortgage Sale Agreement on the Closing
Date or on each Additional Purchase Date will be effective to transfer the full, unencumbered benefit of
and right, title and interest (present and future) to the Initial Mortgage Asset Portfolio and each Additional
Mortgage Asset Portfolio to the Issuer.
Notification Event
Following the occurrence of a Notification Event, the Originator will execute and deliver to the Issuer: (a)
all property deeds and other documents in the Originator's possession or which the Originator is able to
obtain and which are necessary in order to register the transfer of the Mortgage Assets from the
Originator to the Issuer, (b) an official application form duly filled in to be filed in the relevant
Portuguese Real Estate Registry Office requesting registration of the assignment to the Issuer of each
Mortgage or, whenever possible, a pool of Mortgages, (c) notices addressed to the relevant Borrowers and
copied to the Issuer in respect of the assignment to the Issuer of each of the Mortgage Assets included in
the Mortgage Asset Portfolio, together with the respective mail register forms duly filled in, and (d) such
other documents and provide such other assistance as is necessary in order to register the assignment of
the Mortgage Asset Portfolio and notify the relevant Borrowers.
The notice will instruct the relevant Borrowers, with effect from the date of receipt by the Borrowers of
the notice, to pay all sums due in respect of the relevant Mortgage Loan into an account designated by the
Issuer being an account with a bank having the Minimum Rating. In the event that the Originator cannot
or will not effect such actions, the Issuer is entitled under Portuguese Law: (a) to have delivered to it any
such deeds and documents as referred to above, (b) to complete any such application forms as referred to
above and (c) to give any such notices to Borrowers as referred to above.
No further act, condition or thing will be required to be done in connection with the assignment of the
Mortgage Asset Portfolio to enable the Issuer to require payment of the Receivables arising under the
Mortgage Assets or to enforce any such rights in court other than the registration of any related Mortgage
assigned to the Issuer at the relevant Portuguese Real Estate Registry Office and the delivery to the
relevant Borrower of a Notification Event Notice. Such action by the Issuer will only be effected
following the occurrence of a Notification Event.
A “Notification Event” means:
(i) the delivery by the Common Representative of an Enforcement Notice in respect of the Issuer in
accordance with the Conditions;
(ii) the occurrence of a Insolvency Event in respect of the Originator; or
(iii) the delivery of a Servicer Termination Notice following the occurrence of a Servicer Event in
respect of the Servicer.
“Notification Event Notice” means a notice substantially in the form set out in Part B of Schedule 4 of
the Mortgage Sale Agreement;
“Insolvency Event“
(i) in respect of a natural person or entity means:
(a) the initiation of, or consent to any Insolvency Proceedings by such person or entity;
(b) the initiation of Insolvency Proceedings against such a person or entity and such
proceedings are not contested in good faith on appropriate legal advice;
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(c) the application (and such application is not contested in good faith on appropriate legal
advice) to any court for, or the making by any court of, a bankruptcy, an insolvency or an
administration order against such person or entity;
(d) the enforcement of, or any attempt to enforce (and such attempt is not contested in good
faith on appropriate legal advice) any security over the whole or a material part of the assets
and revenues of such a person or entity;
(e) any distress, execution, attachment or similar process (and such process, if contestable, is
not contested in good faith on appropriate legal advice) being levied or enforced or imposed
upon or against any material part of the assets or revenues of such a person or entity;
(f) the appointment by any court of a liquidator, provisional liquidator, administrator,
administrative receiver, receiver or manager, common representative, trustee or other
similar official in respect of all (or substantially all) of the assets of such a person or entity
generally; or
(g) the making of an arrangement, composition or reorganisation with the creditors of such
person or entity; and
(ii) in respect of the Originator and/or the Servicer, the suspension of payments, the commencing of
any recovery or insolvency proceedings against the Originator or Servicer under Decree Law
298/92 of 31 December 1992, Decree Law No. 199/2006 of 26 October 2006 and/or (if applicable)
under the Code for the Insolvency and Recovery of Companies introduced by Decree Law 54/2004
of 18 March 2004 (each one as amended from time to time).
Representations and Warranties as to the Mortgage Assets
On the Closing Date and on each Additional Sale Date, the Originator will make certain representations
and warranties in respect of the Mortgage Assets included in the Mortgage Asset Portfolio as at the
relevant Collateral Determination Date including statements to the following effect:
(i) the Receivables arising under each Mortgage Asset Agreement are “Eligible Receivables“ in that
they:
(a) are originated by the Originator in accordance with the Originator’s standard practices and
are legally and beneficially owned by the Originator;
(b) are created in compliance with the laws of Portugal;
(c) are payable in euro without any deduction, rebate or discount;
(d) are not the subject of any dispute, right of set-off, counterclaim, defence or claim existing
or pending against the Originator;
(e) are debts, the rights to which may be freely sold and transferred by way of assignment
under the laws of Portugal;
(f) are free and clear of any Encumbrance;
(g) are payable in full at least thirty-six months prior to the Final Legal Maturity Date;
(h) can be segregated and identified on any day;
(i) have a Principal Outstanding Balance as at the relevant Collateral Determination Date,
which does not exceed €2,550,000;
(j) have not been the object of a notice of early repayment received by the Originator prior to
the relevant Collateral Determination Date; and
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(k) have no payments that are due and remain unpaid for more than thirty days prior to the
relevant Collateral Determination Date.
(ii) each Mortgage Asset Agreement was, at its execution date, an “Eligible Mortgage Asset
Agreement“:
(a) was entered into in the ordinary course of the Originator's business, on arm’s length
commercial terms;
(b) has been concluded in accordance with applicable laws and regulations in Portugal,
including but not limited to, the Lei de Defesa do Consumidor, the Lei das Cláusulas
Contratuais Gerais and all applicable legislation governing mortgages;
(c) has been duly executed by the relevant Borrower or Borrowers and constitutes the legal,
valid, binding and enforceable obligations of the relevant Borrower or Borrowers;
(d) has been duly executed by the Originator and constitutes the legal, valid, binding and
enforceable obligations of the Originator;
(e) is governed by and subject to the laws of Portugal;
(f) does not contain any restriction on assignment of the benefit of any right, title and interest
to the relevant Mortgage Asset Agreement or, where consent to assign is required, such
consent has been obtained;
(g) in respect of which at least one instalment due under the relevant Mortgage Asset
Agreement has been paid in full prior to the relevant Collateral Determination Date and, in
respect of a Substitute Mortgage Asset, at least one instalment has been paid in full prior to
the Substitution Date;
(h) is entered into in writing on the terms of the standard documentation of the Originator;
(i) does not contain provisions which may give rise (after the Closing Date or the relevant
Additional Purchase Date, as applicable) to a liability on the part of the Originator to make
further advances, pay money or perform any other onerous act;
(j) has been duly registered in the relevant Portuguese Real Estate Registry Office in favour of
the Originator (rendering the Mortgage Asset Agreement a fully valid security interest with
first ranking priority, with the exception of Mortgage Loans secured by a second or lower
ranking priority mortgage provided that, in such cases, (a) all higher ranking mortgages
over the relevant Property have also been granted by the Borrower to the Originator on or
before the date on which the lower ranking mortgage was granted and (b) all Mortgage
Loans with the higher ranking mortgages are included in the Mortgage Asset Portfolio) for
the performance of all payment obligations under the Mortgage Loan;
(k) relates to a Mortgage over a residential Property located in Portugal;
(l) does not contain provisions permitting the deferral of payment of interest thereunder;
(m) is secured on, at least, one mortgage asset or on one mortgage asset and a pledge over
financial instruments;
(n) bears a floating interest rate indexed to 1 month, 3 month, 6 month or 12 month-
EURIBOR;
(o) is a loan with payments due monthly, has a fixed maturity date and whose instalments can
only change because of interest fluctuations;
(p) does not have a cap on interest rates;
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(q) is covered by property insurance;
(r) has a term of no longer than fifty years;
(s) includes information on the property valuation;
(t) includes information on the ranking of the mortgage, the identification of the notary and the
lien registration number;
(u) has a maximum Current LTV of 100 per cent.;
(v) in the case of a Mortgage Asset Agreement for construction purposes, the construction
proposed in such Mortgage Asset Agreement is complete; and
(w) was not granted for the exclusive purpose of acquisition of land.
(iii) each Borrower in respect of each Mortgage Asset Agreement to which it is a party is an “Eligible
Borrower“ in that such Borrower:
(a) is a natural person;
(b) is a party to a Mortgage Asset Agreement as primary borrower or guarantor;
(c) as far as the Originator is aware, is not dead or untraceable;
(d) as far as the Originator is aware, is not insolvent;
(e) complied with the Originator's Lending Criteria prior to entering into the relevant
Mortgage Asset Agreement;
(f) has a bank account which is capable of direct debit;
(g) had his/her identity verified by the Originator when entering into the Mortgage Asset
Agreement;
(h) is not an employee of the Originator; and
(i) if employed or self-employed, has shown that his/her regular income, aggregated with
the regular income of other Borrower(s) in the same Mortgage Asset Agreement,
complied with the Lending Criteria at the time the relevant Mortgage Asset Agreement
was entered into.
In addition, the Originator will also make, inter alia, the following representations and warranties:
(i) each Mortgage Asset Agreement (but not necessarily any subsequent amendments introduced
thereto) has been executed as a public deed drawn up by a Portuguese public notary and
constitutes a legal, valid and binding obligation of the Borrower enforceable in accordance with its
terms;
(ii) the Originator has taken all steps which a reasonably prudent mortgage lender lending to
borrowers in Portugal would take to ensure that, at the date of completion of each Mortgage, the
relevant Property was insured under a policy with an insurance company against fire and other
property risks for an amount not less than the full reinstatement value determined by an
independent valuer approved by the Originator and that the Originator became a joint beneficiary
or its interest was noted or endorsed by the insurers under such insurance policies, except in cases
of transfer of mortgage loans from other credit institutions where the relevant Property has an
insurance policy fully valid and effective in the terms stated above;
(iii) under the Mortgage Asset Agreement, the Originator does not have any obligation to advance any
further amounts to the relevant Borrowers;
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(iv) all steps necessary to perfect the Originator's title to each Mortgage Loan and its related Mortgage
were duly taken at the appropriate time or are in the process of being taken with all due diligence
and all related costs and fees have been or will be duly paid for;
(v) title in respect of each Mortgage is registered at the relevant Portuguese land registry;
(vi) prior to making a Mortgage Loan, the nature and amount of such Mortgage Loan and the
circumstances of the relevant Borrower satisfied the Lending Criteria in force at the time of
origination in all material respects;
(vii) prior to the granting of a Mortgage Loan, the relevant Property was valued by an independent
valuer from the panel of valuers from time to time appointed by the Originator;
(viii) the only product types included in the Mortgage Asset Portfolio are (i) fully amortising variable
rate loans, (ii) fully amortising loans with a fixed rate period, (iii) loans with a residual repayment
option and (iv) loans with an interest only period;
(ix) the Aggregate Outstanding Principal Balance of Mortgage Assets which are interest only loans
(due to a restructuring) will not, at any time prior to the Final Discharge Date, exceed 15 per cent
of the Aggregate Principal Outstanding Balance of the Mortgage Asset Portfolio as at the
Collateral Determination Date; and
(x) the Original LTV and Current LTV of any Mortgage Asset is less than 100%.
Replenishment Criteria
Where an Additional Purchase is made on an Additional Purchase Date, the following requirements
(“Replenishment Criteria”), verified by the Servicer, by reference to the relevant Additional Collateral
Determination Date, must be met (each a “Portfolio Test” and together the “Portfolio Tests”):
(i) the weighted average seasoning of the Aggregate Mortgage Asset Portfolio following an
Additional Purchase must be greater than or equal to the weighted average seasoning of the
Aggregate Mortgage Asset Portfolio as at the Initial Collateral Determination Date;
(ii) the weighted average Current LTV ratio of the Aggregate Mortgage Asset Portfolio following an
Additional Purchase must not exceed the weighted average Current LTV ratio of the Aggregate
Mortgage Asset Portfolio as at the Initial Collateral Determination Date by more than 1 per cent.;
(iii) in the case of a Mortgage Asset which has a Current LTV ratio greater than or equal to 95 per
cent., the percentage of such loans in the Aggregate Mortgage Asset Portfolio following the
purchase of such Mortgage Asset would be less than or equal to 15 per cent. of the Aggregate
Principal Outstanding Balance of the Mortgage Assets after such Additional Purchase;
(iv) in the case of a Mortgage Asset which has a Current LTV ratio greater than or equal to 90 per
cent., the percentage of such loans in the Aggregate Mortgage Asset Portfolio following the
purchase of such Mortgage Asset would be less than or equal to 20 per cent. of the Aggregate
Principal Outstanding Balance of the Mortgage Assets after such Additional Purchase;
(v) in the case of a Mortgage Asset which has a Current LTV ratio greater than or equal to 80 per
cent., the percentage of such loans in the Aggregate Mortgage Asset Portfolio following the
purchase of such Mortgage Asset would be less than or equal to 25 per cent. of the Aggregate
Principal Outstanding Balance of the Mortgage Assets after such Additional Purchase;
(vi) in the case of a Mortgage Asset which was made to a Borrower who is self-employed, the
percentage of such loans in the Aggregate Mortgage Asset Portfolio following the purchase of
such Mortgage Asset would be less than or equal to 15 per cent. of the Aggregate Principal
Outstanding Balance of the Mortgage Assets after such Additional Purchase;
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(vii) in the case of a Mortgage Asset paying or making interest only payments, the percentage of such
loans in the Aggregate Mortgage Asset Portfolio following the purchase of such Mortgage Asset
would be less than or equal to 10 per cent. of the Aggregate Principal Outstanding Balance of the
Mortgage Assets after such Additional Purchase;
(viii) in the case of a Mortgage Asset which was made for the purchase of a second home, the
percentage of such loans in the Aggregate Mortgage Asset Portfolio following the purchase of
such Mortgage Asset would be less than or equal to 7 per cent. of the Aggregate Principal
Outstanding Balance of the Mortgage Assets after such Additional Purchase;
(ix) the weighted average spread over EURIBOR of the Mortgage Assets Portfolio after the purchase
of any Additional Mortgage Assets shall be equal to or greater than 0.79 per cent per annum;
(x) the geographic concentration limits for the Mortgage Asset Portfolio must meet the following
criteria:
Region Maximum Permitted Exposure
Lisboa 55.0 per cent.
Norte 35.0 per cent.
Centro 15.0 per cent.
Algarve 10.0 per cent.
Alentejo 8.8 per cent.
Açores 0.5 per cent.
Madeira 2.0 per cent.
(xi) the aggregate of Receivables with a Principal Amount Outstanding in the amount higher than
€300.000 shall be less than 15 per cent. of the Aggregate Mortgage Asset Portfolio;
(xii) the number of borrowers (mutuários) which are not Portuguese residents shall be equal or less than
1 per cent. of the Aggregate Mortgage Asset Portfolio;
(xiii) the aggregate Principal Amount Outstanding divided by the total number of borrowers (mutuários)
is not higher than €150,000; and
(xiv) the weighted average Original LTV ratio of the Aggregate Mortgage Asset Portfolio following an
Additional Purchase must not exceed the weighted average Original LTV ratio of the Aggregate
Mortgage Asset Portfolio as at the Initial Collateral Determination Date by more than 2 per cent.,
provided that, if any of the thresholds indicated in paragraphs (i) to (xiii) above, calculated by reference to
the relevant Additional Collateral Determination Date but in respect of the Mortgage Assets included in
the Mortgage Asset Portfolio prior to the relevant Additional Purchase, has already been surpassed, the
relevant Portfolio Test shall be deemed to have been met if the result of such Portfolio Test, calculated by
reference to the Mortgage Assets included in the Mortgage Asset Portfolio after the relevant Additional
Purchase, is lower than the result of the same Portfolio Test calculated in respect of the relevant Mortgage
Assets included in the Mortgage Asset Portfolio prior to the relevant Additional Purchase.
Breach of Mortgage Asset Warranties and other matters
If there is a breach of any of the warranties given by the Originator in respect of the Mortgage Asset
Portfolio in the Mortgage Sale Agreement (each a “Mortgage Asset Warranty”) which, in the opinion of
the Common Representative, upon receiving advice at the cost of the Issuer from a reputable Portuguese
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counsel selected by the Common Representative and such advice is in form and substance satisfactory to
it, (without limitation, having regard to whether a loss is likely to be incurred in respect of the Mortgage
Asset to which the breach relates) could have a material adverse effect on the validity or enforceability of
any Mortgage Asset, its related Mortgage Asset Agreements or the Receivables in respect of such
Mortgage Asset, if such breach is capable of remedy, the Originator shall remedy such breach within
thirty days after receiving written notice of such breach from the Issuer or the Common Representative.
If, in the reasonable opinion of the Common Representative, such breach is not capable of remedy, or, if
capable of remedy, is not remedied within the thirty day period, the Originator shall hold the Issuer
harmless against any losses which the Issuer may suffer as a result thereof. In addition, if, in the case of
the representation made by the Originator that no rights of set-off exist or are pending against the
Originator in respect of a Receivable being proved to have been breached, the Originator fails to pay to
the Issuer an amount equal to the amount so set-off, the Originator shall also hold the Issuer harmless
against any losses which the Issuer may suffer as a result thereof. The Originator may discharge the
liability by, at its option, repurchasing or causing a third party to repurchase or, in certain circumstances,
substituting or causing the substitution of the relevant Mortgage Asset in accordance with the paragraph
below.
The consideration payable by the Originator or a third party purchaser, as the case may be, in relation to
the repurchase of a relevant Mortgage Asset will be an amount equal to the aggregate of: (a) the Principal
Outstanding Balance of the relevant Mortgage Asset as at the date of re-assignment of such Assigned
Mortgage Rights, (b) an amount equal to all other amounts due on or before the date of re-assignment in
respect of the relevant Mortgage Asset and its related Mortgage Asset Agreement, and (c) the properly
incurred costs and expenses of the Issuer incurred in relation to such re-assignment.
If a Mortgage Asset expressed to be included in the Mortgage Asset Portfolio has never existed or has
ceased to exist so that it is not outstanding on the date on which it is due to be re-assigned, the Originator
shall, on demand, indemnify the Issuer against any and all liabilities suffered by the Issuer by reason of
the breach of the relevant Mortgage Asset Warranty.
Pursuant to the Mortgage Sale Agreement, the Originator may, instead of repurchasing a Mortgage Asset
from the Issuer or indemnifying the Issuer, require the Issuer to accept in consideration for the repurchase
or in place of an indemnity payment, the assignment of Substitute Mortgage Assets such that the
aggregate of the Principal Outstanding Balance of such Substitute Mortgage Assets will be at least equal
to the said payment in cash that would have been payable by the Originator to the Issuer.
Substitute Mortgage Assets will be required to meet the original Eligibility Criteria for the inclusion of
Mortgage Assets in the Mortgage Asset Portfolio and all the following additional requirements:
(i) the weighted average Current LTV of the Mortgage Asset Portfolio taking into account the
Substitute Mortgage Assets does not exceed the weighted average Current LTV of the Mortgage
Asset Portfolio before such substitution by more than 0.50 per cent.;
(ii) the maturity date of the Substitute Mortgage Asset must not be later than three years prior to the
Final Legal Maturity Date and each shall bear a floating rate of interest indexed to EURIBOR;
(iii) the resultant weighted average spread of the Mortgage Asset Portfolio must be at least equal to the
lower of: (i) 0.79 per cent.; (ii) the weighted average spread over EURIBOR of the Mortgage
Asset Portfolio before such substitution;
(iv) the Principal Outstanding Balance of the Substitute Mortgage Asset Pool on any date of
substitution must be greater than or equal to the Principal Outstanding Balance of the Retired
Mortgage Asset Pool on the same date of substitution unless: (i) the amount by which the
Principal Outstanding Balance of the Substitute Mortgage Asset Pool on the previous Substitution
Date exceeded the Principal Outstanding Balance of the Retired Mortgage Asset Pool on the same
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Substitution Date is greater than the amount by which the Principal Outstanding Balance of the
Retired Mortgage Asset Pool on the current Substitution Date would exceed the Principal
Outstanding Balance of the Substitute Mortgage Asset Pool on the same Substitution Date; or (ii)
the Originator pays an amount in cash to the Issuer that is equal to the amount by which the
Principal Outstanding Balance of the Retired Mortgage Asset Pool on the current Substitution
Date would exceed the Principal Outstanding Balance of the Substitute Mortgage Asset Pool on
the same Substitution Date;
(v) where the Property relating to the Retired Mortgage Asset (which is subject to a first ranking
mortgage) has a lesser ranking mortgage over the same Property, such associated Mortgage Asset
must also be substituted at the same time;
(vi) the aggregate Principal Outstanding Balance of Substitute Mortgage Assets which have been
substituted by reason of any variation in the terms of the relevant Retired Mortgage Assets may
not exceed 20 per cent. of the Principal Outstanding Balance of the Mortgage Asset Portfolio on
the Initial Collateral Determination Date. The 20 per cent. limit referred to in this paragraph may
be increased from time to time upon written confirmation from the Rating Agencies that no
downgrading of the Class A Notes will occur as a result thereof;
(vii) the Substitute Mortgage Asset constitutes the same ranking and priority of security over a
property as the security provided in respect of the relevant Retired Mortgage Assets and if the
Substitute Mortgage Asset is secured by a second or lower ranking priority mortgage, the
Mortgage Asset which includes any first ranking priority mortgages over that same property must
be included in the Mortgage Asset Portfolio after the substitution;
(viii) the Substitute Mortgage Asset is an Eligible Receivable, the borrower in respect of the Substitute
Mortgage Asset is an Eligible Borrower and the relevant Mortgage Asset Agreement is an
Eligible Mortgage Asset Agreement, where references to the Closing Date in the defined terms
used in this paragraph shall be references to the Additional Purchase Date or the date upon which
the relevant Mortgage Asset or Mortgage Assets and the related Receivables were substituted, as
applicable; and references to the “Collateral Determination Date” were references to the date
upon which the Principal Outstanding Balance of the relevant Mortgage Asset or Mortgage Assets
and the related Receivables was determined for the purposes of such substitution;
(ix) no Enforcement Notice in respect of the Notes has been delivered by the Common Representative
to the Issuer in accordance with the Conditions;
(x) no Servicer Termination Notice has been delivered by the Issuer to the Servicer in accordance
with the Mortgage Servicing Agreement;
(xi) by reference to the date on which Substitute Mortgage Assets are substituted into the Mortgage
Asset Portfolio, the balance of the Cash Reserve Account at the previous Interest Payment Date
was greater than or equal to the Cash Reserve Account Required Balance;
If there is a breach of any other representations and warranties (other than a Mortgage Asset Warranty)
and the Issuer has suffered a loss, the Originator has an obligation to pay a compensation payment to the
Issuer in respect of such loss.
“Retired Mortgage Asset Pool” means the pool of Retired Mortgage Assets that are retired from the
Mortgage Asset Portfolio on any given substitution date.
“Substitute Mortgage Asset Pool” means the pool of Substitute Mortgage Assets that are substituted
into the Mortgage Asset Portfolio on any given substitution date.
“Current LTV” means, in respect of all Mortgage Loans relating to a Borrower and secured on the same
property, the ratio calculated in respect of an Interest Payment Date, of the aggregate amount of the
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Principal Outstanding Balance of such Mortgage Loans on such Interest Payment Date to the most recent
valuation of the relevant property, provided that the Current LTV as at the Closing Date or the Additional
Purchase Date, as applicable, is calculated as the ratio of the aggregate amount of the Principal
Outstanding Balance of such Mortgage Loans on the relevant Collateral Determination Date to the most
recent valuation of the relevant Property.
“Original LTV” means, in respect of all Mortgage Loans relating to a Borrower and secured on the same
property, the ratio of the aggregate amount of the Principal Outstanding Balance of such Mortgage Loans
as at the date such Mortgage Loans were originated to the original valuation of the relevant property
completed when the Mortgage Loan was originated.
Undertakings for the Retained Interest
In the Mortgage Sale Agreement, the Originator will undertake the following in relation to Article 122a
of the CRD and Notice 9/2010:
(i) retain the Retained Interest, as selected at the Closing Date, until the Principal Amount
Outstanding of the Instruments is reduced to zero;
(ii) confirm to the Issuer and Transaction Manager on the date of each the Quarterly Servicer’s Report
that it continues to hold the Retained Interest;
(iii) provide notice to the Issuer, the Common Representative and the Transaction Manager as soon as
practicable in the event it no longer holds the Retained Interest;
(iv) not reduce its credit exposure to the Retained Interest either through hedging or the sale of all or
part of the Retained Interest;
(v) provide, or procure that the Servicer shall provide to the Issuer, the Common Representative and
the Transaction Manager such information as may be reasonably required by the Noteholders to be
included in the Investor Report to enable such Noteholders to comply with their obligations
pursuant to the CRD and Notice 9/2010; and
(vi) provide the Servicer such information as may be reasonably required by the Noteholders to be
included in the Investor Report, in order to enable such Noteholders to comply with their
obligations pursuant to the CRD and Notice 9/2010.
Borrower Set-Off
Pursuant to the terms of the Mortgage Sale Agreement, the Originator will undertake to pay to the Issuer
an amount equal to the amount of any reduction in any payment due with respect to any Mortgage Asset
sold to the Issuer as a result of any exercise of any right of set-off by any Borrower against the Issuer
which has occurred on or prior to the Closing Date.
Applicable law and jurisdiction
The Mortgage Sale Agreement and all non-contractual obligations arising out of or in connection with it
shall be governed by and construed in accordance with the laws of Portugal. The courts of Lisbon shall
have exclusive jurisdiction to settle any disputes that may arise out of or in connection therewith
(including a dispute relating to the existence, validity or termination of the Mortgage Sale Agreement or
any non-contractual obligation arising out of or in connection with it) or the consequences of its nullity.
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Mortgage Servicing Agreement
Servicing and Collection of Receivables
Pursuant to the terms of the Mortgage Servicing Agreement, the Issuer will appoint the Servicer to
provide certain services relating to the servicing of the Mortgage Assets and the collection of the
Receivables in respect of such Mortgage Assets (the “Services“).
Sub-Contractor
The Servicer may appoint sub-contractors to carry out certain of the Services subject to certain conditions
specified in the Mortgage Servicing Agreement including, but not limited to, the Servicer retaining
liability to the Issuer for those services performed by any sub-contractor. In certain circumstances the
Issuer may require the Servicer to assign any rights which the Servicer may have against a sub-contractor.
Servicer's Duties
The duties of the Servicer will be set out in the Mortgage Servicing Agreement, and will include, but not
be limited to:
(i) servicing and administering the Mortgage Asset Portfolio;
(ii) collecting amounts due in respect of the Mortgage Asset Portfolio;
(iii) exercising rights and remedies against a Borrower in respect of such Borrower's obligations arising
from any Mortgage Loan in respect of which such Borrower is in default in accordance with the
standard procedures of the Servicer in relation to Defaulted Mortgage Assets;
(iv) complying with its customary and usual servicing procedures for servicing comparable residential
mortgages in accordance with its policies and procedures relating to its residential mortgage
business;
(v) using all reasonable endeavours to procure that payment by each Borrower under the relevant
Mortgage Asset is by direct debit, and if a Borrower will not make payment by direct debit, using
all reasonable endeavours to ensure that alternative payment arrangements are promptly made in
accordance with the provisions of the Mortgage Servicing Agreement;
(vi) servicing and administering the cash amounts received in respect of the Mortgage Assets including
transferring amounts to the Issuer Account on the Lisbon Business Day following the day on
which such amounts are credited to the Collection Account;
(vii) preparing periodic reports for submission to the Common Representative, the Issuer and the
Transaction Manager in relation to the Mortgage Asset Portfolio in an agreed form including
reports on delinquency and default rates;
(viii) determining interest rates applicable to the Mortgage Loans;
(ix) administering relationships with the Borrowers;
(x) assisting the Issuer in exercising its rights under the Mortgage Sale Agreement, in particular, in
respect of the remedies with respect to the Defaulted Mortgage Assets; and
(xi) in the circumstances specified in the Mortgage Servicing Agreement, notifying the Borrowers of
the assignment by the Originator to the Issuer of the Mortgage Loans, the Receivables arising
thereunder and the related Ancillary Rights.
The Servicer is required no later than seven Lisbon Business Days after the end of each relevant
Collection Period to deliver to the Issuer and the Transaction Manager a report in a form reasonably
acceptable to the Transaction Manager (the “Quarterly Servicing Report”) relating to such Collection
Period.
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Variations of Mortgage Assets
The Servicer will covenant in the Mortgage Servicing Agreement that it shall not agree to any
amendment, variation or waiver of any Material Term in a Mortgage Asset Agreement, other than (i) a
Permitted Variation (provided that the aggregate Principal Outstanding Balance of Mortgage Assets
which are subject to a Permitted Variation does not exceed 10% of the Principal Outstanding Balance of
the Initial Mortgage Asset Portfolio on the Initial Collateral Determination Date), (ii) the relevant
Mortgage Asset is substituted or repurchased, as provided below, or (iii) a variation made while
Enforcement Procedures are being taken against such Mortgage Asset.
In addition, outside of Enforcement Procedures, the Servicer will not agree to any amendment, variation
or waiver of a Material Term of a Mortgage Asset Agreement (where such amendment or variation will
cause the relevant Mortgage Asset to be substituted or repurchased) if the aggregate Principal
Outstanding Balance of Mortgage Assets which are subject to substitutions or repurchases under the
conditions set under clause 13.2 (Conditions for Substitute Mortgage Assets) of the Mortgage Sale
Agreement exceeds (in result of the aforementioned substitution or repurchase) 20 (twenty) per cent. of
the Principal Outstanding Balance of the Initial Mortgage Asset Portfolio on the Initial Collateral
Determination Date (provided that such percentage may be altered during the life of the transaction (i)
subject to the written confirmation of Fitch that the then current ratings of the Class A Notes will not be
affected or (ii) as approved via an extraordinary resolution from the Noteholders).
Subject to the paragraphs above, if the Servicer determines that it will accept a request by a Borrower for
an amendment, variation or waiver of any Material Term of a Mortgage Asset Agreement that is not
otherwise permitted (as described in “Variations of Mortgage Assets” above), the Servicer shall substitute
(or, where the Servicer is not also the Originator, the Servicer shall notify the Originator of such a
determination, and the Originator must substitute), within thirty-seven days of such amendment, variation
or waiver being made, the Mortgage Asset in question with a Substitute Mortgage Asset (save where such
amendment is made in the fifty day period commencing on the relevant Collateral Determination Date in
which case the Originator will have thirty-seven days from the end of this period to substitute the relevant
Mortgage Asset). Where the Originator is unable to identify a Substitute Mortgage Asset which meets the
specified conditions upon substitution, the Originator or, if applicable, a third party purchaser shall pay an
amount in cash to the Issuer to purchase the Assigned Mortgage Rights in respect of such Mortgage Asset
or Mortgage Assets.
In any case, the Servicer may only amend, vary or waive any Material Term in a Mortgage Asset
Agreement (other than a Permitted Variation or any amendment or variation made while Enforcement
Procedures are being taken against such Mortgage Asset) if, further to the conditions set under clause
13.2 (Conditions for Substitute Mortgage Assets) of the Mortgage Sale Agreement, the following
conditions are met:
(i) such amendment, variation or waiver arises from circumstances that do not relate to the solvency
or ability to pay of the respective Borrower; and
(ii) such amendment, variation or waiver is based on changes to the prevailing market conditions,
including more favourable offers regarding the Borrower's Material Terms by competing entities
(whether in relation to specific terms or as a package) or changes to applicable laws and
regulations.
“Permitted Variation” means any variation or amendment relating to a Material Term of a Mortgage
Asset Agreement other than (i) an amendment which results in a reduction to the Principal Outstanding
Balance of such Mortgage Assets or (ii) an amendment which causes the maturity of such Mortgage Asset
Agreement to fall later than three years prior to the Final Legal Maturity Date, or (iii) an amendment to
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the Repayment Profile of such Mortgage Asset, other than a Permitted Repayment Profile Variation or
(iv) such Mortgage Asset Agreement having already been amended in Material Terms more than 3 (three)
times, except if otherwise imposed by law;
“Permitted Repayment Profile Variation” means a variation to the Repayment Profile of any Mortgage
Asset which results in (i) a principal payment grace period equal to or less than 24 months, (ii) an interest
payment grace period equal to or less than 12 months, or (iii) an increase to the final principal instalment
on the Mortgage Asset such that the final instalment is equal to or less than 25% of the Principal
Outstanding Balance of such Mortgage Asset, provided that such variations may only be made until the
fifth anniversary of the Closing Date or any such longer period subject to written confirmation from Fitch
that the then current ratings of the Class A Notes will not be affected.
“Material Term” means, in respect of any Mortgage Asset Agreement, any provision thereof on the date
on which the Mortgage Asset is assigned to the Issuer relating to (i) the maturity date of the Mortgage
Asset, (ii) the Principal Outstanding Balance of such Mortgage Assets, (iii) the Repayment Profile of such
Mortgage Asset and (iv) the spread over EURIBOR of the Mortgage Asset.
Servicing Fee
The Servicer (or, if applicable, a replacement Servicer) will receive a servicer fee quarterly in arrears
calculated by reference to the Aggregate Principal Outstanding Balance of the Mortgage Assets as at the
first day of the preceding Collection Period and payable by the Issuer on each Interest Payment Date.
Representations and Warranties
The Servicer will make certain representations and warranties to the Issuer in accordance with the terms
of the Mortgage Servicing Agreement relating to itself and any subcontracted servicer and its entering
into the Transaction Documents to which it is a party.
Covenants of the Servicer
The Servicer will be required to make positive and negative covenants in favour of the Issuer in
accordance with the terms of the Mortgage Servicing Agreement relating to itself and any subcontracted
servicer and its entering into the Transaction Documents to which it is a party.
Servicer Event
The following events (each a “Servicer Event“) will entitle the Issuer to serve a notice requiring the
Servicer to comply with certain directions of the Issuer as set out in the Mortgage Servicing Agreement (a
“Servicer Event Notice“):
(i) default is made by the Servicer in ensuring the payment on the due date of any payment required
to be made under the Mortgage Servicing Agreement and such default continues unremedied for a
period of three Business Days after the earlier of the Servicer becoming aware of the default or
receipt by the Servicer of written notice from the Issuer requiring the default to be remedied; or
(ii) without prejudice to (i) above:
a) default is made by the Servicer in the performance or observance of any of its other
covenants and obligations under the Mortgage Servicing Agreement; or
b) any of the representations or warranties made by the Servicer in the Mortgage Servicing
Agreement proves to be untrue, incomplete or incorrect; or
c) any certification or statement made by the Servicer in any certificate or other document
delivered pursuant to the Mortgage Servicing Agreement proves to be untrue,
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and in each case (if such default is capable of remedy) such default continues unremedied for a
period of five Business Days after the earlier of the Servicer becoming aware of such default and
receipt by the Servicer of written notice from the Issuer requiring the same to be remedied; or
(iii) it is or will become unlawful for the Servicer to perform or comply with any of its material
obligations under the Mortgage Servicing Agreement; or
(iv) if the Servicer is prevented or severely hindered for a period of 60 calendar days or more from
complying with its obligations under the Mortgage Servicing Agreement as a result of a Force
Majeure Event; or
(v) any event or circumstance occurs which the Issuer reasonably believes will have a material
adverse effect on the ability of the Servicer to perform or comply with its obligations under the
Mortgage Servicing Agreement; or
(vi) any Insolvency Event occurs in relation to the Servicer; or
(vii) a material adverse change occurs in the financial condition of the Servicer since the date of the
then latest audited financial statements of the Servicer which in the reasonable opinion of the
Issuer impairs due performance of the obligations of such Servicer under the Mortgage Servicing
Agreement; or
(viii) the Bank of Portugal intervenes in or commences an investigation into the regulatory affairs of the
Servicer where such intervention or investigation could lead to the withdrawal by the Bank of
Portugal of the Servicer's authorisation to carry on its business.
After receipt by the Servicer of a Servicer Event Notice but prior to the delivery of a notice terminating
the appointment of the Servicer under the Mortgage Servicing Agreement (the “Servicer Termination
Notice”), the Servicer shall, inter alia, except to the extent prevented or prohibited by law, regulation or
Force Majeure event:
(i) hold to the order of the Issuer, the Mortgage Asset Records and the Servicer Records (as defined in
the Mortgage Servicing Agreement);
(ii) hold to the order of the Issuer any monies then held by the Servicer on behalf of the Issuer together
with any other Mortgage Assets of the Issuer;
(iii) other than as the Issuer may direct pursuant to (e) below, continue to perform all of the Services
(unless prevented by any Portuguese law or any applicable law) until the date specified in the
Servicer Termination Notice;
(iv) take such further action as the Issuer may direct in relation to the Servicer's obligations under the
Mortgage Servicing Agreement, including, if so requested, giving notice to the Borrowers and
providing such assistance as may be necessary to enable the Services to be performed by a
successor Servicer; and
(v) stop taking any such action under the terms of the Mortgage Servicing Agreement as the Issuer
may direct, including, the collection of the Receivables into the Collection Account,
communication with Borrowers or dealing with the Mortgage Assets.
“Mortgage Asset Records” means, in respect of a Mortgage Asset, the original and/or copies of the
Mortgage Asset Agreement, all information maintained in electronic form including tapes and discs
relating to the Mortgage Asset and any original public documentation evidencing the Mortgage Asset
including the Property Deeds.
“Property Deeds” means, in respect of a Property, the copy substituting the property tax certificates and
the official land registry certificates evidencing registration of title to the Property and the relevant
Mortgage.
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“Servicer Records“ means the original and/or any copies of all documents and records, in whatever form
or medium, relating to the Services including all information maintained in electronic form (including
computer tapes, files and discs) relating to the Services.
Servicer Termination Notice
At any time after the delivery of a Servicer Event Notice, the Issuer may deliver a Servicer Termination
Notice to the Servicer, the effect of which will be to terminate the Servicer's appointment from the date
specified in such notice and from such date, inter alia:
(i) all authority and power of the retiring Servicer shall be terminated and shall be of no further effect;
(ii) the retiring Servicer shall no longer hold itself out in any way as the agent of the Issuer; and
(iii) the rights and obligations of the retiring Servicer and any obligations of the Issuer and the
Originator to the retiring Servicer shall cease but such termination shall be without prejudice to,
inter alia:
a) any liabilities or obligations of the retiring Servicer to the Issuer or the Originator or any
successor Servicer incurred before such date;
b) any liabilities or obligations of the Issuer or the Originator to the retiring Servicer incurred
before such date;
c) any obligations of the retiring Servicer referred to in the Mortgage Servicing Agreement;
d) the retiring Servicer's obligation to deliver documents and materials in accordance with the
Mortgage Servicing Agreement; and
e) the duty to provide assistance to the Issuer and the Successor Servicer as required to
safeguard the Issuer's interests or the Issuer's interest in the Mortgage Assets.
The occurrence of a Servicer Event leading to the replacement of the Servicer or a Notification Event will
not, of itself, constitute an Event of Default under the Conditions of the Notes.
Termination
The appointment of the Servicer will continue (unless otherwise terminated by the Issuer) until the date
on which the Common Representative notifies the Issuer and the other Transaction Creditors that it is
satisfied that all the Secured Obligations and/or all other monies and other liabilities due or owing by the
Issuer have been paid or discharged in full (the “Final Discharge Date” at which time the obligations of
the Issuer under the Transaction Documents will be discharged in full. The Issuer may terminate the
Servicer's appointment and appoint a successor servicer (such appointment being subject to the prior
approval of the CMVM and prior notification being given to the Rating Agencies) upon the occurrence of
a Servicer Event and the delivery of a Servicer Termination Notice in accordance with the provisions of
the Mortgage Servicing Agreement.
Back-up Servicer
Upon the downgrade by Fitch of the Servicer’s long term issuer default rating below ”BBB-” or its short-
term issuer default rating below “F3”, a back-up servicer shall be identified and appointed by the Issuer,
subject to prior approval of the Common Representative and to all other approvals required by Portuguese
law, including, but not limited, the approval from the CMVM, by the entry of such back-up servicer, the
Originator and the Issuer into a replacement servicing agreement in accordance with the provisions of the
Mortgage Servicing Agreement.
Collection Accounts Bank
The appointment of the Collection Account Bank shall be terminated in case the Collection Account Bank
is downgraded below the Minimum Rating, or it otherwise ceases to be rated, by the Rating Agencies
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provided that if at the time when the transfer of the Collection Account would have to be made to the
successor collection account bank there is no other bank with the Minimum Rating and which accepts and
is capable act as successor collection account bank, the Collection Account need not be transferred until
such time as there is a bank which meets such requirements.
Payments
The Servicer will procure that all Collections received from Borrowers are paid into the Collection
Account. The Servicer will give instructions to the Collection Account Bank to ensure that monies
received by the Collection Account Bank from Borrowers on any particular Lisbon Business Day are paid
on such day into the Collection Account.
The Servicer will direct the Collection Account Bank to transfer the amount of all Collections relating to
Mortgage Assets received in the Collection Account on any Lisbon Business Day to the Issuer Account at
least once in each Collection Period or, in case the Servicer has been downgraded below the Minimum
Rating or ceases to be rated by the Rating Agencies, on each following Lisbon Business Day.
If the Collection Account Bank is downgraded below the Minimum Rating, or it otherwise ceases to be
rated, this may, among other things, result in the termination of the appointment of the Collection
Account Bank within thirty calendar days of the downgrade and the appointment of a replacement
accounts bank complying with the Minimum Rating and subject to the provisions of the Mortgage
Servicing Agreement.
Applicable law and jurisdiction
The Mortgage Servicing Agreement and all non-contractual obligations arising out of or in connection
with it shall be governed by and construed in accordance with the laws of Portugal. The courts of Lisbon
shall have exclusive jurisdiction to hear any disputes that may arise out of or in connection therewith
(including a dispute relating to the existence, validity or termination of the Mortgage Servicing
Agreement or any non-contractual obligation arising out of or in connection with it) or the consequences
of its nullity.
Common Representative Appointment Agreement
On the Closing Date, the Issuer and the Common Representative will enter into an agreement setting forth
the Terms and Conditions of the Notes and providing for the appointment of the Common Representative
as common representative of the Noteholders for the Notes pursuant to Article 65 of the Securitisation
Law and to articles 357, 358 and 359 of the Portuguese Companies Code (Código das Sociedades
Comerciais), enacted by Decree-Law no. 262/86, of 2 September 1986, as amended.
Pursuant to the Common Representative Appointment Agreement, the Common Representative will agree
to act as Common Representative of the Noteholders in accordance with the provisions set out therein and
the terms of the Conditions. The Common Representative shall have among other things the power:
(i) to exercise in the name and on behalf of the Noteholders all the rights, powers, authorities and
discretions vested on the Noteholders or on it (in its capacity as the common representative of the
Noteholders pursuant to article 65 of the Securitisation Law) at law, under the Common
Representative Appointment Agreement or under any other Transaction Document to which the
Common Representative is a Party;
(ii) to start any action in the name and on behalf of the Noteholders in any proceedings;
(iii) to enforce or execute in the name and on behalf of the Noteholders any Resolution passed by a
Meeting of the Noteholders; and
(iv) after the delivery of an Enforcement Notice or the Notes having become otherwise immediately
due and payable at their Principal Amount Outstanding together with any accrued interest, to
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exercise, in its name and on its behalf, the rights of the Issuer under the Transaction Documents
pursuant to the terms of the Co-ordination Agreement.
The rights and obligations of the Common Representative are set out in the Common Representative
Appointment Agreement and include, but are not limited to:
(i) determining whether any proposed modification to the Notes or the Transaction Documents is
materially prejudicial to the interest of any of the Noteholders and the Transaction Creditors;
(ii) giving any consent required to be given in accordance with the terms of the Transaction
Documents;
(iii) waiving certain breaches of the terms of the Notes or the Transaction Documents on behalf of the
Noteholders; and
(iv) determining certain matters specified in the Common Representative Appointment Agreement,
including any questions in relation to any of the provisions therein.
In addition, the Common Representative may, at any time without the consent or sanction of the
Noteholders or any other Secured Creditor, concur with the Issuer and any other relevant Transaction
Party in making (A) any modification to the Notes or the Transaction Documents in relation to which the
consent of the Common Representative is required (other than in respect of a Reserved Matter or any
provisions of the Notes, the Common Representative Appointment Agreement or any Transaction
Document referred into the definition of Reserved Matter) which, in the opinion of the Common
Representative will not be materially prejudicial to the interests of (i) the holders of the Most Senior Class
of Notes then outstanding and (ii) any of the Transaction Creditors unless in the case of (ii) such
Transaction Creditors have given their prior written consent to any such modification, and (B) any
modification to any provision of the Notes, the Common Representative Appointment Agreement or any
of the Transaction Documents in relation to which the consent of the Common Representative is required,
if, in the opinion of the Common Representative, such modification is of a formal, minor or technical
nature, or is made to correct a manifest error or is necessary or desirable for purposes of clarification,
provided that any such changes pursuant to (A) have always been notified to the Rating Agencies.
Remuneration of the Common Representative
The Issuer shall pay to the Common Representative remuneration for its services as Common
Representative as from the date of the Common Representative Appointment Agreement, such
remuneration to be at such rate as may from time to time be agreed between the Issuer and the Common
Representative. Such remuneration shall accrue from day to day and be payable in accordance with the
Payments Priorities until the powers, authorities and discretions of the Common Representative are
discharged.
In the event of the occurrence of an Event of Default the Issuer agrees that the Common Representative
shall be entitled to be paid additional remuneration which may be calculated at its normal hourly rates in
force from time to time or, in any other case, if the Common Representative considers it expedient or
necessary or where Noteholders’ Meetings are required or where the Common Representative is
requested by the Issuer to undertake duties which the Common Representative and the Issuer agree to be
of an exceptional nature or otherwise outside the scope of the normal duties of the Common
Representative under the Common Representative Appointment Agreement, the Issuer shall pay to the
Common Representative such additional remuneration as may be agreed between them (and which may
be calculated by reference to the Common Representative’s normal hourly rates in force from time to
time).
Retirement of the Common Representative
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The Common Representative may retire at any time upon giving not less than three calendar months
notice in writing to the Issuer without assigning any reason therefor and without being responsible for any
Liabilities occasioned by such retirement. The retirement of the Common Representative shall not
become effective until the appointment of a new Common Representative. In the event of the Common
Representative giving notice under the Common Representative Appointment Agreement, the Issuer shall
use its best endeavours to find a substitute common representative and prior to the expiry of the three
calendar months notice period the Common Representative shall convene a Meeting for appointing such
person as the new common representative.
Termination of the Common Representative
The Noteholders may at any time, by means of resolutions passed in accordance with the relevant terms
of the Conditions and the Common Representative Appointment Agreement remove the Common
Representative and appoint a new Common Representative provided that a 20 days’ prior notice is given
to the Common Representative.
The Common Representative Appointment Agreement and all non-contractual obligations arising out of
or in connection with it shall be governed by and construed in accordance with laws of Portugal. The
courts of Lisbon will have exclusive jurisdiction to hear and determine any disputes that may arise in
connection therewith.
Transaction Management Agreement
Pursuant to the Transaction Management Agreement, the Issuer will appoint the Transaction Manager to
carry out certain management tasks on behalf of the Issuer, including:
(i) operating the Transaction Accounts in such a manner as to enable the Issuer to perform its
financial obligations pursuant to the Notes and the Transaction Documents;
(ii) providing the Issuer and the Common Representative with certain cash management, calculation,
notification and reporting information in relation to the Issuer Account, the Cash Reserve Account,
the Liquidity Account and the Principal Deficiency Ledgers;
(iii) taking the necessary action and giving the necessary notices to ensure that the Transaction
Accounts are credited with the appropriate amounts in accordance with the Transaction
Management Agreement;
(iv) taking all necessary action to ensure that all payments are made out of the Transaction Accounts in
accordance with the Transaction Management Agreement;
(v) maintaining adequate records to reflect all transactions carried out by or in respect of the
Transaction Accounts and the Principal Deficiency Ledgers;
(vi) investing the funds credited to the Issuer Account, the Cash Reserve Account and the Liquidity
Account in Authorised Investments in accordance with the terms and conditions of the Transaction
Management Agreement;
(vii) maintaining the Principal Deficiency Ledgers in the books of the Issuer, crediting and debiting it in
accordance with the terms and conditions of the Transaction Management Agreement; and
(viii) producing the Investor Report not later than 6 Business Days prior to each Interest Payment Date.
The Transaction Manager will covenant that it will, at all times, exercise the above listed functions with
due care, skill and diligence and the utmost good faith, as if it were the owner of the assets subject of the
Transaction Management Agreement. The Transaction Manager will further indemnify the Issuer and the
Common Representative against all liabilities, losses, damages, actions, proceedings and claims brought
against, suffered or incurred by the Issuer and the Common Representative which are directly attributable
to any negligence, wilful misconduct or wilful default on the part of the Transaction Manager.
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The Transaction Manager will receive a fee to be paid on a quarterly basis on each Interest Payment Date
by the Issuer in accordance with the Payments Priorities. The Transaction Manager will also be
reimbursed by the Issuer for all reasonable costs, expenses, liabilities and charges incurred by the
Transaction Manager to third parties pursuant to the Transaction Management Agreement.
The appointment of the Transaction Manager will continue (unless it resigns or its appointment is
otherwise terminated by the Issuer or the Common Representative) until the Final Discharge Date when
the obligations of the Transaction Manager under the Transaction Management Agreement will be
discharged in full. The Issuer, with the written consent of the Common Representative, or the Common
Representative may terminate the Transaction Manager's appointment and appoint a successor transaction
manager (prior confirmation being obtained from the Rating Agencies that such appointment shall not
have an adverse effect on the rating of the Class A Notes) upon the occurrence of certain events of default
in relation to the Transaction Manager or, upon the occurrence of certain insolvency events in relation to
the Transaction Manager.
The Transaction Management Agreement and all non-contractual obligations arising out of or in
connection with it shall be governed by and construed in accordance with Portuguese law. The courts of
England shall have exclusive jurisdiction to hear any disputes that may arise out of or in connection
therewith (including a dispute relating to the existence, validity or termination of the Transaction
Management Agreement or any non-contractual obligation arising out of or in connection with it) or the
consequences of its nullity.
Accounts Agreement
Pursuant to the Accounts Agreement, the Accounts Bank will agree to open and maintain the Transaction
Accounts which are to be held in the name of the Issuer, and provide the Issuer with certain services in
connection with account handling and reporting requirements in relation to the monies from time to time
standing to the credit of the Transaction Accounts. The Accounts Bank will pay interest on the amounts
standing to the credit of the Transaction Accounts.
The Accounts Bank will agree to comply with any directions given by the Transaction Manager in
relation to the management of the Transactions Accounts. The Accounts Bank will receive a fee to be
paid by the Issuer annually in advance on the Closing Date and on each Interest Payment Date (excluding
the final Interest Payment Date) immediately following an anniversary of the Closing Date.
If the Accounts Bank is no longer rated at least the Minimum Rating by the Rating Agencies, the
Transaction Manager will within 30 calendar days of the downgrade use reasonable endeavours to assist
the Issuer to (i) procure a replacement Accounts Bank rated at least the Minimum Rating by the Rating
Agencies which is willing and able to give the relevant representations and warranties contained in the
Accounts Agreement; (ii) procure a suitable guarantee of the obligations of the Accounts Bank from a
financial institution rated at least the Minimum Rating by the Rating Agencies; or (iii) if (i) and (ii) are
not possible, take such other action as the Rating Agencies confirm would not adversely affect the then
rating of the Class A Notes. Any costs relating to such replacement shall be borne at no cost to the Issuer.
The Accounts Agreement and all non-contractual obligations arising out of or in connection with it shall
be governed by and construed in accordance with Portuguese law. The courts of Lisbon shall have
exclusive jurisdiction to hear any disputes that may arise out of or in connection therewith (including a
dispute relating to the existence, validity or termination of the Accounts Agreement or any non-
contractual obligation arising out of or in connection with it) or the consequences of its nullity.
Paying Agency Agreement
Pursuant to the Paying Agency Agreement, the Issuer will appoint the Agents (the Paying Agent and the
Agent Bank) to perform various payments and other administrative functions in connection with the
Notes and the other Transaction Documents.
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Each of the Agents may resign its appointment upon not less than 30 days' notice to the Issuer and the
Issuer may terminate the appointment of each of the Agents by not less than 30 days' notice to the
relevant Agent (and such appointment shall automatically terminate in case an Insolvency Event occurs in
respect of the relevant Agent), provided such termination does not take effect until a successor has been
duly appointed. Any successor Agent appointed by the Issuer must be appointed prior to the termination
of the appointment of the previous Agent and shall be a reputable and experienced financial institution
which is rated at least the Minimum Rating.
Upon the downgrade by Fitch of the Paying Agent’s long term issuer default rating below “BBB+” or its
short-term issuer default rating below “F2”, the Issuer shall, within 30 days of such downgrade, terminate
the appointment of the Paying Agent and appoint a successor paying agent which complies with the
aforementioned rating requirements, provided such termination does not take effect until a successor has
been duly appointed. Any successor Paying Agent appointed by the Issuer must be appointed prior to the
termination of the appointment of the previous Paying Agent and shall be a reputable and experienced
financial institution which is rated at least the Minimum Rating.
The Paying Agency Agreement and all non-contractual obligations arising out of or in connection with it
shall be governed by and construed in accordance with Portuguese law. The courts of Lisbon shall have
exclusive jurisdiction to hear any disputes that may arise out of or in connection therewith (including a
dispute relating to the existence, validity or termination of the Paying Agency Agreement or any non-
contractual obligation arising out of or in connection with it) or the consequences of its nullity.
Co-ordination Agreement
On the Closing Date, the Transaction Creditors and the Issuer will enter into the Co-ordination
Agreement pursuant to which the parties (other than the Common Representative) will be required,
subject to Portuguese law, to give certain information and notices to and give due consideration to any
request from or opinion of the Common Representative in relation to certain matters regarding the
Mortgage Asset Portfolio, the Originator and its obligations under the Mortgage Sale Agreement, the
Servicer and its obligations under the Mortgage Servicing Agreement.
Pursuant to the terms of the Co-ordination Agreement, the Common Representative Appointment
Agreement, the Conditions and the relevant provisions of the Securitisation Law, the Common
Representative shall, following the delivery of an Enforcement Notice, act in the name and on behalf of
the Issuer in connection with the Transaction Documents and in accordance with the Co-ordination
Agreement.
Pursuant to the terms of the Co-ordination Agreement, the Common Representative will have the direct
benefit of certain representations and warranties made by the Originator and the Servicer in the Mortgage
Sale Agreement and the Mortgage Servicing Agreement respectively. The Issuer will authorise the
Common Representative to exercise the rights provided for in the Co-ordination Agreement and the
Originator and the Servicer will acknowledge such authorisation therein.
The Co-ordination Agreement and all non-contractual obligations arising out of or in connection with it
shall be governed by and construed in accordance with Portuguese law. The courts of Lisbon shall have
exclusive jurisdiction to hear any disputes that may arise out of or in connection therewith (including a
dispute relating to the existence, validity or termination of the Co-ordination or any non-contractual
obligation arising out of or in connection with it) or the consequences of its nullity.
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USE OF PROCEEDS
The net proceeds of the issue of the Notes will amount to € 1,373,100,001.
The Issuer will apply the proceeds of the issue of the Mortgage Backed Notes solely towards the purchase
of the Mortgage Assets pursuant to the Mortgage Sale Agreement. The proceeds of the Class C Notes will
be used to establish the Cash Reserve Account and to pay the part of the purchase price of the Mortgage
Assets not paid from the proceeds of the issue of the Mortgage Backed Notes. The proceeds of the VFN,
once issued, will be initially credited to the Liquidity Account and will be used to protect the Issuer
against the materialisation of any Set-Off Amount through the exercise by a Borrower of any set-off or
deduction from any amount payable by such Borrower under a Mortgage Asset in respect of claims that
such Borrower has against the Originator and the potential failure of such Originator to indemnify the
Issuer. The Issuer may increase the nominal amount of the VFN up to the Maximum Limit. The total
expenses relating to the admission of the Class A Notes to trading on the Stock Exchange's main market
will amount to approximately €17,500 and will be paid by DBAG Portugal.
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CHARACTERISTICS OF THE MORTGAGE ASSETS
The information set out below has been prepared on the basis of a pool of the Mortgage Assets as at 1
August 2013. The Initial Mortgage Asset Portfolio had the aggregate characteristics indicated in tables 1
to 16 below.
The Initial Mortgage Asset Portfolio was selected so that it complies with the Mortgage Asset Warranties
set out in the Mortgage Sale Agreement, the Initial Collateral Determination Date being 1 August 2013.
1. Summary
2. Year of Origination
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3. Original Months to Maturity
4. Remaining Months to Maturity
5. Original Outstanding Balance
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6. Current Outstanding Balance
7. Interest Rate Type
8. Benchmark Index
9. Interest Rate Spread
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10. Original LTV
11. Current LTV
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12. Property Location
13. Purpose
14. Employment Type
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15. Occupancy Type
16. Days in Arrears
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THE ISSUER
1. Introduction
The Issuer is a limited liability company registered and incorporated in Portugal on 11 November
2004 as a special purpose vehicle (known as “Securitisation Company” or “STC”, a sociedade
de titularização de créditos) for the purpose of issuing asset-backed securities under the
Securitisation Law and has been duly authorised by the Portuguese Securities Market Commission
(Comissão do Mercado de Valores Mobiliários, the “CMVM”) through a resolution of the Board
of Directors of the CMVM for an unlimited period of time and was given registration number
9114.
The registered office of the Issuer is at Rua Castilho, no. 20, Lisbon, Portugal. The contact details
of the Issuer are as follows: telephone number (+351) 21 311 1200; fax number (+351) 21 352
6334. The Issuer is registered with the Commercial Registry Office of Lisbon under the sole
registration and taxpayer number 507 130 820.
The Issuer has no subsidiaries.
2. Main Activities
The principal objects of the Issuer are set out in its articles of association (Estatutos or Contrato de
Sociedade) and permit, inter alia, the purchase of a number of portfolios of assets from public and
private entities and the issue of notes in series to fund the purchase of such assets and the entry
into of the relevant transaction documents to effect the necessary arrangements for such purchase
and issuance including, but not limited to, handling enquiries and making appropriate filings with
Portuguese regulatory bodies and any other competent authority and any relevant stock exchange.
3. Corporate Bodies
The directors of the Issuer*, their principal occupations and their respective business addresses
are:
NAME** BUSINESS ADDRESS PRINCIPAL OCCUPATIONS OUTSIDE OF
THE ISSUER
Bernardo Luís de Lima
Mascarenhas Meyrelles do
Souto
Rua Castilho, no. 20, 1250-069 Lisbon,
Portugal
Representative of Deutsche Bank
Aktiengesellschaft
José Francisco Gonçalves de
Arantes e Oliveira
Rua Castilho, no. 20, 1250-069 Lisbon,
Portugal
Officer of Deutsche Bank
Aktiengesellschaft
Jerome David Beadle Rua Castilho, no. 20, 1250-069 Lisbon,
Portugal
Officer of Deutsche Bank
Aktiengesellschaft
* Mr. Joaquim António Furtado Baptista resigned from its office as director of the Issuer with
effects, under the law, from the end of June 2013.
** Mr. Bernardo Luís de Lima Mascarenhas Meyrelles do Souto and Mr. José Francisco
Gonçalves de Arantes e Oliveira have been appointed in May 2013 and Mr. Jerome David Beadle
has been appointed in July 2013. The registry of all of the members of the Issuer’s Board of
Directors is now pending with CMVM.
There are no potential conflicts of interest between any duties of the persons listed above to the
Issuer and their private interests.
On 28 March 2013, the Issuer’s General Assembly passed a resolution whereby, among other
matters, it approved the members of the supervisory board for the 2013-2015 term, as follows:
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Chairman: Manuel Corrêa de Barros de Lancastre;
Members: Maria da Conceição Romão Teixeira Carrapeta and João Alexandre Marques de Castro
Moutinho Barbosa.
Alternate member: Catarina Isabel Lopes Antunes Ribeiro.
The supervisory board’s composition is deliberated in shareholder’s general meeting, and it
exercises functions for terms of 3 (three) years.
The Issuer has no employees. The directors of the Issuer are officers of Deutsche Bank
Aktiengesellschaft – Sucursal em Portugal. The secretary of the Issuer is Sofia Temes Domingues
Ferreira de Campos da Cruz with offices at Rua Castilho, no. 20, 1250-069 Lisbon, Portugal.
The chairman of the Issuer shareholder’s general meeting is Mr. Pedro Cassiano Santos and the
secretary of the Issuer’s shareholder’s general meeting is Mr. Tiago Correia Moreira.
On the date hereof the registration with CMVM of the members of the Issuer’s corporate bodies
appointed for the period 2013-2015 (in accordance with the requirements of the Securitisation Law
and CMVM Regulation 12/2002) is still pending completion.
4. Independent statutory auditor
On 28 March 2013, the Issuer’s General Assembly passed a resolution whereby, among other
matters, it approved the independent statutory auditor for the 2013-2015 term, KPMG, described
below.
KPMG is registered with the Chartered Accountants Bar under number 189 and is represented by
Vitor Manuel da Cunha Ribeirinho, ROC n.º 1081. The registered office of KPMG is Edifício
Monumental, Avenida Praia da Vitória, 71–A, 11th floor, 1069-006 Lisbon, Portugal. KPMG has
taxpayer number 502 161 078.
5. Legislation Governing the Issuer’s Activities
The Issuer’s activities are specifically governed by the Securitisation Law and supervised by the
CMVM.
6. Insolvency of the Issuer
The Issuer is a special purpose vehicle and as such it is not permitted to carry out any activity other
than the issue of securitisation notes and certain activities ancillary thereto including, but not
limited to, the borrowing of funds in order to ensure that securitisation notes have the necessary
liquidity support and the entering into of documentation in connection with each such issue of
securitisation notes.
Accordingly, the Issuer will not have any creditors other than the Republic of Portugal in respect
of tax liabilities, if any, the Noteholders and the Transaction Creditors, third parties in relation to
any third party expenses, and Noteholders and other creditors in relation to other series of
securitisation notes issued or to be issued in the future by the Issuer from time to time.
The segregation principle imposed by the Securitisation Law and the related privileged nature of
the Noteholders’ entitlements, on the one hand, together with the own funds requirements and the
limited number of general creditors an STC may have, on the other, makes the insolvency of the
Issuer a remote possibility. In any case, under the terms of the Securitisation Law, such remote
insolvency would not prevent Noteholders from enjoying privileged entitlements to the Mortgage
Assets.
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7. Capital Requirements
The Securitisation Law imposes on the Issuer certain capitalisation requirements for supervisory
purposes.
The level of capitalisation of the Issuer is determined by reference to the nominal value
outstanding of notes issued by the Issuer and traded (em circulação) at any given point in time.
Apart from the minimum share capital, an “STC” must meet further own funds levels depending
upon the nominal amount outstanding of the securitisation notes issued. In this respect, (a) if the
nominal amount outstanding of the notes issued and traded is €75 million or less, the own funds of
the Issuer shall be no less than 0.5 per cent. of the nominal amount outstanding of such notes, or
(b) if the nominal amount outstanding of the notes issued and traded exceeds €75 million, the own
funds of the Issuer, in relation to the portion of the nominal amount outstanding of the notes in
excess of €75 million, shall be 0.1 per cent. of the nominal amount outstanding of such notes.
An STC can use its own funds to pursue its activities. However if, at any time, the STC's own
funds fall below the percentages referred to above the STC must, within 3 (three) months, ensure
that such percentages are met. CMVM will supervise the Issuer in order to ensure that it complies
with the relevant capitalisation requirements.
The required level of capitalisation can be met, inter alia, through share capital, ancillary
contributions (prestações acessórias) and reserves as adjusted by profit and losses.
The entire authorised share capital of the Issuer corresponds to €250,000.00 comprises 50.000,00
issued and fully paid shares (the “Shares”) of €5.00 each.
The amount of supplementary capital contributions (prestações acessórias) made by Deutsche
Bank Aktiengesellschaft, a private limited liability company incorporated under the laws of
Germany (the “Shareholder”), is €13,086,593.11.
8. The Shareholder
All of the Shares are held directly by the Shareholder. There are not any special mechanisms in
place to ensure that control is not abusively exercised. Risk of control abuse is in any case
mitigated by the provisions of the Securitisation Law and the remainder applicable legal and
regulatory provisions and the supervision of the Issuer by the CMVM and the Bank of Portugal.
9. Capitalisation of Issuer
As at 31 July 2013
(non audited)
Indebtedness
Castilho Mortgages No.1 transaction
Class A Notes .................................................................................................................. €1,132,800,000 Class B Notes .................................................................................................................. €199,900,000 Class C Notes .................................................................................................................. €40,500,000 VFN ................................................................................................................................ €1
Other Securitisation Transactions €10,130,371,302,55 Share capital (Authorised €250,000.00; Issued 50,000.00
shares with a par value of €5.00 each) ............................................................................
€250,000.00
Ancillary Capital Contributions ...................................................................................... €13,086,593.11 Reserves and retained earnings
Total capitalisation .........................................................................................................
€167,618.66 €13,504,211.77
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10. Other Securities of the Issuer
The Issuer has not issued any convertible or exchangeable securities/notes.
11. Financial Statements
Audited financial statements of the Issuer are to be published on an annual basis and are certified
by an auditor registered with the CMVM. The first audited financial statement is for the period
starting on the date of incorporation and ending on 31 December 2005.
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THE ORIGINATOR
Deutsche Bank AG and Deutsche Bank Group - Introduction
Deutsche Bank Aktiengesellschaft (“Deutsche Bank AG”) is a credit institution and a stock corporation
incorporated under the laws of the Federal Republic of Germany, registered in the Commercial Register
of the Local Court of Frankfurt am Main under HRB 30 000. Deutsche Bank AG has its corporate seat in
Frankfurt am Main, Germany. It maintains branches at home and abroad, inter alia, in Portugal, London,
New York, Sydney, Tokyo and an Asia-Pacific Head Office in Singapore, which serve as the head offices
for the business operations in the relevant geographical region.
The corporate purpose of Deutsche Bank AG, as set forth in its Articles of Association, is the conduct of
banking business of every kind, the provision of financial and other services, and the promotion of
international economic relations. Deutsche Bank AG may realize this object itself or through subsidiaries
and affiliated companies. To the extent permitted by law, Deutsche Bank AG is entitled to conduct all
business and to take all steps which appear suitable to promote the object of Deutsche Bank AG, in
particular to acquire and dispose of real estate, to establish branches at home and abroad, to acquire,
administer and dispose of participations in other companies, and to conclude enterprise agreements. The
financial year of Deutsche Bank AG is the calendar year.
Deutsche Bank AG is a leading global investment bank with a strong and profitable private client
franchise. Its businesses are mutually reinforcing each other. Deutsche Bank Group is one of the leading
financial services providers in Europe and worldwide.
Deutsche Bank Group is organised into three group divisions: (i) Corporate and Investment Bank (“CIB”)
comprising the two corporate divisions Corporate Banking & Securities (“CB&S”) and Global
Transaction Banking (“GTB”), (ii) Private Clients and Asset Management (“PCAM”), comprising the
two corporate divisions Asset and Wealth Management (“AWM”) and Private & Business Clients
(“PBC”) and (iii) Corporate Investments (“CI”). In CIB, Deutsche Bank Group carries out its capital
markets business including its origination, sales and trading of capital markets products, as well as its
corporate advisory, corporate lending and transaction banking businesses. The PCAM group division
comprises Deutsche Bank Group's investment management business for both private and institutional
clients as well as the traditional banking business for private individuals and small and medium-sized
businesses. The CI group division manages Deutsche Bank Group's global principal investment activities.
These primarily include the remaining industrial shareholdings, other equity investments and other assets,
which include certain real estate and credit exposures that are not part of the core business of Deutsche
Bank Group.
Capital and shareholders
Share capital
Until the capital increase described below, the share capital of Deutsche Bank AG amounted to EUR
1,589,399,078.40, divided into 620,859,015 no-par value shares. On 20 September 2010, Deutsche Bank
AG resolved upon a capital increase against cash contributions from authorised capital (genehmigtes
Kapital), by which the share capital of Deutsche Bank AG increased from EUR 1,589,399,078.40 by
EUR 790,120,000.00 to EUR 2,379,519,078.40 through the issuance of 308,640,625 new shares against
cash contributions. On 21 September 2010, Deutsche Bank AG made a public offer to its shareholders for
subscription to the afore-mentioned new shares. The capital increase became effective upon entry in the
commercial register on 5 October 2010.
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Shareholders
The share of capital held by private investors was 25 per cent. at the end of 2012 (2011: 26 per cent.).
Institutional investors held 75 per cent. (2010: 74 per cent.) of our total share capital of
€ 2,379,519,078.40. Total share capital held in Germany decreased to 45 per cent. over the course of the
year (2011: 52 per cent.). Reasons for this included, above all, the transfer of the custody of institutional
investors’ shareholdings from Germany to abroad as well as sales of private shareholders in Germany.
Deutsche Bank shares remain almost entirely in free float. Once again, around 99 per cent. of our
shareholders were private investors. BlackRock Inc., New York, which holds 5.14 per cent. of our shares,
is the only large shareholder whose holdings at the end of 2012 are subject to the statutory reporting
threshold of 3 per cent..
Deutsche Bank AG share
Deutsche Bank AG’s shares are admitted to stock exchange trading to the regulated market of the
Frankfurt Stock Exchange with simultaneous admission to the sub-segment of the regulated market with
additional post-admission obligations (Prime Standard) of the Frankfurt Stock Exchange and to the
regulated market on all other stock exchanges in Germany as well as on the New York Stock Exchange,
and can be traded in the electronic trading system XETRA. The shares are included in the DAX® share
index.
The Portuguese Branch of Deutsche Bank AG
DBAG Portugal is the Portuguese branch of Deutsche Bank AG and is registered with Portuguese Central
Bank (“Banco de Portugal”) under the banking licence no. 43. According to the Portuguese Legal
Framework for Credit Institutions and Financial Companies established in Decree-law no. 298/92, dated
December 31, 1992 in its current version (“RGICSF”), credit institutions may carry the following
activities: (i) acceptance of deposits or other repayable funds; (ii) lending, including the granting of
guarantees and other commitments, financial leasing and factoring; (iii) money transmission services; (iv)
issuance and administration of means of payment, e.g., cheques, travellers’ cheques and bankers drafts;
(v) trading for own account or for account of clients in money market instruments, foreign exchange,
financial futures and options, exchange or interest rate instruments, goods and other transferable
securities; (vi) securities issues and placement and provision of related services; (vii) money broking;
(viii) portfolio management and advice, safekeeping and administration of securities; (ix) management
and consulting in relation to other assets; (x) advice to undertakings on capital structure, industry strategy
and related questions as well as advice and services relating to mergers and purchase of undertakings; (xi)
dealing with precious metals and stones; (xii) acquisition of holdings in companies; (xiii) trading in
insurance policies; (xiv) rendering of business information; (xv) safe custody services; (xvi) leasing of
movable property, in similar terms of the financial leasing companies; (xvii) provision of the investment
services referred to in article 199-A of the RGICSF, not covered by the preceding paragraphs; (xviii)
other similar transactions not forbidden by law.
DBAG Portugal is registered as credit institution authorised to carry on financial intermediation activities
with the Portuguese Securities Commission under the licence no. 349.
In what concerns the activity of trading in insurance policies, DBAG Portugal benefits from the passport
into Portugal of Deutsche Bank AG’s license with the German supervisor (“DIHK – Deutscher Industrie
und Handelskammertag”).
History and development of DBAG Portugal
Deutsche Bank AG’s first activity in Portugal started in 1978 and was carried out through a shareholding
in a company called “MDM – Sociedade de Investimentos, S.A.”, an investment advice company. In
1983 MDM corporate purpose changed from investment advice company to investment company and in
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that pursue MDM participated in the establishment of several non-banking financial institutions. In 1987
Deutsche Bank AG acquired the other shareholding of MDM and become its single shareholder.
In 1990 MDM was transformed in an investment bank and changed its corporate name to “Deutsche Bank
de Investimento, S.A.”, working in the investment banking area solely.
In 1991, Deutsche Bank de Investimento, S.A. obtained with Madeira Free-trade Zone Office (Sociedade
de Desenvolvimento da Madeira, S.A.) a licence (no. 329 for undetermined period) for acting in Madeira
Free Trade Zone trough a branch called “Deutsche Bank de Investimento, S.A. – Sucursal Financeira do
Exterior”.
In 1999, the Portuguese affiliate changed its corporate name to Deutsche Bank (Portugal), S.A. and the
company is carrying out general banking activities since that time.
Deutsche Bank Group had since that time a well established corporate investment banking practice and
has remained a strong business area until the present moment.
As far as private and business clients practice were concerned, the first branch office opened in 2001 and
the first private banking activity started on 2002 only. Private and business clients practice remained a
small activity within Deutsche Bank (Portugal), S.A.until 2005, with only three branch offices established
in the Portuguese territory by that time. However, since September 2005 until current date, private and
business clients practice has expanded and on December 2012 Deutsche Bank Group had fifty six branch
offices and 21 financial agent offices covering the Portuguese territory.
In 2010, Deutsche Bank AG, as a consequence of the European Cross Border Merger Directive, which
provided a new legal and tax framework for cross border mergers of EU-entities, initiated a program
implementation of the branch conversion of Deutsche Bank (Portugal), S.A. into Deutsche Bank AG,
Portuguese Branch. The objective of the conversion of relevant subsidiaries of Deutsche Bank in Europe
into branches of Deutsche Bank was, inter alia, to simplify the group structure of Deutsche Bank Group,
and to enhance the efficient allocation of resources between Deutsche Bank and its European branch
network.
Business activities and investments
DBAG Portugal acts currently in the Portuguese jurisdiction under three roles – as a bank, as a financial
intermediary and as an insurance mediator. As a bank, it carries out all activities permitted by the general
banking licence.
During 2012 DBAG Portugal maintained high levels of business activity in the areas of Global
Transaction Banking and Investment Banking, thus strengthening its leadership among international
investment banks operating in the Portuguese market. Simultaneously and just like in the previous
financial year, it was noticed a consolidation of the investment made on the Private & Business Clients
sales network and a persistence of the solid growth of the business activity.
The two Portuguese securitisation vehicles held by Deutsche Bank Group (Tagus, STC, S.A. (a
securitisation company) and Navegator, SGFTC, S.A. (a securitisation fund management company) are
currently held by Deutsche Bank AG.
Business development in 2012
Despite the adverse economic circumstances, in 2012 DBAG Portugal recorded a significant growth,
partly linked to the positive performance the bank registered during the crisis, due to, on one hand, the
market conditions which forced more discipline managing the business, including tighter monitoring of
credit risk and costs, and on the other hand, it also created good opportunity for growth and strengthening
the market position: thus, with the Portuguese economy still significantly impacted by the global
recession and in particular by the Portuguese bailout.
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In June 2013, DBAG Portugal had a portfolio of loans which amounted 2,567,850 thousand euros.
1,612,322 thousand euros of such portfolio are mortgage loans to finance the acquisition of properties.
DBAG Portugal had, as of june 2013, about 983,752 thousend euros in deposits.
Increase commitment to the Portuguese market
Clients in Portugal - particularly those with international reach - increasingly request from their banks
flexible funding, as well as products with high degree of consistency and integration capability across
various markets where they operate. The Cross-Border Merger of DBAG Portugal into DB Europe and
the subsequent spin-off to Deutsche Bank AG resulting in the business of DBAG Portugal to be continued
as branch of Deutsche Bank AG will strengthen Deutsche Bank AG’s commitment to the Portuguese
market by - inter alia - enabling Deutsche Bank AG to allocate more financial resources out of the
balance sheet of Deutsche Bank AG to the benefit of Portuguese clients. Further, it will enable Deutsche
Bank AG to further harmonise its product portfolio (for instance, by aligning product development and
management processes) in order to be able to provide clients with integrated solutions that meet their
financing and trading requirements.
Effect harmonisation of operating model
Operating models of banks are often – and to a considerable extent – tied to the type of the underlying
legal entities. From a regional strategic perspective, fragmentation of banking operating models leads to
incremental costs of doing business. Deutsche Bank AG strives to pursue harmonisation of its European
operating model by operating – where feasible – via branches of Deutsche Bank AG. The envisaged
conversion aspires to further integrate – inter alia – the operations and systems infrastructure of DBAG
Portugal into the existing Deutsche Bank AG network, in an effort to achieve cost synergies and meet
efficiency targets as anticipated by shareholders and regulators alike.
Business Areas Overview
DBAG Portugal is presented in Portugal with 4 main areas: 1) Institutional Client Group (“ICG”) –
Institutional Client Group which is the sales group of Deutsche Bank, covering Financial institution's –
Banks, Asset Managers, Insurance Companies, and Pension Funds – ICG sells fixed income products
(such as rates, credit, commodities, and structured equity). All trades are booked against either DB
Frankfurt or DB London, meaning that clients are facing as count party London or Frankfurt. All products
are approved in London and subject to England procedures – legal and compliance. All clients are
adopted in London or Frankfurt. 2) Corporate Finance – Corporate Finance Portugal provides corporate
advisory services such as Mergers & Acquisitions, Privatizations, Equity Capital Markets, Structured
Finance and Real Estate. Target clients are the top 15 Portuguese companies (including the Portuguese
government) and foreign clients advised by other Deutsche Bank teams on transactions involving the
Portuguese market. The main focus is on the origination of transactions and providing local support to the
execution by Deutsche Bank's global industry and product teams. 3) Global Transaction Banking
(“GTB”) is a provider of Cash Management, Trade Finance, Capital Market Sales and Trust & Securities
Services for corporate clients and financial institutions. The whole spectrum of innovative and market
leading Transaction Banking products are promoted by a skilled sales force and serviced by a dedicated
team of client service professionals, leveraging on close partnerships with colleagues in Global Banking,
Global Markets and PCAM, GTB optimizes opportunities for customers. 4) Private & Business Banking
role / responsibility includes the definition, control, and management of 56 Investment Financial Centers
and 21 Financial Agents, as well as the two existing Private Banking Centers (Lisbon and Oporto).
Distribution Channels
Distribution is settled in 3 main pillars: Branches; Financial Agents & Private Banking. Since Q3 2005,
with the new management in Deutsche Bank PBC, the network of Private & Business Clients area –
distribution – is significantly growing in retail (own branches) and private banking.
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A strategic 6 year plan was assessed and implemented with significant success. DBAG Portugal expanded
the network and positioning for the affluent segments, with particular focus on investment products.
Deutsche Bank AG aspires to develop the best advisory bank for affluent & private banking clients in
Portugal. Since 2006, distribution channel revenues grew at a Compound Annual Growth Rate (CAGR)
of 45 per cent. and Earnings Before Interest and Tax (EBIT) at a CAGR of 33 per cent. DBAG Portugal
was awarded Delloite / Exame award for the “The Bank with highest growth in its segment during 2011”.
DBAG Portugal has currently 77 distribution channels (56 branches and 21 financial agencies) and 347
employees.
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ORIGINATOR'S STANDARD BUSINESS PRACTICES, SERVICING AND CREDIT
ASSESSMENT
Origination and Underwriting Process
The Originator is the Portuguese branch of a German bank (Deutsche Bank Aktiengesellschaft) providing
full retail banking services, including residential mortgage loans. The mortgage loans are originated
through its branch and financial agents network, as a result of direct contact with borrowers.
The mortgage loan application is prepared at the branch level by branch staff, including Client adoption
procedures and Credit Quick Check (Client Trustworthiness, reputational risk and plausibility of credit
purpose). The applicant is provided with information regarding the financial conditions attached to the
mortgage loan and any associated expenses, together with a request list of the information and documents
which the applicant is required to provide as part of the application process. The Originator reviews the
following matters during the application process: applicant’s income, debt to income and loan to value
ratios and the applicant’s credit profile. In establishing this information the Originator checks external
databases (such as the Bank of Portugal’s database) and applies for scoring systems under Basel II rules.
The completed application is sent to the responsible officer at the Originator for approval.
Collections
Mortgages are generally repaid on a monthly basis. Interest and principal components are paid through
debit on the borrowers’ current account with the Originator.
Monitoring Delinquency and Default Recovery Procedures
Collections is the Department in the Originator responsible for control over unpaid instalments.
A delinquency is recorded if and when an instalment remains unpaid on the first day subsequent to the
date on which the debit on the obligors’ current account was due. All delinquencies are monitored on a
daily basis by Collections. In addition, until the fifth day after payment failure, automatically payment
reminder letters and text messages are sent to the obligors. During the first 5 days of delinquency
Relationship Manager and Branch Manager is required to contact client to inform him and request
payment of overdue amounts.
During the 30 first days of payment failure borrowers are contacted by Collections to assess willingness
to pay or to get promises to pay.
Once loan have between 30-60 days past due (dpd) a restructuring of the loan is proposed against
reassessment of the borrowers’ financial situation.
Collections team uses services of external collectors for clients with more than 120 dpd, or borrowers that
contact are missing.
Loans with more than 150 dpd are sent to external legal agency to negotiate an extra-judicial recovery
with the client sending a letter as last warning and establishing a settlement date for the unpaid instalment
warning the obligors of judicial enforcement proceedings or, if it proves unsuccessful, to start
enforcement proceedings, which typically take an additional year to complete.
Lending Criteria
Certain key features of the criteria applied prior to approval of any advance in respect of a mortgage loan
(the “Lending Criteria”) are set out below. The Originator, as a reasonably prudent mortgage lender,
may vary or waive the Lending Criteria from time to time. Only underwriting staff expressly granted the
authority to do so may approve applications for mortgage loans which vary from the Lending Criteria.
The key features of the Lending Criteria are as follows:
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Security
(a) each of the mortgage loans is secured by a first ranking mortgage over a property in Portugal or by a
subsequent ranking mortgage only to the extent that every prior ranking mortgage loan is also held by the
Originator;
(b) an independent appraisal company selected by the relevant Originator is required to assess the value
of the property securing of each mortgage loan, Independent Appraisal Companies are selected based on
their professional qualifications and experience, and the quality and accuracy of their valuation reports are
regularly monitored by specialised staff of the relevant Originator; and
(c) Borrowers are required to effect and maintain property insurance in an amount sufficient to recover
the reinstatement value of the property and the relevant Originator is a joint beneficiary under the policy.
Credit risk
Credit risk management is comprised of: the identification and measurement of credit risk and the control
and mitigation of credit exposures in relation to the following stages:
(i) Risk Criteria /Client Classification: corresponds to definition of risk criteria through policies,
strategies and procedures, and assessment of the client worthiness and reputational risk.
(ii) Risk Assessment and Credit Decision: corresponds to the analysis and decision-making on credit
exposures;
(ii) Maintenance and Portfolio Management: corresponds to gathering and analysis of information on risk
management, determining the mitigating procedures which may be required, and actions aimed at
preventing risk deterioration, and
(iii) Problem Loan Management: corresponds to the management of overdue loan portfolios in order to
minimise losses.
The organisation of credit risk management is based on various common principles and on shared criteria
of the various market segments. To effectively develop this function the Originator has established a
combined set of policies, procedures, and management and assessment tools for the Portuguese market.
The role of the credit risk management group includes the identification, measurement, integration and
assessment of various credit exposures, from a global perspective and within each segment. The group
also focuses on establishing the potential return of a given investment, as against the associated risk
exposure. The credit risk management process is constantly adjusted to meet the requirements of the
client group in question, throughout the successive stages of Risk Criteria /Client Classification, Risk
Assessment and Credit Decision, Maintenance and Portfolio Management and Problem Loan
Management.
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THE ACCOUNTS BANK
The Accounts Bank is DBAG Portugal which is the Portuguese branch of Deutsche Bank AG. For further
information please see the section headed “The Originator”.
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SELECTED ASPECTS OF LAWS OF PORTUGAL RELEVANT TO THE MORTGAGE
ASSETS AND THE TRANSFER OF THE MORTGAGE ASSETS
Securitisation Legal Framework
General
Decree-Law no. 453/99, of 5 November, as amended by Decree-Law no. 82/2002, of 5 April, by Decree-
Law no. 303/2003, of 5 December, by Decree-Law no. 52/2006, of 15 March, and by Decree-Law no.
211-A/2008, of 3 November (the “Securitisation Law”) has implemented a specific securitisation legal
framework in Portugal, which contains a simplified process for the assignment of credits. The
Securitisation Law regulates (i) the establishment and activity of Portuguese securitisation vehicles (ii)
the type of credits that may be securitised and (iii) the entities which may assign credits for securitisation
purposes.
The most important aspects of this legal framework include:
(i) the establishment of special rules facilitating the assignment of credits (including mortgage loans)
in the context of securitisation transactions;
(ii) the establishment of the types of originators that may assign their credits pursuant to the
Securitisation Law;
(iii) the establishment of the types of credits that may be securitised and the eligibility criteria such
credits are required to comply with;
(iv) the creation of 2 (two) different types of securitisation vehicles: (i) credit securitisation funds
(Fundos de Titularização de Créditos – “FTC”) and (ii) credit securitisation companies
(Sociedades de Titularização de Créditos – “STC”).
In November 2006, the CMVM submitted to public consultation a draft of a Decree-Law amending the
Securitisation Law. The public consultation period ended on 4 December 2006, but the consultation paper
can still be consulted at www.cmvm.pt. Decree-Law no. 211-A/2008, of 3 November, which aimed at
reinforcing transparency and information duties within the financial sector, inserted certain changes in the
Securitisation Law, notably one permitting the acquisition of new receivables by closed funds (fundos de
património fixo) in case there has been a variation to the characteristics that the mortgage loans evidenced
by the time they were assigned to the fund, including by virtue of renegotiation of the applicable terms
and conditions. Without prejudice to the amendments inserted by the alluded Decree-Law, and namely
taking into account the aforementioned public consultation, it is possible that the Securitisation Law may
be subject to more substantial amendments in the future, although the exact terms of such amendments
and the relevant enactment time cannot be ascertained.
Securitisation Tax Law
Decree-Law no. 219/2001, as amended by Law no. 109-B/2001, of 27 December, by Decree-Law no.
303/2003, of 5 December, by Law no. 107-B/2003, of 31 December, and by Law no. 53-A/2006, of 29
December (together the “Securitisation Tax Law”) established the tax regime applicable to the
securitisation of credits implemented under the Securitisation Law. The Securitisation Tax Law allows for
a neutral fiscal treatment of securitisation vehicles to non-resident entities without a permanent
establishment in Portuguese territory. However, where a Portuguese resident entity holds more than 25.00
per cent. of such non-resident entity, a withholding tax applies regarding the amounts paid by the
company to such non-resident entity, unless a tax treaty that might be applicable to the situation
establishes a reduced withholding tax rate. Withholding tax also becomes due in the event that such non-
resident entity is located in a country or territory included in the list of countries determined by the
Portuguese Tax Ministry pursuant to Ministerial Order no. 150/2004, of 13 February (as amended).
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STC Securitisation Companies
STCs are established for the exclusive purpose of carrying out securitisation transactions in accordance
with the Securitisation Law. The following is a description of the main features of an STC.
Corporate Structure
STCs are commercial companies (“sociedades anónimas”) incorporated with limited liability, having a
minimum share capital of €250,000.00. The shares in STCs can be held by one or more shareholders.
STCs are subject to the supervision of the CMVM and their incorporation is subject to the prior
authorisation by the CMVM. STCs are subject to ownership requirements. A prospective shareholder
must obtain approval from the CMVM in order to establish an STC. Such approval is granted when the
prospective shareholder shows that it is capable of providing the company with a sound and prudent
management.
If the shares in an STC are to be transferred to another shareholder or shareholders, prior authorisation of
the CMVM of the prospective shareholder has to be obtained. The interest of the new shareholder in the
STC has to be registered within 15 days of the purchase.
Regulatory Compliance
In order to ensure the sound and prudent management of STCs, the Securitisation Law provides that the
members of the board of directors and the members of the board of auditors meet high standards of
professional qualification and personal reputation.
The members of the board of directors and the members of the board of auditors must be registered with
the CMVM.
Corporate Object
STCs can only be incorporated for the purpose of carrying out one or more securitisation transactions by
means of the acquisition, management and transfer of receivables and the issue of securitisation notes for
payment of the purchase price for the acquired receivables.
An STC may primarily finance its activities with its own funds and by issuing notes.
Without prejudice to the above, pursuant to the Securitisation Law, STCs are permitted to carry out
certain financial activities, but only to the extent that such financial activities are (i) ancillary to the
issuance of the securitisation notes, and (ii) aimed at ensuring that the appropriate levels of liquidity funds
are available to the STC.
Nature of credits
The Securitisation Law sets out the credits that may be securitised and the eligibility criteria which such
credits shall comply with in order to be securitised.
Who may assign assets for securitisation purposes?
Under the Securitisation Law, originators include Portugal and public corporate entities, credit
institutions, financial companies, insurance companies, pension funds and pension fund managing
companies and any other corporate entities whose accounts have been audited (by an auditor registered
with the CMVM) for the last 3 (three) consecutive years.
Assignment of credits
Under the Securitisation Law, the sale of credits for securitisation is effected by way of assignment of
credits. In this context the following should be noted:
(i) Notice to Debtors
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In general, and as provided in the Código Civil (the Portuguese Civil Code), an assignment of
credits is effective against the relevant debtor after notification of assignment is made to such
debtor or in cases where the assignment is accepted by the debtor. Código Civil (the Portuguese
Civil Code) does not require a given form for such notification to the debtor to be made.
An exception to this framework applies when the assignment of credits is made under the
Securitisation Law by, inter alia, credit institutions or financial companies, and such entities are
the servicers of the credits. In that case, there is no requirement to notify the relevant debtor since
such assignment is deemed to be effective in relation to such debtor when it is effective between
assignor and assignee.
Accordingly, in the situation set out above, any payments made by the debtor to its original
creditor after an assignment of credits has been made will effectively belong to the assignee who
may, at any time and even in the context of the insolvency of the assignor, claim such payments
from the assignor.
(ii) Assignment Formalities
There are no specific formality requirements for an assignment of credits under the Securitisation
Law. A written private agreement between the parties is sufficient for a valid assignment to occur
(including an assignment of mortgage loans). Transfer by means of a public deed is not required.
In the case of an assignment of mortgage loans, the signatures to the assignment contract must be
certified by a notary public or the company secretary of each party (when the parties have
appointed such a person) under the terms of the Securitisation Law, such certification being
required for the registration of the assignment at the Mortgage Asset’s relevant Portuguese Real
Estate Registry Office.
In order to perfect an assignment of mortgage loans and ancillary rights which are capable of
registration at a public registry against third parties, the assignment must be followed by the
corresponding registration (as described in the paragraph below) of the transfer of such mortgage
loans and ancillary mortgage rights in the relevant Real Estate Registry Office.
As of 1 January 2009, the law allows for the registration of the assignment of any Mortgage Asset
at any Portuguese Real Estate Registry Office, even if the said Portuguese Real Estate Registry
Office is not the office where the Mortgage Asset is registered. The registration of the transfer of
the mortgage loans requires the payment of a fee for each mortgage loan of up to €300 (three
hundred euros).
The Securitisation Law provides for the assignment of credits to be effective between the parties
upon execution of the relevant assignment agreement. This means that in the event of insolvency
of the assignor prior to registration of the assignment of credits, the credits will not form part of
the assignor’s insolvency estate even if the assignee may have to claim its entitlement to the
assigned credits before a competent court.
However, the assignment of any security over real estate in Portugal is only effective against third
parties acting in good faith further to registration of such assignment with the competent registry
by or on behalf of the assignee. The Issuer is entitled under the Securitisation Law to effect such
registration.
(iii) Assignment and Insolvency
Unless an assignment of credits is effected in bad faith and is deemed prejudicial to the assignor’s
insolvency estate, such assignment under the Securitisation Law cannot be challenged for the
benefit of the assignor’s insolvency estate and any payments made to the assignor in respect of
credits assigned prior to a declaration of insolvency will not form part of the assignor’s insolvency
estate even when the term of the credits falls after the date of declaration of insolvency of the
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assignor. In addition any amounts held by the servicer as a result of its collection of payments in
respect of the credits assigned under the Securitisation Law will not form part of the servicer’s
insolvency estate.
Mortgages charging real estate under Portuguese law
(i) Concept
A mortgage entitles the mortgagee, in the event of default of the relevant obligations, to be paid
with preference to non-secured creditors from the proceeds of the sale of the relevant property, the
subject of the mortgage.
(ii) Legal Form, Registry and Priority Rights
Until 31 December 2008, mortgages could only be created by means of a notarial deed, which is a
document prepared and testified by, and executed before, a public notary and in compliance with
certain formalities as to its creation.
As of 1 January 2009, besides the previously existing procedure for creation of a mortgage by
means of a notarial deed, mortgages can also be validly created by a private document, provided
that the authenticity of such document is ensured, which means that it shall be either executed
before, or certified by, a notary public, a lawyer, a bailiff (solicitador) or a commerce association.
The mortgage can also be created by a public document executed before a Real Estate Registry
Office.
The public deed or written contract for the creation of a mortgage is not sufficient for the full
validity and enforceability of this type of security, and registration with the Real Estate Registry
Office is required in order for a mortgage to be considered validly created and fully enforceable. If
the mortgage is not duly registered it will not produce any effects, not even between the parties
thereto.
Registration also rules the ranking of creditors in the event that several mortgages are created over
the same property. In this case, the ranking of rights among such creditors will correspond to the
priority of mortgage registration (i.e., the creditor with a prior registered mortgage will rank ahead
of the others).
Although mortgagees have priority over non-secured creditors, there are preferential rights which
apply as a matter of law and which rank ahead of a mortgage, such as: (i) amounts due to Portugal
in respect of social security charges and taxes (except when insolvency of the obligor has been
declared); and (ii) employees’ credits in respect of unpaid salaries due by the mortgagor.
In accordance with the Código Civil (the Portuguese Civil Code), the relevant originator as lender
of a mortgage loan may require a borrower to provide additional security for a mortgage loan if the
value of the property securing the mortgage loan is insufficient to cover the amount of the
mortgage loan due to reasons unattributable to the lender.
(iii) Enforcement and court procedures
Enforcement of a mortgage over real property may only be made through a court procedure,
whereby the mortgagee is entitled, inter alia, to demand the sale by a court of the property and be
paid from the proceeds of such sale (after payment to the preferential creditors, if any).
The mortgagee may not take possession or become owner of the property (foreclosure) by virtue of
enforcement of the mortgage, and is only entitled to be paid out of the proceeds of sale of the
relevant property.
Should the mortgagee be willing to acquire the property, he may bid in the court sale along with
(but with no preference) any other parties interested in the purchase of the property.
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In case there are various creditors with mortgages over the same property, the proceeds of the sale
of the property are distributed among the secured creditors in accordance with the above explained
registration priority and are allocated first to the payment of the first ranking secured creditor, with
the remaining amount (if any) being allocated to the next ranking creditor.
Court procedures in relation to enforcement of mortgages over real property usually take two to
four years on average for a final decision to be reached on the execution of a mortgage loan. Court
fees payable in relation to the enforcement process are calculated on the basis of the value of the
enforcement procedure and of the procedural incidents arisen.
Risk of Set-off by Borrowers
(i) General
The Securitisation Law does not contain any specific provisions in respect of set-off. Accordingly,
Articles 847 to 856 of the Código Civil (the Portuguese Civil Code) are applicable. The Securitisation
Law has an impact on set-off risk to the extent that, by virtue of establishing that the assignment of credits
by a credit institution, a financial company, an insurance company, pension funds and pension fund
managers is effective against the debtor on the date of assignment of such credits without notification to
the debtor being required (provided that the assignor is the servicer of the assigned credit), it effectively
prevents a debtor from exercising any right of set-off against an assignee if such right did not exist against
the assignor prior to the date of assignment.
(ii) Set-off on Insolvency
Under Article 99 of the Código da Insolvência e da Recuperação de Empresas (the Code for the
Insolvency and Recovery of Companies), implemented by Decree-Law no. 53/2004, of 18 March (as
amended), applicable to insolvency proceedings commenced on or after 15 September 2004, a debtor will
only be able to exercise any right of set-off against a creditor after a declaration of insolvency of such
creditor provided that, prior to the declaration of insolvency, (i) such set-off right existed, and (ii) the
circumstances allowing set-off as described in Article 847 of the Código Civil (the Portuguese Civil
Code) were met.
Data Protection Law
Law no. 67/98, of 26 October (“Law 67/98”, which implemented Directive no. 95/46/EC, of 24 October)
provides for the protection of individuals regarding the processing and transfer of personal data and Law
no. 41/2004, of 18 August, as amended ((“Law 41/2006”, which implemented Directive no. 2002/58/CE,
of 12 July) foresees a special protection of personal data and privacy in the electronic communications
sector.
Pursuant to the law, any processing of personal data requires express consent from the data subject, unless
the processing is necessary in certain specific circumstances as provided under the relevant laws.
The entity collecting and processing personal data must obtain prior authorisation from the Comissão
Nacional de Proteção de Dados (the “CNPD”, the Portuguese Data Protection Commission) before
processing such data.
Transfer of personal data to an entity within a European Union Member State does not require to be
authorised by the CNPD but must be notified to the relevant data subjects.
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SUMMARY OF PROVISIONS RELATING TO THE NOTES CLEARED THROUGH
INTERBOLSA
General
Interbolsa manages a centralised system (sistema centralizado) composed of interconnected securities
accounts, through which such securities (and inherent rights) are held and transferred, and which allows
Interbolsa to control at all times the amount of securities so held and transferred. Issuers of securities,
financial intermediaries, the Bank of Portugal and Interbolsa, as the controlling entity, all participate in
such centralised system.
The centralised securities system of Interbolsa provides for all the procedures required for the exercise of
ownership rights inherent in notes held through Interbolsa.
In relation to each issue of securities, Interbolsa’s centralised system comprises, inter alia, (i) the issue
account, opened by the relevant issuer in the centralised system and which reflects the full amount of
issued securities; and (ii) the control accounts opened by each of the financial intermediaries which
participate in Interbolsa’s centralised system, and which reflect the securities held by such participant on
behalf of its customers in accordance with its individual securities accounts.
Securities held through Interbolsa will be attributed an International Securities Identification Number
(‘‘ISIN’’) code through the codification system of Interbolsa and will be accepted for clearing through
LCH.Clearnet, S.A. as well as through the clearing systems operated by Euroclear and Clearstream,
Luxembourg and settled by Interbolsa’s settlement system. Under the procedures of Interbolsa’s
settlement system, settlement of trades executed through the Stock Exchange takes place on the third
Business Day after the trade date and is provisional until the financial settlement that takes place at the
Bank of Portugal on the settlement date.
Form of the Notes
The Notes will be in book-entry (forma escritural) and nominative (nominativa) form and title to the
Notes will be evidenced by book entries in accordance with the provisions of the Portuguese Securities
Code and the applicable CMVM regulations. No physical document of title will be issued in respect of
Notes held through Interbolsa.
The Notes will be registered in the relevant issue account opened by the Issuer with Interbolsa and will be
held in control accounts by each Interbolsa Participant on behalf of the holders of the Notes. Such control
accounts reflect at all times the aggregate of Notes held in individual securities accounts opened by
holders of the Notes with each of the Interbolsa Participants. The expression ‘‘Interbolsa Participant’’
means any authorised financial intermediary entitled to hold control accounts with Interbolsa on behalf of
their customers and includes any depository banks appointed by Euroclear and Clearstream, Luxembourg
for the purpose of holding accounts on behalf of Euroclear and Clearstream, Luxembourg.
Each person shown in the records of an Interbolsa Participant as having an interest in Notes shall be
treated as the holder of the principal amount of the Notes recorded therein.
Payment of principal and interest in respect of Notes
Whilst the Notes are held through Interbolsa, payment of principal and interest in respect of the Notes
will be (a) credited, according to the procedures and regulations of Interbolsa, by the Paying Agent
(acting on behalf of the Issuer) to the TARGET2 payment current-accounts of the Interbolsa Participants
whose control accounts with Interbolsa are credited with such Notes and thereafter (b) credited by such
Interbolsa Participants from the aforementioned payment current-accounts to the accounts of the owners
of those Notes or through Euroclear and Clearstream, Luxembourg to the accounts with Euroclear and
Clearstream, Luxembourg of the beneficial owners of those Notes, in accordance with the rules and
procedures of Interbolsa, Euroclear or Clearstream, Luxembourg, as the case may be.
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The Issuer must provide Interbolsa with a prior notice of all payments in relation to the Notes and all
necessary information for that purpose. In particular, such notice must contain:
(i) the identity of the Paying Agent responsible for the relevant payment; and
(ii) a statement of acceptance of such responsibility by the Paying Agent.
Interbolsa must notify the Paying Agent of the amounts to be settled, which Interbolsa calculates on the
basis of the balances of the accounts of the Interbolsa Participants.
In the case of a partial payment, the amount held in the current account of the Paying Agent with the
Bank of Portugal must be apportioned pro-rata between the accounts of the Interbolsa Participants.
Transfer of Notes
In relation to the VFN, which is a variable funding note, the nominal face amount of the VFN shall be the
amount recorded in respect thereof on the issue account maintained by Interbolsa and shall be updated
when there is an increase or decrease of the Principal Amount Outstanding of the VFN by Interbolsa,
upon receiving such information from the Issuer.
Notes held through Interbolsa may, subject to compliance with all applicable rules, restrictions and
requirements of Interbolsa and Portuguese law, be transferred to a person who wishes to hold such Notes.
No owner of a Note will be able to transfer such Note, except in accordance with Portuguese law and the
applicable procedures of Interbolsa.
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TERMS AND CONDITIONS OF THE NOTES
The Issuer has agreed to issue the Notes subject to these Conditions and the terms of the Common
Representative Appointment Agreement. The Paying Agency Agreement records certain arrangements in
relation to the payment of interest and principal in respect of the Notes. Certain provisions of these
Conditions are summaries of the Common Representative Appointment Agreement, the Co-Ordination
Agreement and the Paying Agency Agreement and are subject to their detailed provisions. The
Noteholders are bound by the provisions of the Common Representative Appointment Agreement and are
deemed to have notice of all the provisions of the Transaction Documents. Copies of the Transaction
Documents are available for inspection by the Noteholders during normal business hours at the specified
office of the Paying Agent, the initial specified offices of which are set out below.
1. Form, Denomination and Title
1.1 Form and Denomination: The Notes are in book-entry (forma escritural) and registered
(nominativas) form in the denomination of (except the VFN) €100,000. Title to the Notes will pass
by registration in the corresponding securities account.
1.2 Variable Funding Note: The VFN will be issued on the Closing Date with a Principal Amount
Outstanding of €1 and will be subscribed for by the VFN Noteholder. The Principal Amount
Outstanding of the VFN may be increased up to the Maximum Limit in accordance with the
provisions of the Transaction Management Agreement and for the purpose of protect the Issuer
against the materialisation of any Set-Off Amount through the exercise by a Borrower of any set-
off or deduction from any amount payable by such Borrower under a Mortgage Asset in respect of
claims that such Borrower has against the Originator and the potential failure of such Originator to
indemnify the Issuer. If further funding is made in respect of the VFN, such increases shall be
recorded in the corresponding securities account held with affiliate members of Interbolsa.
1.3 Title: The registered holder of any Note shall (except as otherwise required by law) be treated as
its absolute owner for all purposes (whether or not it is overdue and regardless of any notice of
ownership, trust or any other interest therein, any writing thereon or any notice of any previous
loss or theft thereof) and no person shall be liable for so treating such holder.
2. Status and Ranking
2.1 Status: The Notes constitute direct limited recourse obligations of the Issuer.
2.2 Ranking: The Notes in each class will at all times rank without preference or priority pari passu
amongst themselves. The VFN ranks junior to the other Notes, as provided in these Conditions and
in the Transaction Documents.
2.3 Sole Obligations: The Notes are obligations solely of the Issuer limited to the Transaction Assets
(including the segregated portfolio of Mortgage Assets allocated to this transaction (as identified
by the corresponding asset code awarded by the CMVM pursuant to article 62 of the Securitisation
Law)) and without recourse to any other assets of the Issuer pertaining to other issuances of
securitisation notes by the Issuer or to the Issuer’s own funds or to the Issuer’s directors, managers
or shareholders and are not obligations of, or guaranteed by, any of the other Transaction Parties.
2.4 Priority of Interest Payments: Payments of interest (a) on the Class A Notes will at all times rank
in priority to payments of interest on the Class B Notes and any amounts due on the Class C Notes
and on the Variable Funding Note; (b) on the Class B Notes will at all times rank in priority to
payments of any amounts due on the Class C Notes and on the Variable Funding Note, and in each
case in accordance with the Pre-Enforcement Interest Payments Priorities. The VFN does not bear
interest.
2.5 Priority of Principal Payments: Payments of principal on the Class A Notes will at all times rank
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in priority to payments of principal on the Class B Notes in accordance with the Pre-Enforcement
Principal Payments Priorities.
2.6 Payments Priorities: Prior to the delivery of an Enforcement Notice, the Issuer is required to apply
the Available Interest Distribution Amount and the Available Principal Distribution Amount in
accordance with the Pre-Enforcement Interest Payments Priorities and the Pre-Enforcement
Principal Payments Priorities respectively and thereafter both in accordance with the Post-
Enforcement Payments Priorities.
3. Statutory Segregation
3.1 Segregation under the Securitisation Law: The Notes and any Issuer Obligations have the benefit
of the statutory segregation under the Securitisation Law.
3.2 Restriction on Disposal of Transaction Assets: The Common Representative shall only be entitled
to dispose of the Transaction Assets upon the delivery by the Common Representative of an
Enforcement Notice in accordance with Condition 9 (Events of Default) and subject to the
provisions of Condition 10.2 (Proceedings). If an Enforcement Notice has been delivered by the
Common Representative, the Common Representative will only be entitled to dispose of the
Transaction Assets to a Portuguese securitisation fund (FTC) or to another Portuguese
securitisation company (STC) or to the Originator in accordance with the Securitisation Law.
4. Covenants of the Issuer
So long as any Note remains outstanding, the Issuer shall comply with all the covenants of the
Issuer, as set out in the Transaction Documents, including but not limited to those covenants set
out in Schedule 4 to the Master Framework Agreement.
5. Interest and Class C Return Amount
5.1 Accrual of Interest: The Mortgage Backed Notes bear interest from the Closing Date, and the
Class C Notes carry interest equating to the Class C Return Amount to the extent of available
funds and subject to the relevant Payments Priorities, in each case, payable quarterly in arrear on
each Interest Payment Date. For the avoidance of doubt, interest accrues on the Mortgage Backed
Notes on a daily basis irrespective of whether such day is a Business Day. The Class C Notes will
not carry interest.
5.2 Deferred Interest Amount Arrears: To the extent that there are any Deferred Interest Amount
Arrears on any Interest Payment Date (including any Deferred Interest Amount Arrears which
accrued prior to the beginning of the Interest Period ending on that Interest Payment Date), such
Deferred Interest Amount Arrears shall cease to be payable and shall not be regarded as due on
such Interest Payment Date and shall become payable and due on the next Interest Payment Date.
5.3 Cessation of Interest: Each Mortgage Backed Note of each class shall cease to bear interest from
its due date for final redemption unless, upon due presentation, payment of the principal is
improperly withheld or refused, in which case, it will continue to bear interest in accordance with
this Condition (both before and after judgment) until the earlier of:
5.3.1 the day on which all sums due in respect of such Mortgage Backed Note up to that day
are received by or on behalf of the relevant Noteholder; and
5.3.2 the day which is seven days after either of the Paying Agent or the Common
Representative has notified the Noteholders of such class that it has received all sums
due in respect of the Notes of such class up to such seventh day (except to the extent
that there is any subsequent default in payment).
5.4 Cessation of Class C Return Amount: The Class C Return Amount shall cease to be payable in
respect of each Class C Note after its due date for final redemption even if, upon due presentation,
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payment of the principal is improperly withheld or refused.
5.5 Rate of interest: The rate of interest applicable to the Mortgage Backed Notes (the “Floating Rate
of Interest”) for each Interest Period will be determined by the Agent Bank by adding the
Relevant Margin in respect of each class to the following (as applicable):
5.5.1 on each Interest Determination Date, the Agent Bank will determine the annual rate of
interest for three-month euro deposits or (“EURIBOR”) calculated, supplied and
distributed by Reuters, which is currently published in the EURIBOR01 electronic
pages (or in any other page that might replace such page in the future), as determined at
11:00 a.m. (Central European Time) (the “Euro Screen Rate”);
5.5.2 if, on any Interest Determination Date, the Euro Screen Rate is unavailable, the Agent
Bank will request the Reference Banks to provide the Agent Bank with their offered
quotations to leading banks in the Euro-zone interbank market for three-month euro
deposits as at 11:00 a.m. (Brussels time) on the relevant Interest Determination Date
and, subject as provided below, will determine the arithmetic mean (rounded, if
necessary, to the nearest one hundred thousandth of one per cent.) of such offered
quotations. As used herein, “Reference Banks” means four leading banks active in the
Euro-zone interbank market selected by the Agent Bank;
5.5.3 if, on any Interest Determination Date, less than all but at least two of the Reference
Banks provide such offered quotations, the Agent Bank will determine a rate in
accordance with Condition 5.5.2 above on the basis of the offered quotations of those
Reference Banks providing such quotations; and
5.5.4 if, on any Interest Determination Date, only one of the Reference Banks provides the
Agent Bank with such offered quotations, the Agent Bank will determine a rate for such
Interest Determination Date on the basis of such annual rate of interest as the Agent
Bank considers to be representative of the rates at which three-month euro deposits are
offered by leading banks in the Euro-zone interbank market as of 11:00 a.m. (Brussels
time) on such Interest Determination Date.
5.6 Calculation of Interest Amount: The Issuer will (or shall cause the Agent Bank to), as soon as
practicable after the Interest Determination Date in relation to each Interest Period, calculate the
Interest Amount payable in respect of each Mortgage Backed Note for such Interest Period.
5.7 Calculation of Class C Return Amount: The Issuer will (or shall cause the Transaction Manager
to), as soon as practicable after each Quarterly Collection Date, calculate the Class C Return
Amount payable on each Class C Note for the related Interest Period by reference to the Principal
Amount Outstanding of such Class C Note in relation to the Principal Amount Outstanding of all
the Class C Notes.
5.8 Interest Payments: Interest on each Mortgage Backed Note is payable in euro in arrear on each
Interest Payment Date commencing on the First Interest Payment Date, in an amount equal to the
Interest Amount in respect of such Mortgage Backed Note for the Interest Period ending on the
day immediately preceding such Interest Payment Date.
5.9 Class C Return Amount Payments: Payment of any Class C Return Amount in relation to the Class
C Notes is payable in euro in arrear on each Interest Payment Date commencing on the First
Interest Payment Date, in an amount equal to the Class C Return Amount calculated as at the
Quarterly Collection Date immediately preceding such Interest Payment Date and notified to the
Class C Noteholders in accordance with the Notices Condition.
5.10 Publication: The Agent Bank will cause each Floating Rate of Interest and Interest Amount
determined by it, the Class C Return Amount determined by the Transaction Manager, together
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with the relevant Interest Payment Date, to be notified to the Issuer, the Paying Agent, the
Transaction Manager, the Common Representative and the Noteholders of the relevant class in
accordance with the Notices Condition and each stock exchange (if any) on which the Notes are
then listed as soon as practicable after such determination but in any event not later than the
second day of the relevant Interest Period. The Agent Bank or the Transaction Manager, as
applicable, will be entitled to recalculate any Interest Amount and the Class C Return Amount (on
the basis of the foregoing provisions) without notice in the event of an extension or shortening of
the relevant Interest Period.
5.11 Determination or Calculation by Common Representative: If the Agent Bank or the Transaction
Manager, as applicable, fails at any time to determine the Floating Rate of Interest or to calculate
an Interest Amount or to calculate the Class C Return Amount’s aforesaid, the Common
Representative, or a third party appointed by it, may (but without any liability accruing to the
Common Representative as a result) determine such Floating Rate of Interest and/or the Class C
Return Amount as it in its discretion considers fair and reasonable in the circumstances (having
such regard as it thinks fit to Condition 5.5 (Rate of interest) above) or (as the case may
be) calculate such Interest Amount and/or the Class C Return Amount in accordance with
Condition 5.6 (Calculation of Interest Amount) and/or Condition 5.7 (Calculation of Class C
Return Amount) above. Such determination will be deemed to have been made by the Agent Bank
or the Transaction Manager, as applicable.
5.12 Notification of Deferred Interest Amount Arrears: If, as at any Quarterly Collection Date, the
Issuer shall determine that any Deferred Interest Amount Arrears will arise, on the immediately
succeeding Interest Payment Date, notice to this effect shall be given by the Issuer in accordance
with the Notices Condition, specifying the amount of the Deferred Interest Amount Arrears to be
deferred on such following Interest Payment Date.
5.13 Notification of Availability for Payment: The Issuer shall cause notice of the availability for
payment of any Deferred Interest Amount Arrears (and any payment date thereof) to be published
in accordance with the Notices Condition.
5.14 Priority of Payment of Interest and Deferred Interest: The Issuer shall pay the Interest Amount
due and payable on any Interest Payment Date prior to any Deferred Interest Amount Arrears
payable on such Interest Payment Date.
6. Final Redemption, Mandatory Redemption in part and Optional Redemption
6.1 Final Redemption: Unless previously redeemed as provided in this Condition, the Issuer shall
redeem the Notes in each class at their Principal Amount Outstanding on the Final Legal Maturity
Date.
6.2 Mandatory Redemption in part of Mortgage Backed Notes: On each Interest Payment Date prior to
the delivery of an Enforcement Notice, the Issuer will cause any Available Principal Distribution
Amount available for this purpose on such Interest Payment Date to be applied in the redemption
in part of the Principal Amount Outstanding of each class of Mortgage Backed Notes determined
as at the related Quarterly Collection Date in the following amounts and sequential order of
priority, in each case the relevant amount being applied to each class divided by the number of
Notes outstanding in such class:
6.2.1 in the case of each Class A Note, in an amount equal to the lesser of the Available
Principal Distribution Amount and the Principal Amount Outstanding of the Class A
Notes; and
6.2.2 in the case of each Class B Note, in an amount equal to the lesser of the Available
Principal Distribution Amount (minus the amount to be applied in redemption of any
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Higher Class Notes (if any) on such Interest Payment Date) and the Principal Amount
Outstanding of the Class B Notes,
in each case in an amount rounded down to the nearest Minimum Denomination.
6.3 Post-Enforcement Mandatory Redemption of the Notes: After the delivery of an Enforcement
Notice the Issuer will cause all amounts received or recovered by the Issuer and/or the Common
Representative and/or a Receiver (including all amounts standing to the credit of the Cash Reserve
Account) and not already applied towards payment of higher items in the Post-Enforcement
Payments Priorities, to be applied in the redemption in full of each class of the Notes in the
following sequential order of priority, in each case the relevant amount being applied to each class
divided by the number of Notes outstanding in such class:
6.3.1 in an amount equal to the Principal Amount Outstanding of the Class A Notes;
6.3.2 in an amount equal to the Principal Amount Outstanding of the Class B Notes;
6.3.3 in an amount equal to the Principal Amount Outstanding of the Class C Notes;
6.3.4 in an amount equal to the Principal Amount Outstanding of the VFN, and
in each case in an amount rounded down to the nearest Minimum Denomination.
6.4 Mandatory Redemption in part of Class C Notes: On each Interest Payment Date prior to the
delivery of an Enforcement Notice, the Issuer will cause the Class C Notes to be redeemed on a
pari passu and pro rata basis in an amount which is equal to the lesser of:
(i) the Available Interest Distribution Amount calculated as at the related Quarterly
Collection Date less the aggregate of all payments or provisions of a higher priority of the
Pre-Enforcement Interest Payments Priorities that fall due to be paid or provided for on
such Interest Payment Date; and
(ii) the Principal Amount Outstanding of the Class C Notes;
rounded down to the nearest Minimum Denomination and provided that the Principal Amount
Outstanding of the Class C Notes may not be reduced to less than the Cash Reserve Account
Required Balance in respect of such Interest Payment Date.
6.5 Calculation of Note Principal Payments and Principal Amount Outstanding: On (or as soon as
practicable after) each Quarterly Collection Date, the Issuer shall calculate (or cause the
Transaction Manager to calculate):
6.5.1 the aggregate of any Note Principal Payments due in relation to each class on the
Interest Payment Date immediately succeeding such Quarterly Collection Date; and
6.5.2 the Principal Amount Outstanding of each Note in each class on the Interest Payment
Date immediately succeeding such Quarterly Collection Date (after deducting any Note
Principal Payment due to be made on that Interest Payment Date in relation to such
class).
6.6 Calculations final and binding: Each calculation by or on behalf of the Issuer of any Note
Principal Payment or the Principal Amount Outstanding of a Note of each class shall in each case
(in the absence of any Breach of Duty) be final and binding on all persons.
6.7 Common Representative to determine amounts in case of Issuer default: If the Issuer does not at
any time for any reason calculate (or cause the Transaction Manager to calculate) any Note
Principal Payment or the Principal Amount Outstanding in relation to each class in accordance
with this Condition, such amounts may be calculated by the Common Representative or by a third
party appointed by it (without any liability accruing to the Common Representative as a result) in
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accordance with this Condition (based on information supplied to it by the Issuer or the
Transaction Manager) and each such calculation shall be deemed to have been made by the Issuer.
6.8 Optional Redemption in whole: The Issuer may redeem all (but not some only) of the Notes in
each class at their Principal Amount Outstanding together with all accrued interest on any Interest
Payment Date when, on the related Quarterly Collection Date, the Aggregate Principal
Outstanding Balance of the Mortgage Assets is equal to or less than 10 per cent of the Aggregate
Principal Outstanding Balance of all of the Mortgage Assets at the Collateral Determination Date
subject to the following:
6.8.1 that the Issuer has given not more than 60 nor less than 30 calendar days' notice to the
Common Representative and the Noteholders in accordance with the Notices Condition
of its intention to redeem all (but not some only) of the Notes in each class; and
6.8.2 that prior to giving any such notice, the Issuer shall have provided to the Common
Representative a certificate signed by two directors of the Issuer to the effect that it will
have the funds on the relevant Interest Payment Date, not subject to the interest of any
other person, required to redeem the Notes pursuant to this Condition and meet its
payment obligations of a higher or equal priority under the Pre-Enforcement Payments
Priorities.
6.9 Optional Redemption in whole for taxation reasons: The Issuer may redeem all (but not some
only) of the Notes in each class at their Principal Amount Outstanding together with all accrued
interest on any Interest Payment Date:
6.9.1 after the date on which, by virtue of a change in Tax law of the Issuer's Jurisdiction (or
the application or official interpretation of such Tax law), the Issuer would be required
to make a Tax Deduction from any payment in respect of the Notes (other than by
reason of the relevant Noteholder having some connection with the Republic of
Portugal, other than the holding of the Notes); or
6.9.2 after the date on which, by virtue of a change in the Tax law of the Issuer's Jurisdiction
(or the application or official interpretation of such Tax law), the Issuer would not be
entitled to relief for the purposes of such Tax law for any material amount which it is
obliged to pay, or the Issuer would be treated as receiving for the purposes of such Tax
law any material amount which it is not entitled to receive, in each case under the
Transaction Documents; or
6.9.3 after the date of a change in the Tax law of the Issuer's Jurisdiction (or the application or
official interpretation of such Tax law) which would cause the total amount payable in
respect of the Notes to cease to be receivable by the Issuer including as a result of any
of the Borrowers being obliged to make a Tax Deduction in respect of any payment in
relation to any Mortgage Asset or the Issuer being obliged to make a Tax Deduction in
respect of any payment in relation to any of the Note,
subject to the following:
6.9.5 that the Issuer has given not more than 60 nor less than 30 calendar days' notice to the
Common Representative and the Noteholders in accordance with the Notices Condition
of its intention to redeem all (but not some only) of the Notes in each class; and
6.9.6 that the Issuer has provided to the Common Representative:
(i) a legal opinion (in form and substance satisfactory to the Common Representative)
from a firm of lawyers in the Issuer's Jurisdiction or such other applicable
jurisdiction (approved in writing by the Common Representative), opining on the
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relevant change in Tax law; and
(ii) a certificate signed by two directors of the Issuer to the effect that the obligation to
make a Tax Deduction cannot be avoided or that the entitlement to relief cannot be
retained (as applicable); and
(iii) a certificate signed by two directors of the Issuer to the effect that it will have the
funds on the relevant Interest Payment Date, not subject to the interest of any other
person, required to redeem the Notes pursuant to this Condition and meet its
payment obligations of a higher or equal priority under the Pre-Enforcement
Payments Priorities.
6.10 Optional Redemption in Whole by Sole Noteholder: a Noteholder (being the Originator) holding all
Notes outstanding from time to time may, following an Extraordinary Resolution and by giving
not less than 15 (fifteen) days’ notice to the Issuer that it is exercising its option (the “Put
Option”) decide to have all of the Notes redeemed at their Principal Amount Outstanding together
with all accrued interest on the date specified in such notice (the “Put Option Date”) provided
that:
(i) the Notes are free of any encumbrance at the moment when the Put Option notice is
delivered to the Issuer and will remain free of any encumbrance up to and including the
Put Option Date;
(ii) the necessary funds for the redemption are available to the Issuer for payment of all the
Issuer Expenses, its payment obligations of a higher or equal priority under the Pre-
Enforcement Interest Payment Priorities or Pre-Enforcement Principal Payment
Priorities (as the case may be) and all and any other amounts which may be due or owed
by the Issuer under or in connection with the Notes up to and including the Put Option
Date;
(iii) the Originator accepts to acquire the Mortgage Asset Portfolio on the Put Option Date;
(iv) the Noteholder exercising the Put Option has established to the satisfaction of the Issuer
that it holds all of the Notes on the date on which the Put Option is exercised and that it
will be the holder of all of the Notes on the Put Option Date;
(v) the exercise of the Put Option by the sole Noteholder is valid to discharge all of the
Issuer’s obligations under or in connection with the Notes towards the sole Noteholder
and the Transaction Creditors pursuant to this Condition and to the confirmation that
funds are available to the Issuer to meet its payment obligations of a higher or equal
priority as foreseen under Condition 6.10(ii) above; and
(vi) the exercise of the Put Option satisfies all the applicable legal requirements, including
of the Securitisation Law,
subject to, prior to delivery of the Put Option notice to the Issuer, the Issuer receiving a
certificate (in form and substance satisfactory to it) signed on behalf of the Transaction
Manager confirming that all the requirements detailed under Conditions 6.10(i) to
6.10(vi) above have or will be duly met up to the Put Option Date.
It is expressly stated and agreed that the exercise of the Put Option by the sole
Noteholder shall be conditional upon there being sufficient funds to redeem the Notes in
accordance with Conditions 6.10(i) to 6.10(vi) above, and the Issuer shall have no
obligation whatsoever to actually redeem the Notes in the event that there are no such
sufficient funds, and the Issuer shall not be obliged to use any efforts to procure that
such sufficient funds are made available to it. In case the Notes are not redeemed on the
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Put Option Date, the exercise of the Put Option will become ineffective, which shall not
affect the Noteholder’s right to exercise further Put Options in accordance with the
terms of this Condition.
Upon delivery of the Mortgage Asset Portfolio on the Put Option Date to the entity
appointed under 6.10(iii) above and payment of the Residual Cash Amount (if any) to
the Noteholder which exercised the Put Option, the rights and obligations of the
Noteholder towards the Issuer shall be extinguished.
“Residual Cash Amount” means such amount of cash available to the Issuer, including
the price (if any) received by the Issuer from the Originator as foreseen in 6.10(iii)
above, on the Put Option Date which is not (or will not, as certified to the Issuer’s
satisfaction by the Transaction Manager to the Issuer, be) required to pay any amounts
owing in priority to the Noteholder.
6.11 Conclusiveness of certificates and legal opinions: Any certificate and legal opinion given by or on
behalf of the Issuer pursuant to Condition 6.8 (Optional Redemption in whole), Condition 6.9
(Optional Redemption in whole for taxation reasons) and Condition 6.10 (Optional Redemption by
the Sole Noteholder) may be relied on by the Common Representative without liability and
without further investigation and shall be conclusive and binding on the Noteholders and on the
other Transaction Creditors.
6.12 Notice of Calculation: The Issuer will cause each calculation of a Note Principal Payment and the
Principal Amount Outstanding in relation to each class of Notes to be notified immediately after
calculation to the Common Representative, the Agents and, for so long as the Notes are admitted
to trading on the Stock Exchange's main market, the Stock Exchange will immediately cause
details of each calculation of a Note Principal Payment and a Principal Amount Outstanding in
relation to each class to be published in accordance with the Notices Condition by not later than
three Business Days prior to each Interest Payment Date.
6.13 Notice of no Note Principal Payment: If no Note Principal Payment is due to be made on the Notes
in relation to any class on any Interest Payment Date, a notice to this effect will be given to the
Noteholders in accordance with the Notices Condition by not later than three Business Days prior
to such Interest Payment Date.
6.14 Notice irrevocable: Any such notice as is referred to in Condition 6.8 (Optional Redemption in
whole) or Condition 6.9 (Optional Redemption in whole for taxation reasons) or Condition 6.10
(Optional Redemption by the Sole Noteholder) or Condition 6.12 (Notice of Calculation) shall be
irrevocable and, upon the expiration of such notice, the Issuer shall be bound to redeem the Notes
to which such notice relates at their Principal Amount Outstanding together with all accrued
interest if effected pursuant to Condition 6.8 (Optional Redemption in whole) or Condition 6.9
(Optional Redemption in whole for taxation reasons) or Condition 6.10 (Optional Redemption by
the Sole Noteholder) and in an amount equal to the Note Principal Payment calculated as at the
Quarterly Collection Date immediately preceding such Interest Payment Date if effected pursuant
to Condition 6.2 (Mandatory Redemption in part of Mortgage Backed Notes), Condition 6.3 (Post-
Enforcement Mandatory Redemption of the Notes) and Condition 6.4 (Mandatory Redemption in
part of Class C Notes).
6.15 No Purchase: The Issuer may not at any time purchase any of the Notes.
7. Payments
7.1 Principal and Interest: Payments of principal and interest (when applicable) in respect of the
Notes may only be made in euro.
Payment in respect of the Notes of principal and interest will, in accordance with the applicable
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rules and procedures of Interbolsa, be (a) credited by the Paying Agent (acting on behalf of the
Issuer) to the TARGET2 payment current accounts held by Interbolsa Participants (whose control
accounts with Interbolsa are credited with such Notes) and (b) thereafter credited by such
Interbolsa Participants from the aforementioned payment current accounts to the accounts of the
owners of those Notes or through Euroclear and Clearstream, Luxembourg to the accounts with
Euroclear and Clearstream, Luxembourg of the beneficial owners of those Notes, in accordance
with the rules and procedures of Interbolsa, Euroclear or Clearstream, Luxembourg, as the case
may be.
7.2 Payments subject to fiscal laws: All payments in respect of the Notes are subject in all cases to any
applicable fiscal or other laws and regulations, but without prejudice to the provisions of
Condition 8 (Taxation). No commissions or expenses shall be charged to the Noteholders in
respect of such payments.
7.3 Notifications to be final: All notifications, opinions, determinations, certificates, calculations,
quotations and decisions given, expressed, made or obtained for the purposes of this Condition,
whether by the Reference Banks (or any of them), the Paying Agent, the Agent Bank or the
Common Representative shall (in the absence of any gross negligence, wilful default, fraud or
manifest error) be binding on the Issuer and all Noteholders and (in the absence of any gross
negligence, wilful default, fraud or manifest error) no liability to the Common Representative or
the Noteholders shall attach to the Reference Banks, the Agents, or the Common Representative in
connection with the exercise or non-exercise by them or any of them of their powers, duties and
discretions under this Condition 7 (Payments).
8. Taxation
8.1 Payments free of Tax: All payments in respect of the Notes shall be made free and clear of, and
without withholding or deduction for, any Taxes unless the Issuer, the Common Representative or
the Paying Agent is required by law to make any such payment subject to any such withholding or
deduction. In that event, the Issuer, the Common Representative or the Paying Agent shall be
entitled to withhold or deduct the required amount for or on account of Tax from such payment
and shall account to the relevant Tax Authorities for the amount so withheld or deducted.
8.2 No payment of additional amounts: Neither the Common Representative, the Issuer nor the Paying
Agent will be obliged to pay any additional amounts to Noteholders in respect of any Tax
Deduction made in accordance with Condition 8.1 (Payments free of Tax) above.
8.3 Taxing Jurisdiction: If the Issuer becomes subject at any time to any taxing jurisdiction other than
the Issuer's Jurisdiction, references in these Conditions to the Issuer's Jurisdiction shall be
construed as references to the Issuer's Jurisdiction and/or such other jurisdiction.
8.4 Tax Deduction not Event of Default: Notwithstanding that the Common Representative, the Issuer
or the Paying Agent is required to make a Tax Deduction in accordance with in Condition 8.1
(Payments free of Tax) above, this shall not constitute an Event of Default.
9. Events of Default
9.1 Events of Default: The following shall be Events of Default in respect of the Notes:
9.1.1 Non-payment: the Issuer fails to pay any amount of principal in respect of the Notes
within five days of the due date for payment of such principal or fails to pay any amount
of interest (other than any interest which is deferred pursuant to Condition 5.2 (Deferred
Interest Amount Arrears) or Class C Return Amount in respect of the Notes within ten
days of the due date for payment of such interest or Class C Return Amount; or
9.1.2 Breach of other obligations: the Issuer defaults in the performance or observance of any
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of its other obligations under or in respect of the Notes or the Common Representative
Appointment Agreement and such default (a) is, in the opinion of the Common
Representative, incapable of remedy or (b) being a default which is, in the opinion of
the Common Representative, capable of remedy, remains unremedied for 30 days; or
9.1.3 Issuer Insolvency: an Insolvency Event occurs with respect to the Issuer; or
9.1.4 Unlawfulness: it is or will become unlawful for the Issuer to perform or comply with
any of its obligations under or in respect of the Notes or the Common Representative
Appointment Agreement.
9.2 Delivery of Enforcement Notice: If an Event of Default occurs and is continuing, the Common
Representative may at its discretion and shall:
9.2.1 if so requested in writing by the holders of at least 25 per cent. of the Principal Amount
Outstanding of the Most Senior Class of outstanding Notes; or
9.2.2 if so directed by a Resolution of the holders of the Most Senior Class of outstanding
Notes;
deliver an Enforcement Notice to the Issuer.
9.3 Conditions to delivery of Enforcement Notice: Notwithstanding Conditions 9.1.1 and 9.1.2 above,
the Common Representative shall not be obliged to deliver an Enforcement Notice unless:
9.3.1 in the case of the occurrence of any of the events mentioned in Condition 9.1.2 above,
the Common Representative shall have certified in writing that the happening of such
event is in its opinion materially prejudicial to the interests of the Noteholders; and
9.3.2 it shall have been indemnified and/or secured and/or pre-funded to its satisfaction
against all Liabilities to which it may thereby become liable or which it may incur by so
doing.
10. Enforcement
10.1 Consequences of delivery of Enforcement Notice: Upon the delivery of an Enforcement Notice, the
Notes of each class shall become immediately due and payable without further action or formality
at their Principal Amount Outstanding together with any accrued interest and any Deferred Interest
Amount Arrears.
10.2 Proceedings: After the occurrence of an Event of Default, the Common Representative may at its
discretion and without further notice, institute such proceedings as it thinks fit to enforce its rights
under these Conditions and the Common Appointment Agreement in respect of the Notes of each
class and under the other Transaction Documents, but it shall not be bound to do so unless it is:
10.2.1 so requested in writing by the holders of at least 25 per cent of the Principal Amount
Outstanding of the Most Senior Class of outstanding Notes; or
10.2.2 so directed by a Resolution of the holders of the Most Senior Class of outstanding
Notes;
and in any such case, only if it shall have been indemnified and/or secured and/or pre-
funded to its satisfaction against all Liabilities to which it may thereby become liable or
which it may incur by so doing.
10.3 Restrictions on disposal of Transaction Assets: If an Enforcement Notice has been delivered by the
Common Representative otherwise than by reason of non-payment of any amount due in respect of
the Notes, the Common Representative will not be entitled to dispose of the Transaction Assets or
any part thereof unless either:
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10.3.1 a sufficient amount would be realised to allow payment in full of all amounts owing to
the Noteholders of each class after payment of all other claims ranking in priority to the
Notes in accordance with the Post-Enforcement Payments Priorities; or
10.3.2 the Common Representative is advised by an investment bank or other financial adviser
selected by the Common Representative, (and if the Common Representative is unable
to obtain such advice having made reasonable efforts to do so this Condition shall not
apply) that the cash flow prospectively receivable by the Issuer will not (or that there is
a significant risk that it will not) be sufficient, having regard to any other relevant
actual, contingent or prospective liabilities of the Issuer, to discharge in full in due
course all amounts owing to the Noteholders after payment of all other claims ranking
in priority to the Notes in accordance with the Post-Enforcement Payments Priorities,
and the Common Representative shall not be bound to obtain the advice referred to in Condition
10.3.2 above unless the Common Representative shall have been indemnified and/or secured
and/or pre-funded to its satisfaction against all Liabilities to which it may thereby become liable or
which it may incur by so doing.
10.4 Directions to the Common Representative: Without prejudice to Condition 10.2 (Proceedings), the
Common Representative shall not be bound to take any action described in Condition 10.2
(Proceedings) and may take such action without having regard to the effect of such action on
individual Noteholders or any other Transaction Creditor. The Common Representative shall have
regard to the Noteholders of each Class as a Class and, for the purposes of exercising its rights,
powers, duties or discretions, the Common Representative shall have regard only to the Most
Senior Class of Notes then outstanding, provided that so long as any of the Most Senior Class of
Notes are outstanding, the Common Representative shall not, and shall not be bound to, act at the
request or direction of the Noteholders of any other Class of Notes unless:
10.4.1 to do so would not, in its opinion, be materially prejudicial to the interests of the
Noteholders of all the Classes of Notes ranking senior to such other Class; or
10.4.2 (if the Common Representative is not of that opinion) such action of each Class is
sanctioned by a Resolution of the Noteholders of the Class or Classes of the Notes
ranking senior to such other Class.
11. Prescription
11.1 Claims for principal in respect of the Notes shall become void twenty years after the appropriate
Relevant Date.
11.2 Claims for interest and any Class C Return Amount shall become void five years after the
appropriate Relevant Date.
12. Common Representative and Agents
12.1 Common Representative's Right to indemnity: Under the Transaction Documents, the Common
Representative is entitled to be indemnified and relieved from responsibility in certain
circumstances and to be paid its fees, costs and expenses in priority to the claims of the
Noteholders. In addition, the Common Representative is entitled to enter into business transactions
with the Issuer and any entity relating to the Issuer without accounting for any profit and to act as
common representative for the holders of any other securities issued by or relating to the Issuer
without accounting for any profits and to exercise and enforce its rights, comply with its
obligations and perform its duties under/or in relation to any such transactions or any such role.
For the avoidance of doubt, the Common Representative will not be obliged to enforce the
provisions of the Common Representative Appointment Agreement unless it is directed to do so
by the Noteholders and unless it is (to the extent permitted by law) indemnified and/or secured
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and/or prefunded to its satisfaction.
12.2 Common Representative not responsible for loss or for monitoring: The Common Representative
will not be responsible for any loss, expense or liability which may be suffered as a result of the
Transaction Assets or any documents of title thereto being uninsured or inadequately insured or
being held by or to the order of the Transaction Manager or by any person on behalf of the
Common Representative. The Common Representative shall not be responsible for monitoring the
compliance by any of the other Transaction Parties with their obligations under the Transaction
Documents and shall assume, until it has actual knowledge to the contrary, that such
parties/persons are properly performing this duties and that no Event of Default or breach of duty
has occurred. The Common Representative shall have no responsibility (other than arising from its
wilful default, gross negligence or fraud) in relation to the legality, validity, sufficiency, adequacy
and enforceability of any Transaction Documents. The Common Representative shall not be
responsible for any loss, expense or liability which may be suffered as a result of any Mortgage
Asset or documents of title thereto, being uninsured or inadequately insured.
12.3 Regard to classes of Noteholders: In the exercise of its powers and discretions under these
Conditions and the Common Representative Appointment Agreement, the Common
Representative will:
12.3.1 have regard to the interests of each class of Noteholders as a class and will not be
responsible for any consequence of individual Noteholders being domiciled or resident
in, or otherwise connected in any way with, or subject to the jurisdiction of, a particular
territory or taxing jurisdiction; and
12.3.2 have regard only to the holders of the Most Senior Class of outstanding Notes and will
not have regard to any lower ranking class of Notes nor to the interests of the other
Transaction Creditors except to ensure the application of the Issuer's funds after the
delivery of an Enforcement Notice in accordance with the Post-Enforcement Payments
Priorities.
12.4 Paying Agent solely agent of Issuer: In acting under the Paying Agency Agreement and in
connection with the Notes, the Paying Agent acts solely as agent of the Issuer and (to the extent
provided therein) the Common Representative and does not assume any obligations towards or
relationship of agency or trust for or with any of the Noteholders.
12.5 Initial Paying Agent: The initial Paying Agent and their initial Specified Office are listed below.
The Issuer reserves the right (with the prior written approval of the Common Representative) to
vary or terminate the appointment of any Agent and to appoint a successor paying agent or agent
bank and additional or successor paying agent at any time, having given not less than 30 days’
notice to such Agent. On any termination of the appointment of the initial Paying Agent, a
successor paying agent will be appointed.
12.6 Maintenance of Agents: The Issuer will at all times maintain a paying agent with its Specified
Office in any city where a stock exchange on which the Notes are listed requires there to be a
paying agent and an agent bank and will ensure that it maintains a paying agent in an EU member
state that will not be obliged to withhold or deduct tax pursuant to European Council Directive
2003/48/EC or any other Directive implementing the conclusions of the ECOFIN Council meeting
of 26-27 November 2000 or any law implementing or complying with, or introduced in order to
conform to, such Directive. Notice of any change in any of the Agents or in their Specified Offices
shall promptly be given to the Noteholders in accordance with the Notices Condition.
13. Meetings of Noteholders
13.1 Meetings of Noteholders: The Common Representative Appointment Agreement contains
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provisions for convening meetings of Noteholders to consider matters relating to the Notes,
including the modification of any provision of these Conditions or the Common Representative
Appointment Agreement.
13.2 Request of Noteholders: A Meeting of Noteholders may be convened by the Common
Representative or the Issuer at any time and must be convened by the Common Representative
(subject to it being, to the extent permitted by law, indemnified and/or secured and/or prefunded to
its satisfaction), or if the Common Representative refuses by the Chairman of the Shareholders
General Meeting of the Issuer, upon the request in writing of Noteholders holding not less than
five per cent. of the aggregate Principal Amount Outstanding of the outstanding Notes of the
relevant class or classes.
13.3 Quorum: The quorum at any Meeting convened to vote on:
13.3.1 a Resolution, other than regarding a Reserved Matter, relating to a meeting of a
particular class or classes of the Notes will be any person or persons holding or
representing a majority of the Principal Amount Outstanding of the outstanding Notes
in that class or those classes or, at any adjourned meeting, any person or persons being
or representing Noteholders of that class or those classes, whatever the Principal
Amount Outstanding of the outstanding Notes so held or represented in such class or
classes; and
13.3.2 a Resolution regarding a Reserved Matter (which must be proposed separately to each
class of Noteholders) will be two or more persons holding or representing in aggregate
75 per cent. of the Principal Amount Outstanding of the outstanding Notes in the
relevant class or classes or, at any adjourned meeting, two or more persons holding or
representing not less than in the aggregate 33 1/3 per cent. of the Principal Amount
Outstanding of the outstanding Notes in the relevant class or classes.
13.4 Relationship between Classes: In relation to each class of Notes:
13.4.1 no Resolution involving a Reserved Matter that is passed by the holders of one class of
Notes shall be effective unless it is sanctioned by a Resolution of the holders of each of
the other classes of Notes (to the extent that there are outstanding Notes in each such
other classes);
13.4.2 no Resolution or other resolution (as applicable) to approve any matter other than a
Reserved Matter of any class of Notes shall be effective unless it is sanctioned by a
Resolution or other resolution (as applicable) of the holders of each of the other classes
of Notes ranking senior to such class (to the extent that there are outstanding Notes
ranking senior to such class) unless the Common Representative considers that none of
the holders of each of the other classes of Notes ranking senior to such class would be
materially prejudiced by the absence of such sanction; and
13.4.3 any Resolution passed at a Meeting of Noteholders of one or more classes of Notes duly
convened and held in accordance with the Common Representative Appointment
Agreement shall be binding upon all Noteholders of such class or classes, whether or
not present at such Meeting and whether or not voting and, except in the case of a
meeting relating to a Reserved Matter, any Resolution passed at a meeting of the
holders of the Most Senior Class of Notes duly convened and held as aforesaid shall
also be binding upon the holders of all the other classes of Notes.
13.5 Separate Meetings for each class of Notes: Where more than one class of Notes is outstanding,
(a) business which in the opinion of the Common Representative affects only one class of Notes
will be transacted at a separate meeting of the holders of that class, (b) business which in the
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opinion of the Common Representative affects more than one class of Notes but does not give rise
to an actual or potential conflict of interest between the holders of those classes shall be transacted
either at separate meetings of the holders of each class or at a single meeting of the holders of all
those classes, as the Common Representative shall in its absolute discretion determine and
(c) business which in the opinion of the Common Representative affects more than one class of
Notes and gives rise to an actual or potential conflict of interest between the holders of those
classes shall be transacted at one or more separate meetings of the holders of each class.
13.6 Written Resolutions: A Written Resolution shall take effect in the same terms as a Resolution.
14. Modification and Waiver
14.1 Modification: The Common Representative may at its sole discretion, at any time and from time to
time, without the consent or sanction of the Noteholders or any other Transaction Creditors concur
with the Issuer and any other relevant parties in making:
14.1.1 any modification to these Conditions, the Common Representative Appointment
Agreement, the Notes or the other Transaction Documents (other than in respect of a
Reserved Matter or any provisions of the Common Representative Appointment
Agreement, Conditions, Notes or other Transaction Documents referred to in the
definition of a Reserved Matter) in relation to which the Common Representative's
consent is required which, in the opinion of the Common Representative, will not be
materially prejudicial to the interests of holders of the Most Senior Class of outstanding
Notes;
14.1.2 any modification to these Conditions and the other Transaction Documents in relation to
which the Common Representative's consent is required if, in the opinion of the
Common Representative, such modification is of a formal, minor or technical nature
resulting from mandatory provision of Portuguese Law, is made to correct a manifest
error or is necessary or desirable for the purposes of clarification;
The Issuer shall send prior notice of any such modification pursuant to Condition 14.1.1 above to
the Rating Agencies and as regards any substitution pursuant to Condition 14.1.3 above, the Issuer
shall procure prior confirmation from the Rating Agencies to the Issuer and the Common
Representative that the current Rating of the Class A Notes will not be adversely affected as a
result of such substitution.
14.2 Waiver: In addition, the Common Representative may at its sole discretion, without the consent of
the Noteholders or any other Transaction Creditors, authorise or waive any proposed breach or
actual breach of the covenants or provisions contained in the Common Representative
Appointment Agreement, the Notes, the other Transaction Documents or determine that an Event
of Default or Potential Event of Default shall not be so treated if, in the opinion of the Common
Representative the holders of the Most Senior Class of outstanding Notes will not be materially
prejudiced by such waiver and the Issuer shall cause any such authorisation or waiver to be
notified to the Rating Agencies.
14.3 Restriction on power to waive: The Common Representative shall not exercise any powers
conferred upon it by Condition 14.2 (Waiver) in contravention of any express direction by a
Resolution of the holders of the Most Senior Class of Notes then outstanding or of a request or
direction in writing made by the holders of not less than 25 per cent in aggregate Principal Amount
Outstanding of the Most Senior Class of Notes then outstanding, but so that no such direction or
request (a) shall affect any authorisation, waiver or determination previously given or made or (b)
shall authorise or waive any such proposed breach or breach relating to a Reserved Matter unless
the holders of each class of Notes outstanding have, by Resolution, so authorised its exercise.
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14.4 Notification: Unless the Common Representative otherwise agrees, the Issuer shall cause any such
authorisation, waiver, modification or determination to be notified to the Noteholders, the other
Transaction Creditors and the Rating Agencies in accordance with the Notices Condition and the
relevant Transaction Documents, as soon as practicable after it has been made.
14.5 Binding Nature: Any authorisation, waiver, determination or modification referred to in Condition
14.1 (Modification) or Condition 14.2 (Waiver) shall be binding on the Noteholders and the other
Transaction Creditors.
15. No action by Noteholders
15.1 The Noteholders may be restricted from proceeding individually against the Issuer and the
Transaction Assets or otherwise seek to enforce the Issuer's Obligations, where such action or
actions, taken on an individual basis, contravene a Resolution of the Noteholders.
15.2 Furthermore, and to the extent permitted by Portuguese Law, only the Common Representative
may pursue the remedies available under the general law or under the Common Representative
Appointment Agreement against the Issuer and the Transaction Assets and, other than as permitted
in this Condition 15.2, no Noteholders shall be entitled to proceed directly against the Issuer and
the Transaction Assets or otherwise seek to enforce the Issuer's Obligations. In particular, each
Noteholder agrees with and acknowledges to each of the Issuer and the Common Representative,
and the Common Representative agrees with and acknowledges to the Issuer that:
15.2.1 none of the Transaction Creditors other than the Common Representative (nor any
person on their behalf) is entitled, otherwise than as permitted by the Transaction
Documents, to direct the Common Representative to take any proceedings against the
Issuer or take any proceedings against the Issuer unless the Common Representative,
having become bound to serve an Enforcement Notice or having been requested in
writing or directed by a Resolution of the Noteholders in accordance with Condition
10.2 (Proceedings) to take any other action to enforce its rights under the Notes and the
Common Representative Appointment Agreement and under the other Transaction
Documents (such obligation a “Common Representative Action”), fails to do so
within 30 days of becoming so bound or of having been so requested or directed and
that failure is continuing (in which case each of the Noteholders and the Transaction
Creditors shall (subject to Conditions 15.2.3 and 15.2.4) be entitled to take any such
steps and proceedings as it shall deem necessary in respect of the Issuer);
15.2.2 none of the Transaction Creditors other than the Common Representative (nor any
person on their behalf) shall have the right to take or join any person in taking any steps
against the Issuer for the purpose of obtaining payment of any amount due from the
Issuer to any of such Transaction Parties unless the Common Representative, having
become bound to take a Common Representative Action, fails to do so within 30 days
of becoming so bound and that failure is continuing (in which case each of the
Noteholders and the Transaction Creditors shall be entitled to take any such steps and
proceedings as it shall deem necessary in respect of the Issuer);
15.2.3 until the date falling two years after the Final Discharge Date none of the Transaction
Creditors nor any person on their behalf (including the Common Representative) shall
initiate or join any person in initiating any Insolvency Event or the appointment of any
insolvency official in relation to the Issuer; and
15.2.4 none of the Transaction Creditors shall be entitled to take or join in the taking of any
steps or proceedings which would result in the Payments Priorities not being observed.
15.3 Each of the Noteholders will be deemed to have agreed with the Issuer that notwithstanding any
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other provisions of these Conditions or the Transaction Documents, all obligations of the Issuer to
the Noteholders, including, without limitation, the Issuer Obligations, are limited in recourse as set
out below:
15.3.1 it will have a claim only in respect of the Transaction Assets and will not have any claim,
by operation of law or otherwise, against, or recourse to, any of the Issuer's other assets or
its contributed capital;
15.3.2 sums payable to each Noteholder in respect of the Issuer's obligations to such Noteholder
shall be limited to the lesser of (a) the aggregate amount of all sums due and payable to
such Noteholder and (b) the aggregate amounts received, realised or otherwise recovered
by or for the account of the Issuer in respect of the Transaction Assets, net of any sums
which are payable by the Issuer in accordance with the Payment Priorities in priority to or
pari passu with sums payable to such Noteholder; and
15.3.3 on the Final Legal Maturity Date or upon the Common Representative giving written
notice to the Noteholders or any of the Transaction Creditors that it has determined in its
sole opinion, and the Servicer having certified to the Common Representative, that there
is no reasonable likelihood of there being any further realisations in respect of the
Transaction Assets (other than the Transaction Accounts) and the Transaction Manager
having certified to the Common Representative that there is no reasonable likelihood of
there being any further realisations in respect of the Transaction Accounts which would be
available to pay in full the amounts outstanding under the Transaction Documents and the
Notes owing to such Transaction Creditors and Noteholders, then such Transaction
Creditors shall have no further claim against the Issuer in respect of any such unpaid
amounts and such unpaid amounts shall be discharged in full.
16. Notices
16.1 Valid Notices: Any notice to Noteholders shall only be validly given if such notice is published on
the CMVM’s website and as has been notified to the Noteholders in accordance with the Notices
Condition (the “Relevant Screen”), provided that for so long as any of the Notes are listed on any
stock exchange and the rules of such stock exchange’s jurisdiction so require, such notice will
additionally be published in accordance with the requirements applicable in such jurisdiction. It
may additionally be published on a page of the Reuters service or of the Bloomberg service or on
any other medium for the electronic display of data as may be previously approved in writing by
the Common Representative.
16.2 Date of Publication: Any notices so published shall be deemed to have been given on the date of
such publication or, if published more than once or on different dates, on the first date on which
the publication was made.
16.3 Other Methods: The Common Representative shall be at liberty to sanction some other method of
giving notice to the Noteholders if, in its opinion, such other method is reasonable having regard to
market practice then prevailing and to the requirements of the stock exchange (if any) on which
the Notes are then listed and provided that notice of such other method is given to the Noteholders
in such manner as the Common Representative shall require.
17. Governing Law and Jurisdiction
17.1 Governing Law: The Common Representative Appointment Agreement and the Notes and all non-
contractual obligations arising out of or in connection with them are governed by, and shall be
construed in accordance with, Portuguese law.
17.2 Jurisdiction: the Issuer has in the Common Representative Appointment Agreement (a) submitted
irrevocably to the jurisdiction of the courts of Lisbon for the purposes of hearing and determining
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any suit, action or proceedings or settling any disputes arising out of or in connection with the
Common Representative Appointment Agreement or the Notes (including a dispute relating to the
existence, validity or termination of the Common Representative Appointment Agreement or the
Notes or any non-contractual obligation arising out of or in connection with them) or the
consequences of their nullity, (b) waived any objection which it might have to any such courts
being nominated as the forum to hear and determine any such suit, action or proceedings or to
settle any such disputes and agreed not to claim that any such court is not a convenient or
appropriate forum and (c) designated a person in Common Representative Appointment
Agreement to accept service of any process on its behalf.
18. Definitions
In these Conditions the following defined terms have the meanings set out below:
“Accounts Agreement” means the agreement to be entered into on the Closing Date and made
between the Accounts Bank, the Issuer and the Common Representative;
“Accounts Bank” means DBAG Portugal, in its capacity as Accounts Bank under the Accounts
Agreement;
“Additional Collateral Determination Date” means in relation to the sale and assignment of an
Additional Mortgage Asset Portfolio on an Additional Purchase Date which is an Interest Payment
Date, the date which is no later than 16 Lisbon Business Days prior to such Interest Payment Date;
“Additional Mortgage Assets” means the Mortgage Loans and the related Mortgages, Ancillary
Rights and Receivables assigned by the Originator to the Issuer included in the Additional
Mortgage Asset Portfolio;
“Additional Mortgage Asset Portfolio” means the aggregate of the Mortgage Loans and the
related Mortgages, Ancillary Rights and Receivables assigned by the Originator to the Issuer on
any Additional Purchase Date in consideration for which the Additional Purchase Price will be
paid to the Originator;
“Additional Purchase” means a purchase by the Issuer from the Originator of certain designated
Mortgage Assets included in an Additional Mortgage Asset Portfolio and the related Ancillary
Rights in an Additional Mortgage Assets Portfolio, being the Additional Purchase Available
Amount available to the Issuer for the purpose of making further purchases of Mortgage Assets;
“Additional Purchase Available Amount” means, in respect of any Interest Payment Date during
the Revolving Period, the amount calculated by the Transaction Manager as at the Quarterly
Collection Date immediately preceding such Interest Payment Date as being equal to the sum of
the Available Principal Distribution Amount and any amounts standing to the credit of the
Principal Accumulation Ledger;
“Additional Purchase Date” means each Interest Payment Date falling within the Revolving
Period on which the Issuer purchases an Additional Mortgage Asset Portfolio;
“Additional Purchase Price” means a sum equal to the Additional Purchase Available Amount;
“Additional Sale Price” means, in respect of Additional Mortgage Assets purchased pursuant to
an Offer, the amount of the consideration paid or to be paid by the Issuer to the Originator for the
purchase of such Additional Mortgage Asset Portfolio, such amount being equal to the Principal
Outstanding Balance of such Additional Mortgage Assets on the relevant Additional Sale Date;
“Agent Bank” means DBAG London, in its capacity as the agent bank in respect of the Notes in
accordance with the Paying Agency Agreement;
“Agents” means the Agent Bank and the Paying Agent and “Agent” means any one of them;
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“Aggregate Principal Outstanding Balance” means, with respect to all Mortgage Assets at any
time, the aggregate amount of the Principal Outstanding Balance of each Mortgage Asset;
“Ancillary Rights” means, in respect of each Mortgage Loan and its Mortgage:
(i) any advice, report, valuation, opinion, certificate, undertaking, or other statement of fact
or of law or opinion given in connection with such Mortgage Loan or Mortgage;
(ii) any related Insurance Policies;
(iii) all monies and proceeds payable or to become payable under, in respect of or pursuant
to such Mortgage Loan and its related Mortgage;
(iv) the benefit of all covenants, undertakings, representations, warranties and indemnities in
favour of the Originator contained in or relating to such Mortgage Loan or Mortgage
including, without limitation, those contained in the relevant Mortgage Asset
Agreement; and
(v) all causes and rights of action (present and future) against any person relating to such
Mortgage Loan or Mortgage including, without limitation, such causes and rights of
action arising under the relevant Mortgage Asset Agreement and including the benefit
of all powers and remedies for enforcing or protecting the Originator's right, title,
interest and benefit in respect of such Mortgage Loan or Mortgage;
“Arranger” means DBAG London;
“Authorised Investments” means:
(i) any euro denominated investment, money market funds or other deposit in respect of
which a security interest can be created, in each case in accordance with article 44(3) of
the Securitisation Law and article 3 of CMVM Regulation 12/2002; and
(ii) which has a rating of, or (in the case of a bank account or term deposit) is held at or
made with an institution having a minimum long term issuer default rating and short
term issuer default rating by Fitch equal to “A” and “F1”, respectively; and
(iii) which mature, or (in the case of a bank account) from which amounts deposited may be
withdrawn at any time without penalty, before the earliest of (i) the next Interest
Payment Date or (ii) one month from the date of the investment;
“Available Interest Distribution Amount” means, in respect of any Interest Payment Date, the
amount calculated by the Transaction Manager as at the Quarterly Collection Date immediately
preceding such Interest Payment Date equal to the sum of:
(i) the amount of the Interest Component (less the amount of the Third Party Expenses and
any Incorrect Payments made which are attributable to interest, in each case to the
extent paid prior to such Interest Payment Date) to be received by the Issuer during the
Collection Period immediately preceding such Interest Payment Date;
(ii) where the proceeds or estimated proceeds of disposal or, on maturity, the maturity
proceeds of any Authorised Investment received in relation to the relevant Collection
Period exceeds the original cost of such Authorised Investment, the amount of such
excess together with interest thereon;
(iii) all amounts standing to the credit of the Cash Reserve Account on such Interest
Payment Date;
(iv) in the event of any shortfall in interest payments resulting from exercise of Set-off
Rights by any Borrower or on the Final Legal Maturity Date, any portion of amounts
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standing to the credit of the Liquidity Account available to be used on such Interest
Payment Date required to cover such shortfall in interest payments;
(v) interest accrued and credited to the Issuer Account and the Cash Reserve Account
during the Collection Period ending on such Quarterly Collection Date;
(vi) the amount of any Principal Draw Amount to cover any Payment Shortfall in respect of
such Interest Payment Date;
(vii) in respect of the First Interest Payment Date only, all other amounts received by the
Issuer on or about the Closing Date from the proceeds of the issue of the Notes standing
to the credit of the Issuer Account on such Interest Payment Date not to be otherwise
applied; and
(viii) the Available Principal Distribution Amount remaining after all payments under items
(i) and (ii) of the Pre-Enforcement Principal Payments Priorities that fall due to be paid
on such Interest Payment Date have been made in full;
“Available Principal Distribution Amount” means, in respect of any Interest Payment Date, the
amount calculated by the Transaction Manager as at the Quarterly Collection Date immediately
preceding such Interest Payment Date as being equal to the sum of:
(i) the amount of the Principal Component (less the amount of the Third Party Expenses in
excess of the amount of the Interest Component (if any) and any Incorrect Payments
made which are attributable to principal in each case) to be received by the Issuer
during the Collection Period immediately preceding such Interest Payment Date;
(ii) the amount of the Available Interest Distribution Amount as is credited to the Issuer
Account and which is applied by the Transaction Manager on such Interest Payment
Date in reducing the debit balance on the Principal Deficiency Ledgers;
(iii) the amount of the proceeds from the liquidation or repurchase of Mortgage Assets as
credited to the Issuer Account;
(iv) in the event of any shortfall in principal payments resulting from exercise of Set-off
Rights by any Borrower or on the Final Legal Maturity Date, any portion of amounts
standing to the credit of the Liquidity Account available to be used on such Interest
Payment Date required to cover such shortfall in principal payments;
Less:
(v) the amount of any Principal Draw Amount to be made on such Interest Payment Date
plus the amounts standing to the credit of the Principal Accumulation Ledger, provided
that after the Revolving Period any such amounts standing to the credit of the Principal
Accumulation Ledger shall be added to item (i) above;
“Borrower” means, in respect of any Mortgage Loan, the related borrower or borrowers or other
person or persons who is or are under any obligation to repay that Mortgage Loan, including any
guarantor of such borrower and “Borrowers“ means all of them;
“Breach of Duty” means in relation to any person, a wilful default, fraud, illegal dealing,
negligence or breach of any agreement or trust by such person;
“Business Day” means a TARGET Settlement Day or, if such TARGET Settlement Day is not a
day on which banks are open for business in London and Lisbon, the next succeeding TARGET
Settlement Day on which banks are open for business in London and Lisbon;
“Cash Reserve Account” means the account established with the Accounts Bank, or such other
bank to which the Cash Reserve Account may be transferred, in the name of the Issuer, into which
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an amount equal to € 39,981,000 from the proceeds of the issue of the Class C Notes will be
credited;
“Cash Reserve Account Required Balance” means:
(i) in respect of an Interest Payment Date which falls on or prior to the Interest Payment
Date which falls on or immediately after the third anniversary of the date on which the
Revolving Period terminates, €39,981,000; and
(ii) in respect of any other Interest Payment Date, and as calculated at the immediately
preceding Quarterly Collection Date, the Cash Reserve Account Required Balance on
the immediately preceding Interest Payment Date less the Cash Reserve Release
Amount on the current Interest Payment Date;
“Cash Reserve Floor Amount” means €13,327,000;
“Cash Reserve Release Amount” means on any Interest Payment Date:
(i) if the Cash Reserve Release Test has not been satisfied on such Interest Payment Date,
zero;
(ii) if paragraph (a) of the Cash Reserve Release Test has been satisfied on such Interest
Payment Date, an amount equal to the Cash Reserve Account Required Balance as of
the preceding Interest Payment Date; or
(iii) if paragraph (b) but not paragraph (a) of the Cash Reserve Release Test has been
satisfied on such Interest Payment Date, an amount equal to the greater of:
(i) the Cash Reserve Account Required Balance as at the immediately preceding
Interest Payment Date less the greater of:
6 per cent. of the Principal Amount Outstanding of the Mortgage Backed
Notes on the current Interest Payment Date; and
the Cash Reserve Floor Amount; and
(ii) zero;
“Cash Reserve Release Test” means the test that will be satisfied on an Interest Payment Date if:
(i) the aggregate Principal Amount Outstanding of the Class A Notes has been or will on
that Interest Payment Date be redeemed in full; or
(ii) each of the following tests is satisfied:
a) the Available Interest Distribution Amount as at such Interest Payment Date, less
any amounts due under the Pre-Enforcement Interest Payments Priorities in
priority to crediting the Cash Reserve Account on such Interest Payment Date, is
an amount which is not less than the Cash Reserve Account Required Balance as
at the previous Interest Payment Date;
b) the Aggregate Principal Outstanding Balance of the Mortgage Assets (other than
the Written-off Mortgage Assets) in arrears by more than 90 days as at the
Quarterly Collection Date immediately preceding such Interest Payment Date is
less than 3 per cent. of the Aggregate Principal Outstanding Balance of the
Mortgage Loans in the Mortgage Asset Portfolio (other than the Written-off
Mortgage Assets) as at the immediately preceding Quarterly Collection Date; and
c) the balance of the Principal Deficiency Ledgers, subsequent to any reduction on
that Interest Payment Date, is equal to zero;
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“Class A Notes” means the €1,132,800,000 Class A Mortgage Backed Securitisation Notes due
October 2058 issued by the Issuer on the Closing Date;
“Class A Principal Deficiency Ledger” means the principal deficiency ledger created and
maintained by the Transaction Manager in accordance with the Transaction Management
Agreement in which the Transaction Manager shall record any Principal Draw Amounts and any
Realised Losses in relation to the Mortgage Assets that have occurred in the Collection Period and
ending on the Quarterly Collection Date immediately preceding such Interest Payment Date by
debiting the principal deficiency ledger, so that the debit balance on such principal deficiency
ledger is not greater than the Principal Amount Outstanding of the Class A Notes;
“Class B Interest Amount Arrears” means, in respect of any Class B Note on any Interest
Payment Date, any amount of interest in respect of such Class B Note which is due but remains
unpaid on such Interest Payment Date;
“Class B Notes” means the €199,900,000 Class B Mortgage Backed Securitisation Notes due
October 2058 issued by the Issuer on the Closing Date;
“Class B Principal Deficiency Ledger” means the principal deficiency ledger created and
maintained by the Transaction Manager in accordance with the Transaction Management
Agreement in which the Transaction Manager shall record any Principal Draw Amounts and any
Realised Losses in relation to the Mortgage Assets that have occurred in the Collection Period and
ending on the Quarterly Collection Date immediately preceding such Interest Payment Date by
debiting the principal deficiency ledger, so that the debit balance on such principal deficiency
ledger is not greater than the Principal Amount Outstanding of the Class B Notes;
“Class C Noteholders” means the persons who for the time being are the holders of the Class C
Notes;
“Class C Notes” means the €40,500,000 Class C Notes due October 2058 issued by the Issuer on
the Closing Date;
“Class C Return Amount” means in relation to an Interest Payment Date, the Available Interest
Distribution Amount calculated as at the related Quarterly Collection Date less the aggregate of
the amounts to be paid by the Issuer in respect of items (i) to (xi) of the Pre-Enforcement Interest
Payments Priorities on such Interest Payment Date or, the aggregate of the amounts to be paid by
the Issuer in respect of items (i) to (viii) of the Post-Enforcement Payments Priorities, as
applicable;
“Clearstream, Luxembourg” means Clearstream Banking, société anonyme, Luxembourg;
“Closing Date” means 25 September 2013;
“CMVM” means Comissão do Mercado de Valores Mobiliários, the Portuguese Market Securities
Commission;
“Collateral Determination Date” means the Initial Collateral Determination Date or each
Additional Collateral Determination Date;
“Collection Account” means the account in the name of the Originator at the Collection Account
Bank, utilised for the time being by the Originator and/or the Servicer in relation to Collections on
the Mortgage Assets or, with the prior written consent of the Issuer, such other account or accounts
as may for the time being be in addition thereto or substituted therefor and designated as a
Collection Account;
“Collection Account Bank” means DBAG Portugal or, with the prior written consent of the
Issuer, such other bank or banks as may for the time being be nominated by the Originator and/or
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the Servicer in addition thereto or substituted therefor with which the relevant Collection Account
is maintained;
“Collection Period” means each period commencing on (and including) a Quarterly Collection
Date and ending on (but excluding) the next succeeding Quarterly Collection Date, and, in the case
of the first Collection Period, commencing on (but excluding) the Collateral Determination Date
and ending on (but excluding) the first Quarterly Collection Date;
“Collections” means, in relation to any Mortgage Asset, all cash collections, and other cash
proceeds thereof including any and all (a) principal, interest, fees, late payment or similar charges
which the Originator, or where the Originator is no longer the Servicer, the Servicer applies in the
ordinary course of its business to amounts owed in respect of such Mortgage Asset, (b)
Liquidation Proceeds and (c) Repurchase Proceeds. For the avoidance of doubt, Collections shall
not include front-end fees and pre-payment penalties or similar charges payable and due in relation
to Mortgage Assets;
“Common Representative” means The Law Debenture Trust Corporation P.L.C., a company
incorporated with limited liability under the laws of England and Wales, with registered number
1675231, having its registered office at Fifth Floor, 100 Wood Street, London EC2V 7EX, United
Kingdom, in its capacity as initial representative of the Noteholders pursuant to Article 65 of the
Securitisation Law and in accordance with the Terms and Conditions of the Notes and the terms of
the Common Representative Appointment Agreement and any replacement common
representative or common representative appointed from time to time under the Common
Representative Appointment Agreement;
“Common Representative Appointment Agreement” means the agreement so named to be
entered into on the Closing Date between the Issuer and the Common Representative;
“Common Representative's Fees” means the fees payable by the Issuer to the Common
Representative in accordance with the Common Representative Appointment Agreement;
“Common Representative's Liabilities” means any Liabilities due to the Common
Representative in accordance with the terms of the Common Representative Appointment
Agreement together with interest payable in accordance with the terms of the Common
Representative Appointment Agreement accrued due in the immediately preceding Collection
Period;
“Conditions” means in relation to the Notes, the terms and conditions to be endorsed on the Notes
in, or substantially in, the form set out in Schedule 1 to the Common Representative Appointment
Agreement as any of the same may from time to time be modified in accordance with the Common
Representative Appointment Agreement and any reference to a particular numbered Condition
shall be construed in relation to the Notes accordingly;
“Co-ordination Agreement” means the agreement so named to be entered into on the Closing
Date between the Issuer, the Originator, the Transaction Manager, the Agent Bank, the Accounts
Bank, the Paying Agent, the Servicer and the Common Representative;
“Day Count Fraction” means in respect of an Interest Period, the actual number of days in such
period divided by 360;
“DBAG London” means Deutsche Bank Aktiengesellschaft, acting through its London office at
Winchester House, 1 Great Winchester Street, London EC2N 2DB, United Kingdom;
“DBAG Portugal” means Deutsche Bank Aktiengesellschaft, a corporation duly organised and
existing under the laws of Germany and having its principal place of business in the City of
Frankfurt (Main) and operating in Portugal under branch (Deutsche Bank Aktiengesellschaft –
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Sucursal em Portugal) number 43 and registration and taxpayer number 980 459 079 having its
registered office at Rua Castilho, no. 20, in Lisbon, Portugal;
“DBRS” means DBRS Ratings Ltd. or any successor thereto;
“Defaulted Mortgage Asset” means on any day of determination, any Mortgage Asset which is
not a Written-off Mortgage Asset under item (ii) of such definition and in respect of which twelve
or more monthly instalments have not been paid by the respective Instalment Due Dates relating
thereto and which remain outstanding on such day of determination;
“Deferred Interest Amount Arrears” means, in respect of the Class B Notes on any Interest
Payment Date, any Interest Amount in respect of such class which is due but not paid as at such
date;
“Encumbrance” means:
(i) a mortgage, charge, pledge, lien or other encumbrance securing any obligation of any
person or granting any security to a third party; or
(ii) any other type of preferential arrangement (including any title transfer and retention
arrangement) having a similar effect;
“Enforcement Notice” means a notice delivered by the Common Representative to the Issuer in
accordance with Condition 9 (Events of Default) which declares the Notes to be immediately due
and payable;
“EURIBOR” means the Floating Rate of Interest as defined in Condition 5.5 (Rate of Interest)
before the addition of the Relevant Margin;
“Euro”, “EUR”, “€” or “euro” means the lawful currency of member states of the European
Union that adopt the single currency introduced in accordance with the Treaty;
“Euroclear” means Euroclear Bank S.A./N.V.;
“Event of Default” means any one of the events specified in Condition 9 (Events of Default);
“Final Legal Maturity Date” means the Interest Payment Date falling on 22 October 2058;
“First Interest Payment Date” means 22 January 2014;
“Fitch” means Fitch Ratings Ltd. or any successor thereto;
“Force Majeure Event” means an event beyond the reasonable control of the person affected
including general strike, lock-out, labour dispute, act of God, war, riot, civil commotion, malicious
damage, accident, breakdown of plant or machinery, computer software, hardware or system
failure, fire, flood and/or storm;
“Gross Cumulative Default Ratio” means as at any Quarterly Collection Date, the Aggregate
Principal Outstanding Balance of the Mortgage Assets which have become Defaulted Mortgage
Assets since the Collateral Determination Date (provided that such Aggregate Principal
Outstanding Balance will not be deemed to be zero) divided by the Aggregate Principal
Outstanding Balance of the Mortgage Assets as at the Collateral Determination Date.
“Higher Class Notes” means, in relation to a class of Notes (other than the Class A Notes), each
class of Notes in respect of which the payment obligations of the Issuer rank ahead of such class of
Notes in the Pre-Enforcement Interest Payments Priorities, the Pre-Enforcement Principal
Payments Priorities or the Post-Enforcement Payments Priorities (as the case may be);
“Holder” means the bearer of a Note and the words “holders” and related expressions shall (where
appropriate) be construed accordingly;
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“Incorrect Payments” means:
(i) any payments incorrectly paid or transferred to the Issuer Account, identified as such by
the Servicer and confirmed by the Issuer or the Transaction Manager; and
(ii) any amounts required on any Lisbon Business Day to be paid to a Borrower under the
terms of the Mortgage Asset Agreement to which that Borrower is a party or by
operation of law (but subject to any right to refuse or withhold payment of such amount
or any right of set-off that has arisen by reason of the Borrower's breach of the terms of
such Mortgage Asset Agreement) and allocated as between principal and interest by the
Servicer;
“Initial Collateral Determination Date” means 1 August 2013;
“Initial Purchase Price” means, in respect of the Initial Mortgage Assets Portfolio purchased on
the Closing Date in accordance with the provisions of the Mortgage Sale Agreement, the amount
of the consideration paid or to be paid by the Issuer to the Originator for the purchase of such
Initial Mortgage Assets Portfolio, such amount being equal to the Principal Outstanding Balance
of the Mortgage Assets as calculated at the Collateral Determination Date, plus accrued interest in
relation to the Mortgage Loans as at the Collateral Determination Date, plus an amount agreed
between the Originator and the Issuer as representing the notional cost of funding the Mortgage
Assets between the Collateral Determination Date and the Closing Date;
“Initial Mortgage Asset Portfolio” means the Mortgage Loans and the related Mortgages,
Ancillary Rights and Receivables assigned by the Originator to the Issuer on the Closing Date in
consideration for which the Initial Purchase Price will be paid to the Originator;
“Insolvency Event” means
(i) in respect of a natural person or entity means:
i. the initiation of, or consent to any Insolvency Proceedings by such person or
entity;
ii. the initiation of Insolvency Proceedings against such a person or entity and such
proceeding is not contested in good faith on appropriate legal advice;
iii. the application (and such application is not contested in good faith on appropriate
legal advice) to any court for, or the making by any court of, a bankruptcy, an
insolvency or an administration order against such person or entity;
iv. the enforcement of, or any attempt to enforce (and such attempt is not contested in
good faith on appropriate legal advice) any security over the whole or a material
part of the assets and revenues of such a person or entity;
v. any distress, execution, attachment or similar process (and such process, if
contestable, is not contested in good faith on appropriate legal advice) being levied
or enforced or imposed upon or against any material part of the assets or revenues
of such a person or entity;
vi. the appointment by any court of a liquidator, provisional liquidator, administrator,
administrative receiver, receiver or manager, common representative, trustee or
other similar official in respect of all (or substantially all) of the assets of such a
person or entity generally; or
vii. the making of an arrangement, composition or reorganisation with the creditors of
such a person or entity; and
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(ii) in respect of the Originator and/or the Servicer, the suspension of payments, the
commencing of any recovery or insolvency proceedings against the Originator or
Servicer under Decree Law 298/92 of 31 December 1992, Decree Law No. 199/2006 of
26 October 2006 and/or (if applicable) under the Code for the Insolvency and Recovery
of Companies introduced by Decree Law 54/2004 of 18 March 2004 (each one as
amended from time to time);
“Insolvency Proceedings” means:
(i) the presentation of any petition for the bankruptcy or insolvency of a natural person
(whether such petition is presented by such person or another party); or
(ii) the winding-up, dissolution or administration of an entity,
and shall be construed so as to include any equivalent or analogous proceedings under the law of
the jurisdiction in which such person or entity is ordinarily resident or incorporated (as the case
may be) or of any jurisdiction in which such person or entity may be liable to such proceedings;
“Instalment Due Date” means in relation to any Mortgage Asset the original date on which each
monthly instalment, quarterly instalment or semi-annual instalment (as the case may be) is due and
payable under the relevant Mortgage Asset Agreement;
“Insurance Policies” means the insurance policies taken out by Borrowers in respect of Mortgage
Assets and the related Properties and any other insurance contracts of similar effect in replacement
of, addition to or substitution therefore from time to time and “Insurance Policy” means any one
of those insurance policies;
“Interbolsa” means INTERBOLSA – Sociedade Gestora de Sistemas de Liquidação e de Sistemas
Centralizados de Valores Mobiliários, S.A., having its registered office at Avenida da Boavista,
3433, 4100-138 Porto, Portugal;
“Interest Amount” means:
(i) in respect of a Mortgage Backed Note for any Interest Period, the aggregate of:
a) the amount of interest calculated on the related Interest Determination Date in
respect of such Mortgage Backed Note for such Interest Period by multiplying the
Principal Amount Outstanding of such Mortgage Backed Note on the next Interest
Payment Date following such Interest Determination Date by the relevant Floating
Rate of Interest and multiplying the amount so calculated by the relevant Day Count
Fraction and rounding the resultant figure to the nearest Minimum Denomination;
and
b) in the case of each Class B Note the Deferred Interest Amount Arrears in respect of
such Note on the preceding Interest Payment Date; and
(ii) in relation to a Class of Mortgage Backed Notes for any Interest Period, the aggregate
amount in paragraph (a) above, for all Mortgage Backed Notes in such Class for such
Interest Period;
“Interest Component” means in respect of any Collections:
(i) all interest collected and to be collected thereunder from and including the Collateral
Determination Date which shall be determined, in respect of the Mortgage Assets (other
than Written-off Mortgage Assets), on the basis of the rate of interest specified in the
relevant Mortgage Asset Agreement;
(ii) all late payment penalties and similar charges (excluding any pre-payment penalties and
similar charges);
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(iii) all Liquidation Proceeds in respect of the Mortgage Assets (other than Written-off
Mortgage Assets) allocated to interest;
(iv) all Collections in respect of Written-off Mortgage Assets;
(v) any proceeds of any Ancillary Right related to a Mortgage Asset that is allocated to
interest; and
(vi) all Repurchase Proceeds allocated to interest;
“Interest Determination Date” means:
(i) in the case of the first Interest Period, the day which is two TARGET Settlement Days
prior to the Closing Date; and
(ii) in the case of all other Interest Periods, each day which is two TARGET Settlement
Days prior to the Interest Payment Date falling at the end of the immediately preceding
Interest Period;
(iii) and, in relation to an Interest Period, the “related Interest Determination Date” means,
the Interest Determination Date immediately preceding the commencement of such
Interest Period;
“Interest Payment Date” means the 22nd
day of January, April, July and October in each year
commencing on the First Interest Payment Date, provided that if any such day is not a Business
Day, it shall be the immediately succeeding Business Day unless it would as a result fall into the
next calendar month, in which case it will be brought forward to the immediately preceding
Business Day;
“Interest Period” means each period from (and including) an Interest Payment Date (or the
Closing Date) to (but excluding) the next (or First) Interest Payment Date and, in relation to an
Interest Determination Date, the “related Interest Period” means the Interest Period next
commencing after such Interest Determination Date;
“Investor Report” means an investor report which shall be made available to the Noteholders by
the Transaction Manager in its website (https://tss.sfs.db.com/investpublic) and by the Issuer in the
CMVM’s website (www.cmvm.pt) to be delivered by the Transaction Manager to, inter alios, the
Common Representative, the Paying Agent and the Rating Agencies not less than six Business
Days prior to each Interest Payment Date.
“Issuer” means Tagus - Sociedade de Titularização de Créditos, S.A., a limited liability company
incorporated in the Republic of Portugal registered with the Commercial Registry of Lisbon with
sole registration and tax payer number 507 130 820 as issuer of the Notes;
“Issuer Account” means the account so named in the name of the Issuer and maintained at the
Accounts Bank into which Collections are transferred by the Servicer (or such other bank to which
the Issuer Account may be transferred and operated by the Transaction Manager) or such other
account or accounts as may for the time being be in addition thereto or substituted therefor in
accordance with the provisions of the Accounts Agreement;
“Issuer Expenses” means any fees, costs, liabilities and expenses payable by the Issuer to the
Transaction Manager (or any successor), the Paying Agent, the Accounts Bank, the Agent Bank,
the Servicer and fees payable to any liquidator or any other fees otherwise associated with a
liquidation of the Issuer, including any interest which has accrued due and payable thereon in
accordance with the Transaction Documents, that would be paid or provided for by the Issuer on
the next Interest Payment Date, including the Issuer Fixed Transaction Revenue;
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“Issuer Fixed Transaction Revenue” means an amount equal to 0.018 per cent. per annum of the
Principal Amount Outstanding of the Notes on the relevant Interest Payment Date payable in
arrear on each Interest Payment Date;
“Issuer's Jurisdiction” means Portugal;
“Issuer Obligations” means the aggregate of all moneys and Liabilities which from time to time
are or may become due, owing or payable by the Issuer to each, some or any of the Noteholders or
the other Transaction Creditors under the Transaction Documents;
“Liabilities” means in respect of any person, any losses, liabilities, damages, costs, awards,
expenses (including properly incurred legal fees) and penalties incurred by that person together
with any VAT thereon;
“Liquidation Proceeds” means in relation to a Mortgage Asset the net proceeds of realisation of
such Mortgage Asset including those arising from the sale or other disposition of other collateral
or property of the related Borrower or any other party directly or indirectly liable for payment of
the Receivables related to such Mortgage Asset and available to be applied thereon;
“Liquidity Account” means the account so named in the name of the Issuer and maintained at the
Accounts Bank or such other bank to which the Liquidity Account may be transferred, in the name
of the Issuer, into which the proceeds arising for the subscription of the VFN are transferred, in
accordance with the provisions of the Accounts Agreement and Transaction Management
Agreement.
“Lisbon Business Day” means any TARGET Settlement Day on which banks are open for
business in Lisbon;
“Material Term” means, in respect of any Mortgage Asset Agreement, any provision thereof on
the date on which the Mortgage Asset is assigned to the Issuer relating to (i) the maturity date of
the Mortgage Asset, (ii) the Principal Outstanding Balance of such Mortgage Assets, (iii) the
Repayment Profile of such Mortgage Asset and (iv) the spread over EURIBOR of the Mortgage
Asset;
“Master Execution Agreement” means the agreement so named to be entered into on or about the
Closing Date between the parties to the Transaction Documents;
“Master Framework Agreement” means the agreement so named dated on or about the Closing
Date and made between each of the parties to the Transaction Documents;
“Maximum Limit” means €300,000,000;
“Maximum Principal Accumulation Balance” means the amount equal to 10 per cent. of the
Principal Amount Outstanding of the Mortgage Loans calculated as of the Closing Date;
“Meeting” means a meeting of Noteholders of any class or classes (whether originally convened
or resumed following an adjournment);
“Member State” means at any time any member state of the European Union that has adopted the
euro as its lawful currency in accordance with the Treaty;
“Minimum Denomination” means €100,000;
“Minimum Rating” means, in respect of any entity, a long-term issuer default rating of “BBB+”
and/or a short-term issuer default rating of “F2” by Fitch, or such other rating or ratings as may be
agreed by the Rating Agencies from time to time as would maintain the then current ratings of the
Class A Notes;
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“Mortgage” means, in respect of any Mortgage Loan, the charge by way of voluntary mortgage
over the relevant Property together with all other Encumbrances or guarantees the benefit of which
is vested in the Originator as security for the repayment of that Mortgage Loan;
“Mortgage Asset” means any Mortgage Loan, its Mortgage and its Ancillary Rights assigned by
the Originator to the Issuer;
“Mortgage Asset Agreement” means, in respect of a Mortgage Asset, the public deed by which
the Mortgage was granted and which includes the loan agreement and all other agreements or
documentation relating to that Mortgage Asset;
“Mortgage Asset Portfolio” means the Initial Mortgage Asset Portfolio and the Additional
Mortgage Asset Portfolio;
“Mortgage Asset Warranty” means a warranty given by the Originator in respect of the
Mortgage Asset Portfolio in the Mortgage Sale Agreement;
“Mortgage Backed Notes” means the Class A Notes and Class B Notes;
“Mortgage Loan” means the aggregate advances made by the Originator to the relevant Borrower
by way of a loan and from time to time outstanding;
“Mortgage Sale Agreement” means the agreement so named to be entered into on the Closing
Date and made between the Originator and the Issuer;
“Mortgage Servicing Agreement” means an agreement so named to be entered into on the
Closing Date between the Servicer and the Issuer;
“Most Senior Class” means, the Class A Notes whilst they remain outstanding and thereafter the
Class B Notes whilst they remain outstanding and thereafter the Class C Notes whilst they remain
outstanding and thereafter the VFN whilst it remains outstanding;
"Net Provisioned Amounts" means all amounts used for the reduction of the debit balance on the
Principal Deficiency Ledgers pursuant to paragraphs (v) and (viii) of the Pre-Enforcement Interest
Payments Priorities, including, without limitation, amounts provisioned and accounted for;
“Note Principal Payment” means, any payment to be made or made by the Issuer in accordance
with Condition 6.2 (Mandatory Redemption in part of Mortgage Backed Notes), Condition 6.3
(Post-Enforcement Mandatory Redemption of the Notes) and Condition 6.4 (Mandatory
Redemption in part of Class C Notes);
“Noteholders” means the persons who for the time being are the holders of the Notes;
“Notes” means the Class A Notes, the Class B Notes, the Class C Notes and the VFN;
“Notices Condition” means Condition 16 (Notices);
“Originator” means DBAG Portugal;
“outstanding” means, in relation to the Notes, all the Notes other than:
(i) those which have been redeemed and cancelled in full in accordance with their
respective Conditions;
(ii) those in respect of which the date for redemption, in accordance with the provisions of
the Conditions, has occurred and for which the redemption monies (including all
interest accrued thereon to such date for redemption) have been duly paid to the
Common Representative or the Paying Agent in the manner provided for in the Paying
Agency Agreement (and, where appropriate, notice to that effect has been given to the
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Noteholders in accordance with the Notices Condition) and remain available for
payment in accordance with the Conditions; and
(iii) those which have become void under the Conditions;
provided that for each of the following purposes, namely:
(i) the right to attend and vote at any meeting of Noteholders;
(ii) the determination of how many and which Notes are for the time being outstanding for
the purposes of Clause 8 (Amendments and Substitutions), Clause 9 (Enforcement),
Clause 13 (Appointment of Common Representative) of the Common Representative
Appointment Agreement and Condition 9 (Events of Default), Condition 10
(Enforcement) and Condition 13 (Meetings of Noteholders) and the Provisions for
Meetings of Noteholders; and
(iii) any discretion, power or authority, whether contained in the Common Representative
Appointment Agreement or provided by law, which the Common Representative is
required to exercise in or by reference to the interests of the Noteholders or any of them,
those Notes (if any) which are for the time being held by or for the benefit of the Issuer shall
(unless and until ceasing to be so held) be deemed not to remain outstanding;
“Paying Agency Agreement” means the agreement so named dated on or about the Closing Date
between the Issuer, the Agents, and the Common Representative;
“Paying Agent” means DBAG Portugal, in its capacity as the paying agent in respect of the Notes,
together with any successor or additional paying agents appointed from time to time in connection
with the Notes under the Paying Agency Agreement;
“Payment Shortfall” means, as at any Interest Payment Date, an amount equal to the greater of:
(i) zero; and
(ii) the aggregate of the amounts required to pay or provide in full on such Interest Payment
Date for the items falling in (i) to (iv) (or, following the redemption in full of the Class
A Notes, items (i) to (vii)) of the Pre-Enforcement Interest Payment Priorities less the
amount of the Available Interest Distribution Amount calculated in respect of such
Interest Period but before taking into account any Principal Draw Amount.
“Payments Priorities” means the Pre-Enforcement Interest Payments Priorities, the Pre-
Enforcement Principal Payments Priorities and the Post-Enforcement Payments Priorities, as the
case may be;
“Permitted Variation” means any variation or amendment relating to a Material Term of a
Mortgage Asset Agreement other than (i) an amendment which results in a reduction to the
Principal Outstanding Balance of such Mortgage Assets (ii) an amendment which causes the
maturity of such Mortgage Asset Agreement to fall later than three years prior to the Final Legal
Maturity Date; or (iii) an amendment to the Repayment Profile of such Mortgage Asset, other than
a Permitted Repayment Profile Variation; or (iv) such Mortgage Asset Agreement having already
been amended in Material Terms more than 3 (three) times, except if otherwise imposed by law;
“Permitted Repayment Profile Variation” means a variation to the Repayment Profile of any
Mortgage Asset which results in (i) a principal payment grace period equal to or less than 24
months, (ii) an interest payment grace period equal to or less than 12 months, or (iii) an increase to
the final principal instalment on the Mortgage Asset such that the final instalment is equal to or
less than 25% of the Principal Outstanding Balance of such Mortgage Asset, provided that such
variations may only be made until the fifth anniversary of the Closing Date or any such longer
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period subject to written confirmation from Fitch that the then current ratings of the Class A Notes
will not be affected;
“Post-Enforcement Payments Priorities” means the provisions relating to the order of priority of
payments set out in Clause 18 of the Common Representative Appointment Agreement;
“Potential Event of Default” means any event which may become (with the passage of time, the
giving of notice, the making of any determination or any combination thereof) an Event of
Default;
“Pre-Enforcement Interest Payments Priorities” means the provisions relating to the order of
priority of payments set out in Paragraph 13.1 of Schedule 1 to the Transaction Management
Agreement;
“Pre-Enforcement Payments Priorities” means the Pre-Enforcement Interest Payments Priorities
and the Pre-Enforcement Principal Payments Priorities as the case may be;
“Pre-Enforcement Principal Payments Priorities” means the provisions relating to the order of
priority of payments set out in Paragraph 13.2 of Schedule 1 to the Transaction Management
Agreement;
“Principal Accumulation Ledger” means the principal accumulation ledger created and
maintained in the Issuer Account by the Transaction Manager in accordance with the Transaction
Management Agreement in which the Transaction Manager shall record any amounts not used
towards purchasing at par Additional Mortgage Assets, in accordance with the Pre-Enforcement
Principal Payments Priorities, in the Collection Period ending on the Quarterly Collection Date
immediately preceding such Interest Payment Date;
“Principal Amount Outstanding” means, on any day:
(i) in relation to a Note, the principal amount of that Note upon issue less the aggregate
amount of any principal payments in respect of that Note which have become due and
payable on or prior to that day;
(ii) in relation to a class, the aggregate of the amount in (i) in respect of all Notes
outstanding in such class; and
(iii) in relation to the Notes outstanding at any time, the aggregate of the amount in (i) in
respect of all Notes outstanding, regardless of class;
“Principal Component” means in respect of any Collections:
(i) all cash collections and other cash proceeds in relation to the Mortgage Assets
(including, for the avoidance of doubt, proceeds received under any relevant Insurance
Policies) in respect of principal collected or to be collected thereunder from the
Collateral Determination Date including repayments and prepayments of principal
thereunder and similar charges allocated to principal (other than such amounts as are
referred to in item (iv) of the definition of “Interest Component” and any front-end
fees and pre-payment penalties or similar charges);
(ii) all Liquidation Proceeds in relation to the Mortgage Assets (other than Liquidation
Proceeds arising after such Mortgage Asset becomes a Written-off Mortgage Asset)
allocated to principal; and
(iii) all Repurchase Proceeds in relation to the Mortgage Assets allocated to principal;
“Principal Deficiency Ledgers” means the Class A Principal Deficiency Ledger and the Class B
Principal Deficiency Ledger;
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“Principal Draw Amount” means in relation to any Interest Payment Date the amount (if any) of
the Available Principal Distribution Amount which is to be utilised by the Issuer to reduce or
eliminate any Payment Shortfall on such Interest Payment Date being the aggregate amount
determined on the related Quarterly Collection Date of:
(i) the amount by which the Issuer would be unable to make payment in full of items (i) to
(iv) of the Pre-Enforcement Interest Payments Priorities; and
(ii) following the redemption in full of the Class A Notes, the amount by which the Issuer
would be unable to make payment in full of items (i) to (vii) of the Pre-Enforcement
Interest Payments Priorities;
“Principal Draw Test” means the test that will be satisfied when the Class A Notes are redeemed
in full;
“Principal Outstanding Balance” means in relation to any Mortgage Asset and on any date, the
aggregate of:
(i) the original principal amount advanced to the Borrower; plus
(ii) any other disbursement, legal expense, fee or charge capitalised; plus
(iii) any further advance of principal to the Borrower; less
(iv) any repayments of the amounts in (i) and (iii) above,
provided that, in respect of any Written-off Mortgage Asset, the Principal Outstanding Balance
will be deemed to be zero;
“Property” means, in relation to any Mortgage Loan, the property upon which the repayment of
such Mortgage Loan is secured by the corresponding Mortgage and “Properties” means any of
them;
“Prospectus” means the Prospectus dated 20 September 2013 prepared in connection with the
issue by the Issuer of the Notes;
“Prospectus Directive” means Directive 2003/71/EC as amended by Directive 2010/73/EU to the
extent that such amendments have been implemented in the relevant member state;
“Prospectus Regulations” means Commission Regulation (EC) No 809/2004 of 29 April 2004
implementing Directive 2003/71/EC, as amended;
“Provisions for Meetings of Noteholders” means the provisions contained in Schedule 2 of the
Common Representative Appointment Agreement;
“Quarterly Collection Date” means the first calendar day of January, April, July and October in
each year, the first Quarterly Collection Date being the first calendar day of January 2014,
provided that if any such day is not a Business Day, the Quarterly Collection Date shall be the
immediately succeeding Business Day;
“Quarterly Servicing Report” means a report to be done by the Servicer in relation to each
Collection Period;
“Rating” means the then current rating of the Class A Notes given by the Rating Agencies;
“Rating Agencies” means DBRS and Fitch;
“Realised Loss” means (without double-counting) in relation to a Written-off Mortgage Asset as
at any Quarterly Collection Date, the Principal Outstanding Balance of such Mortgage Asset
determined as at such Quarterly Collection Date, or if the Liquidation Proceeds have been realised
or which has been classified as such by the Servicer, such Principal Amount Outstanding less the
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sum of all Collections, and other recoveries, if any, on such Mortgage Asset which will be applied
first to outstanding expenses incurred with respect to such Mortgage Asset, then to accrued and
unpaid interest and, finally, to principal;
“Receivables” means, in respect of a Mortgage Loan, the Principal Component and the Interest
Component due under such Mortgage Loan;
“Receiver” means any receiver or manager or receiver and manager appointed in respect of the
Issuer by the Common Representative in accordance with the Common Representative
Appointment Agreement;
“Relevant Date” means, in respect of any Notes, the date on which payment in respect thereof
first becomes due or (if any amount of the money payable is improperly withheld or refused) the
date on which payment in full of the amount outstanding is made or (if earlier) the date seven days
after the date on which notice is duly given to the Noteholders in accordance with the Notices
Condition that, upon further presentation of the Notes being made in accordance with the
Conditions, such payment will be made, provided that payment is in fact made upon such
presentation;
“Relevant Margin” means in relation to the Class A Notes, 0.30 per cent. per annum; and in
relation to the Class B Notes, 0.50 per cent. per annum;
“Repayment Profile” means the schedule of periodic principal payment dates and amounts
applicable to a given Mortgage Asset;
“Repurchase Proceeds” means such amounts as are received by the Issuer pursuant to the sale of
certain Mortgage Assets by the Issuer to the Originator pursuant to the Mortgage Sale Agreement;
“Reserved Matter” means any proposal:
(i) to change any date fixed for payment of principal or interest or the Class C Return
Amount in respect of the Notes, to reduce the amount of principal or interest or the
Class C Return Amount payable on any date in respect of the Notes or to alter the
method of calculating the amount of any payment in respect of the Notes;
(ii) to effect the exchange, conversion or substitution of the Notes of any Class for, or the
conversion of such Notes into, shares, bonds or other obligations or securities of the
Issuer or any other person or body corporate formed or to be formed;
(iii) to change the currency of payments under the Notes;
(iv) to alter the priority of payment of interest or principal or any other amount in respect of
the Notes under the Payments Priorities;
(v) to change the quorum requirements relating to meetings or the majority required to pass
a Resolution; or
(vi) to amend this definition.
“Resolution” means, in respect of matters other than a Reserved Matter, a resolution passed at a
Meeting convened in accordance with Condition 13 (Meetings of Noteholders) by a majority of the
votes cast and, in respect of matters relating to a Reserved Matter, a resolution passed at a Meeting
convened in accordance with Condition 13 (Meetings of Noteholders) by a majority of not less
than three quarters of the votes cast;
“Retired Mortgage Asset” means a Mortgage Asset in respect of which (a) any amendment,
variation or waiver of a term of such Mortgage Asset was proposed which was not a Permitted
Variation and such Mortgage Asset is substituted by a Mortgage Asset in accordance with the
Mortgage Sale Agreement and the Mortgage Servicing Agreement or (b) any other Mortgage
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Asset which is substituted at the option of the Originator upon the breach of representation or
warranty in accordance with the Mortgage Sale Agreement;
“Retired Mortgage Asset Pool” means the pool of Retired Mortgage Assets that are retired from
the Mortgage Asset Portfolio on any given substitution date.
“Revolving Period” means the period commencing on the Closing Date and ending on the earlier
of:
(i) the Interest Payment Date following the third anniversary of the Closing Date;
(ii) the date on which a Notification Event occurs; or
(iii) the Calculation Date on which the Principal Outstanding Balance of the Mortgage
Loans in the Mortgage Asset Portfolio in arrears by not less than 90 days (less the sum
of all Net Provisioned Amounts) is more than 4 per cent. of the Principal Outstanding
Balance of the Mortgage Loans in the Mortgage Asset Portfolio as at the Initial
Collateral Determination Date;
(iv) the date on which the Originator informs the Issuer, the Common Representative and
the Transaction Manager that it wishes to end the Revolving Period;
(v) the Calculation Date on which the Principal Outstanding Balance of the Defaulted
Mortgage Assets in the Mortgage Asset Portfolio (less the sum of all Net Provisioned
Amounts) is more than 4 per cent. of the Principal Outstanding Balance of the Mortgage
Assets in the Mortgage Asset Portfolio as at the Initial Collateral Determination Date;
(vi) the date on which a breach of the Originator’s representations and warranties has
occurred, if such breach is not capable of being remedied or, if such breach is capable of
being remedied and has not been so remedied on or prior to the next succeeding Interest
Payment Date, the Business Day immediately following such Interest Payment Date
where the breach was not remedied;
(vii) the date on which the Originator has been downgraded below investment grade and has
not provided to the Issuer a certificate of non-insolvency proceedings issued by the
competent commerce court;
(viii) the date on which the Cash Reserve is not capable of being replenished on the
immediately succeeding Interest Payment Date with an amount necessary to maintain
the Cash Reserve Account Required Balance; or
(ix) when an entry is recorded in the Principal Deficiency Ledgers and is not reduced to zero
on or prior to the succeeding Interest Payment Date, on that succeeding Interest
Payment Date.
“Secured Obligations” means the aggregate of all monies and Liabilities which from time to time
are or may become due, owing or payable by the Issuer to each of the Transaction Creditors under
the Notes or the Transaction Documents;
“Securitisation Law” means Decree Law No. 453/99 of 5 November 1999 as amended by Decree
Law No. 82/2002 of 5 April 2002, Decree Law No. 303/2003 of 5 December 2003, Decree Law
No. 52/2006 of 15 March 2006 and Decree Law No. 211-A/2008 dated 3 November 2008;
“Servicer” means DBAG Portugal, in its capacity as servicer under the Mortgage Servicing
Agreement;
“Servicer Expenses” means the amounts payable to the Servicer:
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(i) in connection with the enforcement of any Mortgage Asset and/or the protection or
enforcement of the Issuer’s rights and remedies in relation to such enforcement in a
Collection Period; and
(ii) in respect of any other losses, liabilities, damages, costs, awards, expenses and penalties
properly and reasonably incurred by the Servicer in the performance of the Servicer's
functions under the Mortgage Servicing Agreement in a Collection Period together with
any interest which has accrued due and payable in the immediately preceding Collection
Period in respect of such amounts in accordance with the provisions of the Mortgage
Servicing Agreement;
“Servicer Records” means the original and/or any copies of all documents and records, in
whatever form or medium, relating to the Services including all information maintained in
electronic form (including computer tapes, files and discs) relating to the Services;
“Servicer's Fees” means the fees due and payable to the Servicer and/or, if applicable, a
replacement servicer, quarterly in arrear, calculated by reference to the Aggregate Principal
Outstanding Balance of the Mortgage Assets as at the first day of each Collection Period and
payable by the Issuer on the related Interest Payment Date;
“Services” means the services to be provided by the Servicer as set out in Schedule 1 to the
Mortgage Servicing Agreement;
“Set-off Amount” means an amount calculated as of the immediately preceding Calculation Date
equal to the Aggregate Principal Outstanding Balance of the Mortgage Assets in respect of which
a Set-off Right has been identified by the Originator on the relevant date of assignment to the
Issuer, excluding the Mortgage Assets that have ceased to be held by the Issuer before such
Calculation Date;
“Set-off Right” means the Borrower’s right to set-off against the Issuer in relation to a Mortgage
Loan any amounts owed to such Borrower by the Originator on or prior to the date of assignment
of the relevant Mortgage Loan to the Issuer;
“Signing Date” means 24 September 2013;
“Specified Office” means in relation to any Agent, the office specified against its name in
Schedule 5 (Notices Details) to the Master Framework Agreement; or such other office as such
Agent may specify in accordance with Clause 17.9 (Changes in Specified Offices) of the Paying
Agency Agreement;
“SPV Criteria” means criteria established from time to time by the Rating Agencies for a single
purpose company in the Issuer's Jurisdiction;
“Stock Exchange” means Euronext Lisbon;
“Subscriber” means DBAG Portugal, in its capacity as subscriber of the Notes under the
Subscription Agreement;
“Subscription Agreement” means an agreement so named dated on or about the Closing Date
between the Issuer, the Originator, the Subscriber and the Arranger;
“Substituted Obligor” means in a single purpose company incorporated in any jurisdiction that
meets the SPV Criteria;
“Substitute Mortgage Asset Pool” means the pool of Substitute Mortgage Assets that are
substituted into the Mortgage Asset Portfolio on any given substitution date;
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“TARGET2” means the Trans-European Automated Real-time Gross Settlement Express Transfer
payment system which utilises a single shared platform and which was launched on 19 November
2007;
“TARGET Settlement Day” means any day on which TARGET2 is open for the settlement of
payments in euro;
“Tax” shall be construed so as to include any present or future tax, levy, impost, duty, charge, fee,
deduction or withholding of any nature whatsoever (including any penalty or interest payable in
connection with any failure to pay or any delay in paying any of the same) imposed or levied by or
on behalf of any Tax Authority and “Taxes”, “taxation”, “taxable” and comparable expressions
shall be construed accordingly;
“Tax Authority” means any government, state, municipal, local, federal or other fiscal, revenue,
customs or excise authority, body or official anywhere in the world exercising a fiscal, revenue,
customs or excise function;
“Tax Deduction” means any deduction or withholding for or on account of Tax;
“Third Party Expenses” means any amounts due and payable by the Issuer to third parties (not
being Transaction Creditors) in respect of the Notes or the Transaction Documents, including any
liabilities payable in connection with:
(i) the purchase or disposal by the Issuer of the Notes;
(ii) the purchase or disposal of any Authorised Investments;
(iii) any filing or registration of any Transaction Documents;
(iv) any provision for and payment of the Issuer's liability to any tax (including any VAT
payable by the Issuer on a reverse charge basis);
(v) any law or any Regulatory Direction with whose directions the Issuer is accustomed to
comply;
(vi) any legal or audit or other professional advisory fees (including without limitation
Rating Agencies’ fees);
(vii) any directors' fees or emoluments;
(viii) any advertising, publication, communication and printing expenses including postage,
telephone and telex charges;
(ix) the admission of the Class A Notes to Euronext Lisbon or to trading on the Stock
Exchange's regulated market; and
(x) any other amounts then due and payable to third parties and incurred without breach by
the Issuer of the provisions of the Transaction Documents;
“Transaction Accounts” means the Issuer Account, the Liquidity Account and the Cash Reserve
Account opened in the name of the Issuer with the Accounts Bank or such other accounts as may,
with the prior written consent of the Common Representative, be designated as such accounts;
“Transaction Assets” means the specific pool of assets of the Issuer which collateralises the
Issuer Obligations including, the Mortgage Assets, Collections, the Transaction Accounts, the
Issuer’s rights in respect of the Transaction Documents and any other right and/or benefit either
contractual or statutory relating thereto purchased or received by the Issuer in connection with the
Notes;
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“Transaction Creditors” means, in relation to the Notes and the Transaction Documents, the
Common Representative (in its capacity as a creditor of the Issuer), the Noteholders, any Receiver
or liquidator of the Issuer (in its capacity as a creditor of the Issuer), the Servicer, the Transaction
Manager, the Agents and the Accounts Bank;
“Transaction Documents” means the Master Framework Agreement, this Prospectus, the
Mortgage Sale Agreement, the Mortgage Servicing Agreement, the Subscription Agreement, the
Common Representative Appointment Agreement, the Co-ordination Agreement, the Notes, the
Transaction Management Agreement, the Paying Agency Agreement, the Accounts Agreement,
the Master Execution Agreement and any other agreement or document entered into from time to
time by the Issuer pursuant thereto;
“Transaction Management Agreement” means the agreement so named to be entered into on the
Closing Date between the Issuer, the Transaction Manager and the Common Representative;
“Transaction Manager” means DBAG London, in its capacity as transaction manager to the
Issuer in accordance with the terms of the Transaction Management Agreement;
“Transaction Party” means any person who is a party to a Transaction Document;
“Treaty” means the treaty establishing the European Communities, as amended by the Treaty on
European Union;
“VAT” means value added tax provided for in the VAT Legislation and any other tax of a similar
fiscal nature whether imposed in Portugal (instead of or in addition to value added tax) or
elsewhere from time to time;
“VAT Legislation” means the Portuguese Value Added Tax Code approved by Decree Law No.
394-B/84 of 26 December 1984 as amended from time to time;
“VFN” means the € 1 Variable Funding Note due October 2058 issued on the Closing Date and
subject to increases and/or decreases in its nominal amount in accordance with the Transaction
Management Agreement;
“VFN Noteholder” means DBAG Portugal or any other entity which is the holder of the VFN;
“Written-off Mortgage Asset” means on any day, a Mortgage Asset:
(i) which is a Defaulted Mortgage Asset; or
(ii) in respect of which the Liquidation Proceeds have been realised.
“Written Resolution” means, in relation to any class, a resolution in writing signed by or on
behalf of all holders of Notes of that class who for the time being are entitled to receive notice of a
Meeting in accordance with the Provisions for Meetings of Noteholders, whether contained in one
document or several documents in the same form, each signed by or on behalf of one or more such
holders of the Notes;
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TAXATION
The following is a summary of the current Portuguese withholding tax treatment at the date hereof in
relation to certain aspects of the Portuguese taxation of payments of principal and interest in respect of,
and transfers of, the Notes. The statements do not deal with other Portuguese tax aspects regarding the
Notes and relate only to the position of persons who are absolute beneficial owners of the Notes. The
following is a general guide, does not constitute tax or legal advice and should be treated with appropriate
caution. This summary is based upon the law as in effect on the date of this Prospectus and is subject to
any change in law that may take effect after such date. Noteholders who may be liable to taxation in
jurisdictions other than Portugal in respect of their acquisition, holding or disposal of the Notes are
particularly advised to consult their professional advisers as to whether they are so liable (and if so under
the laws of which jurisdictions). In particular, Noteholders should be aware that they may be liable to
taxation under the laws of Portugal and of other jurisdictions in relation to payments in respect of the
Notes even if such payments may be made without withholding or deduction for or on account of taxation
under the laws of Portugal.
The reference to “interest” and “capital gains” in the paragraphs below mean “interest” and “capital
gains” as understood in Portuguese tax law. The statements below do not take any account of any
different definitions of “interest” or “capital gains” which may prevail under any other law or which
may be created by the Conditions or any related documentation.
The present transaction qualifies as a securitisation transaction (operação de titularização de créditos) for
the purposes of the Securitisation Law. Portuguese tax-related issues for transactions which qualify as
securitisation transactions under the Securitisation Law are generally governed by Decree-Law no.
219/2001, of 4 August, as amended by Law no. 109-B/2001, of 27 December, by Decree-Law no.
303/2003, of 5 December, by Law no. 107-B/2003, of 31 December, and by Law no. 53-A/2006, of 29
December (the “Securitisation Tax Law”).
Noteholders’ Income Tax
Income generated by the holding (distributions) or transfer (capital gains) of the Notes is generally subject
to the Portuguese tax regime established for debt securities (obrigações).
Any payments of interest made in respect of the Notes to Noteholders who are not Portuguese residents
for tax purposes and do not have a permanent establishment in Portugal to which the income is
attributable will be exempt from Portuguese income tax. The exemption from income tax liability does
not apply to non-residents if: (i) more than 25 per cent. of its share capital is held, either directly or
indirectly, by Portuguese residents, or (ii) its country of residence is any of the jurisdictions listed as a tax
haven in Ministerial Order no. 150/2004, of 13 February, amended by Ministerial Order no. 292/2011, of
8 November (“Tax Haven”). To qualify for the exemption, Noteholders will be required to provide the
Issuer with an adequate evidence of non residence status prior to Interest Payment Date according to the
requirements and procedures set forth in the Securitisation Tax Law, as follows:
(i) When the entities at stake are central banks, public law institutes or international bodies,
credit institutions, financial companies, investment funds, pension funds, or insurance
companies domiciled in a OEDC country or in a country with whom Portugal as entered
into a double taxation convention and are subject to a special supervision regime or
administrative registration, then the following rules shall apply:
(a) The corresponding tax identification, if the corresponding holder has one; or
(b) A certificate issued by the entity responsible for registration or by the supervisory
entity confirming the legal existence of the holder and its domicile; or
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(c) A declaration issued by the relevant holder, duly signed and authenticated, in case
the entity at stake is a central bank, public law institute forming part of the public
administration, either central, regional, peripheral, indirect or autonomous
administration of the State of residence or international bodies; or
(d) Evidence of the non-resident status pursuant to paragraph (iii) below in case the
holder chooses to use the means of evidence provided for therein.
(ii) When the entities at stake are working emigrants, through the documents provided for
the evidence of such status in Ministerial Order no. 909/2003 of 29 August of the
Portuguese Minister of Finance regulating the emigrant saving system (“sistema
poupança-emigrante”);
(iii) In the remaining cases, according to the following rules:
(a) The evidence must be made by presentation of a residence certificate or equivalent
document issued by the tax authorities or the Portuguese Consulate, providing
evidence of the residence in a foreign country, or by document specifically issued
by an official entity of the respective State forming part of the public
administration, either central, regional, periferic, indirect or autonomous
administration with the purpose of certifying the residence in that State, not being
admissible for this purpose namely identification documents such as passport or
personal identity card, or document from which it shall only be possible to
indirectly presume an eventual residence relevant for tax purposes, such as a
working permit or a permit of staying;
(b) The document mentioned in subparagraph (a) above is necessarily the original or
duly certified copy and must have an issuing date not before 3 (three) years nor
after 3 (three) months in respect of the execution transaction date and of the date of
the income receiving, notwithstanding the provision set forth in subparagraph (c)
below;
(c) If the document’ expire date is inferior or if the document indicates a reference
year, the document shall be valid for the referenced year and for the subsequent
year, when the subsequent year is the same as the year of issuing of the document.
(iv) In the general terms provided for in the IRS Code and IRC Code and respective
complementary legislation, in the situations not provided for in subparagraphs (a), (b)
and (c) of paragraph (iii) above.
If the above exemption does not apply, interest payments on the Notes are subject to a
final withholding tax at the current rate of 25 per cent. whenever made to non-resident
legal persons or to a final withholding tax at the current rate of 28 per cent. whenever
made to non-resident individuals persons.
A final withholding tax rate of 35 per cent. applies in case of investment income
payments to individuals or legal persons domiciled in countries and territories included
in the Portuguese “Tax Haven” list approved by Ministerial Order (Portaria) no.
150/2004 of 13 February (Lista dos países, territórios e regiões com regimes de
tributação privilegiada, claramente mais favoráveis) as amended by Ministerial Order
(Portaria) no. 292/2011 of 8 November 2011. Investment income paid or made available
to accounts opened in the name of one or more accountholders acting on behalf of one
or more unidentified third parties is subject to a final withholding tax rate of 35 per
cent., unless the relevant beneficial owner(s) of the income is/are identified, in which
case, the withholding tax rates applicable to such beneficial owner(s) will apply.
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Under the double taxation conventions entered into Portugal which are in full force and
effect on the date of this Prospectus, the withholding tax rate may be reduced to 15, 12,
10 or 5 per cent., depending on the applicable convention and provided that the relevant
formalities and procedures are met in order to benefit from such reduction. Noteholders
shall comply with certain requirements established by the Portuguese Tax Authorities,
aimed at verifying the non-resident status and entitlement to the respective tax treaty
benefits. The reduction may apply at source or through the refund of the excess tax
withheld (currently tax form 21 RFI or 22 RFI, respectively).
Regarding capital gains obtained on the disposal of the Notes by a legal person non
resident in Portugal for tax purposes and without a permanent establishment located
herein to which gains are attributable are exempt from Portuguese capital gains
taxation, unless (i) the share capital of the non-resident entity is more than 25 per cent.
directly or indirectly, held by Portuguese resident entities or if (ii) the legal entity is
resident in a country, territory or region subject to a clearly more favourable tax regime
included in the Portuguese “Tax Haven” list approved by Ministerial Order (Portaria)
no. 150/2004 of 13 February amended by Ministerial Order no 292/2011 of 8
November.
In such cases, capital gains are subject to taxation at a 25 per cent. flat rate. Under the
double taxation conventions entered into by Portugal, Portugal as the State of Source is
usually restricted on its taxation powers to tax such gains and hence those gains are not
generally subject to Portuguese tax, but the applicable rules should be confirmed on a
case by case basis.
Regarding capital gains obtained on the disposal of the Notes by individuals non-
resident in Portugal for tax purposes and without a permanent establishment located
herein to which gains are attributable are exempt from Portuguese capital gains
taxation unless they are resident in a country, territory or region subject to a clearly
more favourable tax regime included in the Portuguese “Tax Haven” list approved by
Ministerial Order no. 150/2004 of 13 February amended by Ministerial Order no
292/2011 of 8 November.
Capital gains obtained by individuals that are not entitled to said exemption will be
subject to taxation at a 28 per cent. flat rate. Under the double taxation conventions
entered into by Portugal, Portugal is usually restricted on its taxation powers to tax such
gains and hence those gains are not generally subject to Portuguese tax, but the
applicable rules should be confirmed on a case by case basis. Accrued interest does not
qualify as capital gains for tax purposes.
Interest derived from the Notes and capital gains obtained with the transfer of the Notes
by legal persons resident for tax purposes in Portugal and by non-resident legal persons
with a permanent establishment in Portugal to which the interest or capital gains are
attributable are included in their taxable income and are subject to a corporate income
tax rate of 25 per cent. to which may be added a municipal surcharge (“derrama
municipal”) of up to 1.5 per cent., over the Noteholders taxable profits. A State
Surcharge (“derrama estadual”) rate of 3 per cent. will be due on the part of the taxable
profits exceeding €1,500,000.00 up to €7,500,000.00 and of 5 per cent. on the part of
the taxable profits exceeding €7,500,000.00. Withholding tax at a rate of 25 per cent.
applies on interest derived from the Notes, which is deemed to be a payment on account
of the final tax due. Financial institutions resident in Portugal for tax purposes or
branches of foreign financial institutions located herein, pension funds, retirement
and/or education savings funds, share savings funds, venture capital funds incorporated
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under the laws of Portugal and certain exempt entities are not subject to Portuguese
withholding tax. Nevertheless, investment income paid or made available to accounts
opened in the name of one or more accountholders acting on behalf of one or more
unidentified third parties is subject to a final withholding tax rate of 35 per cent., unless
the relevant beneficial owner(s) of the income is/are identified and as a consequence the
tax rate applicable to such beneficial owner(s) will apply.
Interest payments on the Notes to Portuguese tax resident individuals are subject to final
withholding tax for personal income tax purposes at the current rate of 28 per cent.,
unless the individual elects for aggregation to his taxable income, subject to tax at
progressive rates of up to 48 per cent.. In the latter circumstance an additional income
tax will be due on the part of the taxable income exceeding € 80,000 as follows: (i) 2.5
per cent. on the part of the taxable income exceeding € 80,000.00 up to € 250,000.00
and (ii) 5 per cent. on the remaining part (if any) of the taxable income exceeding €
250,000.00. Also, if the option of income aggregation is made an additional surcharge at
the rate of 3.5 per cent. will also be due over the amount that exceeds the annual amount
of the monthly minimum guaranteed wage. In this case, the tax withheld will be
creditable against the recipient's final tax liability.
Investment income paid or made available to accounts opened in the name of one or
more accountholders acting on behalf of one or more unidentified third parties is subject
to a final withholding tax rate of 35 per cent., unless the relevant beneficial owner(s) of
the income is/are identified and as a consequence the tax rate applicable to such
beneficial owner(s) will apply.
Capital gains arising from the transfer of the Notes obtained by Portuguese tax resident
individuals will be taxed at a special rate of 28 per cent. levied on the positive
difference between such gains and gains on other securities and losses on securities,
unless the individual elects for aggregation to his taxable income, subject to tax at the
current progressive rates of up to 48 per cent.. In the latter circumstance an additional
income tax will be due on the part of the taxable income exceeding € 80,000.00 as
follows: (i) 2.5 per cent. on the part of the taxable income exceeding € 80,000.00 up to €
250,000.00 and (ii) 5 per cent. on the remaining part (if any) of the taxable income
exceeding € 250,000.00. Also, if the option of income aggregation is made an additional
surcharge at the rate of 3.5 per cent will also be due over the amount that exceeds the
annual amount of the monthly minimum guaranteed wage. Accrued interest does not
qualify as capital gains for tax purposes.
Payments of principal on Notes are not subject to Portuguese withholding tax. For these
purposes, principal shall mean all payments carried out without any remuneration
component.
Stamp Tax
An exemption from stamp tax will apply to the assignment for securitisation purposes of the Receivables
by the Originator to the Issuer or on the commissions paid by the Issuer to the Servicer pursuant to the
Securitisation Tax Law.
Value Added Tax
An exemption from VAT will apply to the servicing activities referred to in the Securitisation Tax Law.
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EU Savings Directive
Portugal has implemented the EC Council Directive 2003/48/EC, of 3 June 2003, on taxation savings
income into the Portuguese law through Decree-Law no. 62/2005, of 11 March 2005, as amended by Law
no 39-A/2005, of 29 July 2005 and Law no. 37/2010, of 2 September 2010.
The forms currently applicable to comply with the reporting obligations arising from the implementation
of the EU Savings Directive were approved by Governmental Order (Portaria) no. 563-A/2005, of 28
June 2005, and may be available for viewing and downloading at www.portaldasfinancas.gov.pt.
The proposed financial transaction tax
The European Commission has published a proposal for a Directive for a common financial transaction
tax (FTT) in Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and
Slovakia (the participating Member States).
The proposed FTT has very broad scope and could, if introduced in its current form, apply to certain
dealings in Notes (including secondary market transactions) in certain circumstances. The issuance and
subscription of Notes should, however, be exempt.
Under current proposals the FTT could apply in certain circumstances to persons both within and outside
of the participating Member States. Generally, it would apply to certain dealings in Notes where at least
one party is a financial institution, and at least one party is established in a participating Member State. A
financial institution may be, or be deemed to be, "established" in a participating Member State in a broad
range of circumstances, including (a) by transacting with a person established in a participating Member
State or (b) where the financial instrument which is subject to the dealings is issued in a participating
Member State.
The FTT proposal remains subject to negotiation between the participating Member States and is the
subject of legal challenge. It may therefore be altered prior to any implementation, the timing of which
remains unclear. Additional EU Member States may decide to participate. Prospective holders of Notes
are advised to seek their own professional advice in relation to the FTT.
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SUBSCRIPTION AND SALE
General
The Subscriber has, upon the terms and subject to the conditions contained in the Subscription
Agreement, agreed to subscribe and pay for the Mortgage Backed Notes and VFN at their issue price of
100 per cent., the Class C Notes at their issue price of 100 per cent. The Subscriber is entitled in certain
circumstances to be released and discharged from their obligations under the Subscription Agreement
prior to the closing of the issue of the Notes.
United States of America
The Notes have not been and will not be registered under the Securities Act of 1933, as amended (the
“Securities Act”), or under the securities law of any state or political sub-division of the United States of
America or any of its territories, possessions or other areas subject to its jurisdiction including the
Commonwealth of Puerto Rico (collectively, the “United States”). No person has registered nor will
register as a commodity pool operator of the Issuer under the Commodity Exchange Act of 1936, as
amended (the “CEA”) and the rules thereunder (the “CFTC Rules”) of the Commodity Futures Trading
Commission (the “CFTC”), and the Issuer has not been or will not be registered under the United States
Investment Company Act of 1940, as amended, nor under any other United States federal laws. The Notes
are being offered and sold in reliance on an exemption from the registration requirements of the Securities
Act pursuant to Regulation S thereunder (“Regulation S”).
Accordingly, the Notes may not be offered, sold, pledged or otherwise transferred except (1) in an
“Offshore Transaction” (as such term is defined under Regulation S) and (2) to or for the account or
benefit of a Permitted Transferee.
A “Permitted Transferee” means any person who is not:
(a) a U.S. person as defined in Rule 902(k)(1) of Regulation S;
(b) a person who comes within any definition of U.S. person for the purposes of the CEA or any
CFTC rule, guidance or order proposed or issued under the CEA (for the avoidance of doubt, any
person who is not a "Non-United States person" as such term is defined under CFTC Rule
4.7(a)(1)(iv), but excluding, for purposes of subsection (D) thereof, the exception for qualified
eligible persons who are not “Non-United States persons”, shall be considered a U.S. person); or
(c) a “resident of the United States” for purposes of, and as defined in implementing regulations
proposed or issued under, Section 13 of the Bank Holding Company Act of 1956, as amended
(“BHC Act”).
Transfers of Notes within the United States or to any person other than a Permitted Transferee are
prohibited. Any transfer of Notes to a person other than a Permitted Transferee (a “Non-Permitted
Transferee”) will be void ab initio and of no legal effect whatsoever. Accordingly, any purported
transferee of any legal or beneficial ownership interest in a Note in such a transaction will not be entitled
to any rights as a legal or beneficial owner of such interest in such Note. The Issuer shall have the right at
any time after becoming aware that any legal or beneficial ownership interest in a Note is held by a Non-
Permitted Transferee to (i) redeem such interest, at the expense and risk of such Non-Permitted
Transferee, or (ii) require such Non-Permitted Transferee to sell such interest to (a) an affiliate of the
Issuer (to the extent permitted by applicable law) or (b) a person who is not a Non-Permitted Transferee,
in each case in accordance with Condition 5.5A.
The foregoing restrictions on the offer, sale, pledge or other transfer of Notes to a Non-Permitted
Transferee may adversely affect the ability of an investor in the Notes to dispose of the Notes in the
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secondary market, if any, and significantly reduce the liquidity of the Notes. As a result, the value of the
Notes may be materially adversely affected.
As defined in Rule 902(k)(1) of Regulation S, “U.S. person” means:
(A) Any natural person resident in the United States;
(B) Any partnership or corporation organized or incorporated under the laws of the United States;
(C) Any estate of which any executor or administrator is a U.S. person;
(D) Any trust of which any trustee is a U.S. person;
(E) Any agency or branch of a foreign entity located in the United States;
(F) Any non-discretionary account or similar account (other than an estate or trust) held by a dealer or
other fiduciary for the benefit or account of a U.S. person;
(G) Any discretionary account or similar account (other than an estate or trust) held by a dealer or
other fiduciary organized, incorporated, or (if an individual) resident in the United States; and
(H) Any partnership or corporation if:
(i) Organized or incorporated under the laws of any foreign jurisdiction; and
(ii) Formed by a U.S. person principally for the purpose of investing in securities not registered
under the Securities Act, unless it is organized or incorporated, and owned, by accredited
investors (as defined in §230.501(a)) who are not natural persons, estates or trusts.
As defined in CFTC Rule 4.7, modified as indicated above, “Non-United States person” means:
(A) A natural person who is not a resident of the United States;
(B) A partnership, corporation or other entity, other than an entity organized principally for passive
investment, organized under the laws of a foreign jurisdiction and which has its principal place of
business in a foreign jurisdiction;
(C) An estate or trust, the income of which is not subject to United States income tax regardless of
source;
(D) An entity organized principally for passive investment such as a pool, investment company or
other similar entity; provided, that units of participation in the entity held by persons who do not
qualify as Non-United States persons represent in the aggregate less than 10% of the beneficial
interest in the entity, and that such entity was not formed principally for the purpose of facilitating
investment by persons who do not qualify as Non-United States persons in a pool with respect to
which the operator is exempt from certain requirements of part 4 of the Commodity Futures
Trading Commission’s regulations by virtue of its participants being Non-United States persons;
and
(E) A pension plan for the employees, officers or principals of an entity organized and with its
principal place of business outside the United States.
As defined in the CFTC's proposed interpretive guidance and policy statement regarding cross-border
application of certain swaps provisions of the CEA, 77 Fed. Reg. 41214, 218 (Jul. 12, 2012), “U.S.
person” means:
(A) Any natural person who is a resident of the United States;
(B) Any corporation, partnership, limited liability company, business or other trust, association, joint-
stock company, fund, or any form of enterprise similar to any of the foregoing, in each case that is
either
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(i) organized or incorporated under the laws of the United States or having its principal place
of business in the United States (‘‘legal entity’’) or
(ii) in which the direct or indirect owners thereof are responsible for the liabilities of such
entity and one or more of such owners is a U.S. person;
(C) Any individual account (discretionary or not) where the beneficial owner is a U.S. person;
(D) Any commodity pool, pooled account, or collective investment vehicle (whether or not it is
organized or incorporated in the United States) of which a majority ownership is held, directly or
indirectly, by a U.S. person(s);
(E) Any commodity pool, pooled account, or collective investment vehicle the operator of which
would be required to register as a commodity pool operator under the CEA;
(F) A pension plan for the employees, officers, or principals of a legal entity with its principal place of
business inside the United States; and
(G) An estate or trust, the income of which is subject to United States income tax regardless of source.
As defined in proposed implementing regulations issued under Section 13 of the BHC Act, 76 Fed. Reg.
68846 (Nov, 7, 2011), “resident of the United States” means:
(A) Any natural person resident in the United States;
(B) Any partnership, corporation or other business entity organized or incorporated under the laws of
the United States or any State;
(C) Any estate of which any executor or administrator is a resident of the United States;
(D) Any trust of which any trustee, beneficiary or, if the trust is revocable, any settlor is a resident of
the United States;
(E) Any agency or branch of a foreign entity located in the United States;
(F) Any discretionary or non-discretionary account or similar account (other than an estate or trust)
held by a dealer or fiduciary for the benefit or account of a resident of the United States;
(G) Any discretionary account or similar account (other than an estate or trust) held by a dealer or
fiduciary organized or incorporated in the United States, or (if an individual) a resident of the
United States; or
(H) Any person organized or incorporated under the laws of any foreign jurisdiction formed by or for a
resident of the United States principally for the purpose of engaging in one or more transactions
described in the permitted activity exemptions set forth in §__.6(d)(1) or §__.13(c)(1) of the
proposed regulations for certain activities conducted solely outside of the United States.
The definitions set forth above of (i) “U.S. Person” in the CFTC's proposed interpretive guidance and
policy statement regarding cross-border application of certain swaps provisions of the CEA and (ii)
“resident of the United States” in the proposed implementing regulations issued under Section 13 of the
BHC Act are accurate as of the date of this Prospectus, but are subject to change upon the issuance of
final guidance and implementing regulations, respectively. Each person who offers, sells, pledges or
otherwise transfers Notes has exclusive responsibility for ensuring that its offer, sale, pledge or other
transfer is not to or for the account or benefit of any person other than a Permitted Transferee as such
term is defined as of the date of such offer, sale, pledge or other transfer.
The Notes have not been approved or disapproved by the United States Securities and Exchange
Commission (“SEC”) or any other regulatory agency in the United States, nor has the SEC or any other
regulatory agency in the United States passed upon the accuracy or adequacy of this document or the
merits of the Notes. Any representation to the contrary is a criminal offence. Furthermore, the Notes do
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not constitute, and have not been marketed as, contracts for the sale of a commodity for future delivery
(or options thereon) subject to the CEA, and neither trading in the Notes nor this document has been
approved by the CFTC under the CEA, and no person other than a Permitted Transferee may at any time
trade or maintain a position in the Notes.
Portugal
In relation to the Notes, the Issuer declares that (i) it has not directly or indirectly taken any action or
offered, advertised or sold or delivered and will not directly or indirectly offer, advertise, sell, re-sell, re-
offer or deliver any Notes in circumstances which could qualify as a public offer pursuant to the Código
dos Valores Mobiliários (the Portuguese Securities Code) and in circumstances which could qualify the
issue of the Notes as an issue in the Portuguese market or otherwise than in accordance with all applicable
laws and regulations and (ii) it has not directly or indirectly distributed and will not directly or indirectly
distribute any document, circular, advertisements or any offering material except in accordance with all
applicable laws and regulations.
Public Offers Generally
In relation to each Member State of the European Economic Area which has implemented the Prospectus
Directive (each, a “Relevant Member State”), the Issuer declares that with effect from and including the
date on which the Prospectus Directive is implemented in that Relevant Member State (the “Relevant
Implementation Date”) it has not made and will not make an offer of the Notes to the public in that
Relevant Member State except that it may, with effect from and including the Relevant Implementation
Date, make an offer of Notes to the public in that Relevant Member State:
(i) at any time to legal entities which are qualified investor as defined in the Prospectus
Directive;
(ii) at any time to fewer than 100 or, if the relevant Member State has implemented the
relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons
(other than qualified investors as defined in the Prospectus Directive) subject to
obtaining the prior consent of the relevant Dealer or Dealers nominated by the Issuer for
any such offer; or
(iii) at any time in any other circumstances falling within Article 3(2) of the Prospectus
Directive.
provided that no such offer of Notes referred to in (b) and (c) above shall require the Issuer to
publish a prospectus pursuant to Article 3 of the Prospectus Directive, or supplement a prospectus
pursuant to Article 16 of the Prospectus Directive.
For the purposes of this provision, the expression an “offer of Notes to the public” in relation to any
Notes in any Relevant Member State means the communication in any form and by any means of
sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to
decide to purchased or subscribe for the Notes, as the same may be varied in the Relevant Member State
by an measure implementing the Prospectus Directive in such Relevant Member State, and the expression
“Prospectus Directive”, whenever used in this chapter, means Directive 2003/71/EC (and amendments
thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member
State), and includes any relevant implementing measure in each Relevant Member State and the
expression “2010 PD Amending Directive” means Directive 2010/73/EU.
Save for applying for admission of the Class A Notes to trading on Euronext Lisbon, no action has been
or will be taken in any jurisdiction by the Issuer or any Transaction Manager that would, or is intended to,
permit a public offering of the Notes, or possession or distribution of this Prospectus or any other offering
material, in any country or jurisdiction where action for that purpose is required.
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Investor Compliance
Persons into whose hands this Prospectus comes are required to comply with all applicable laws and
regulations in each country or jurisdiction in which they purchase, offer, sell or deliver Notes or have in
their possession, distribute or publish this Prospectus or any other offering material relating to the Notes,
in all cases at their own expense. No action has been or will be taken in any jurisdiction by the Issuer or
the Originator that would, or is intended to, permit a public offering of the Notes, or possession or
distribution of this Prospectus or any other offering material, in any country or jurisdiction where action
for that purpose is required.
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GENERAL INFORMATION
1) The creation and issue of the Notes has been authorised by a resolution of the Board of Directors
of the Issuer dated on 27 August 2013.
2) It is expected that the Class A Notes will be admitted to the regulated market Euronext Lisbon and
for trading on its main market on the Closing Date.
3) There are no governmental, litigation or arbitration proceedings, including any which are pending
or threatened of which the Issuer is aware, which may have, or have had during the 12 months
prior to the date of this Prospectus, a significant effect on the financial position of the Issuer.
4) Save as disclosed in this Prospectus, since 31 December 2012 (the date of the most recent audited
annual accounts of the Issuer) there has been (i) no significant change in the financial or trading
position of the Issuer, and (ii) no material adverse change in the financial position or prospects of
the Issuer.
5) The Issuer shall procure that the Servicer shall produce a Quarterly Servicing Report no later than
seven Lisbon Business Days after the end of each relevant Collection Period, and the Transaction
Manager shall produce an Investor Report no later than six Business Days prior to each Interest
Payment Date. Each Investor Report shall be available at the specified offices of the Common
Representative and the Paying Agent, the registered office of the Issuer and in the Transaction
Manager’s website currently located at (https://tss.sfs.db.com/investpublic).
6) Copies of the following documents will be available in physical and/or electronic form at the
specified office of the Paying Agent during usual business hours on any week day (Saturdays,
Sundays and public holidays excepted) after the date of this document and for the life of the Notes:
(i) the Articles of Association (estatutos) of the Issuer;
(ii) the Mortgage Sale Agreement;
(iii) the Master Execution Agreement, which includes:
(a) the Mortgage Servicing Agreement
(b) the Paying Agency Agreement;
(c) the Common Representative Appointment Agreement;
(d) Accounts Agreement;
(e) the Co-ordination Agreement;
(f) the Master Framework Agreement;
(g) the Transaction Management Agreement;
(iv) the Subscription Agreement;
(v) the then current Investor Report.
7) Effective Interest Rate
The estimated effective interest rates of the Mortgage Backed Notes are presented below:
Effective Interest Rate
(gross)*
Class A Notes 0.524%
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Class B Notes 0.724%
These estimated effective interest rates are based on the following assumptions:
(i) 3m EURIBOR used in the calculation of the interest on the Mortgage Backed Notes
constant at 0.224 per cent. (rate as of 12 September 2013);
(ii) Interest on the Mortgage Backed Notes calculated based on an ACT/360 day-count
fraction; and
(iii) Mortgage Assets continuing to be fully performing.
* Withholding tax may or not apply, depending on the investor’s applicable circumstances, as
described in the section “Taxation” above.
8) The most recent publicly available financial statements of the Issuer for the 2011 and 2012
accounting financial periods and the unaudited financial statements of the Issuer in respect of the
first semester of 2013, ended 30 June 2013, will be available for inspection at the following
website: www.cmvm.pt.
9) The Notes shall be freely transferable. No transaction made on the Stock Exchange after the
Closing Date shall be cancelled.
10) Any website (or the contents thereof) referred to in this Prospectus does not form part of this
Prospectus as approved by the CMVM.
11) Any foreign language included in this document is for convenience purposes only.
12) The Comissão do Mercado de Valores Mobiliários, pursuant to article 62 of the Securitisation
Law, has assigned asset identification code 201309TGSDBASXXN0066 to the Notes.
13) The Notes have been accepted for settlement through Interbolsa. The CVM code and ISIN for the
Notes are:
CVM Code ISIN
Class A Notes TGUPOM PTTGUPOM0016
Class B Notes TGUQOM PTTGUQOM0015
Class C Notes TGUROM PTTGUROM0014
VFN TGUSOM PTTGUSOM0013
Post-issuance information
The Issuer intends to provide any post issuance information only where it is required to do so by law in
relation to the issue of the Notes and as applicable pursuant to the legal provisions of the Portuguese
Securities Code, notably article 244 and following.
137
REGISTERED OFFICE OF THE ISSUER
Tagus - Sociedade de Titularização de Créditos, S.A.
Rua Castilho, 20
1250-069 Lisbon, Portugal
ARRANGER
Deutsche Bank Aktiengesellschaft, acting through its London office
Winchester House, 1 Great Winchester Street,
London EC2N 2DB, United Kingdom
PAYING AGENT
Deutsche Bank Aktiengesellschaft – Sucursal em Portugal
Rua Castilho, 20
1250-069 Lisbon, Portugal
COMMON REPRESENTATIVE
The Law Debenture Trust Corporation plc.
Fifth Floor, 100 Wood Street
London EC2V 7EX, United Kingdom
AUDITORS TO THE ISSUER
KPMG & Associados,
Sociedade de Revisores Oficiais de Contas S.A.
Avenida Praia da Vitória, 71 – A, 11º
1069-006 Lisbon, Portugal
LEGAL ADVISERS
To the Originator and to the Common
Representative as to Portuguese Law
Vieira de Almeida & Associados, Sociedade de
Advogados, R.L.
Avenida Duarte Pacheco, 26
1070-110 Lisbon, Portugal
