DBRS Ratings Limited (DBRS) assigned the following ratings to the Class A and Class B notes issued by 4Mori Sardegna S.r.l. (the Issuer):
-- BBB (low) (sf) to the EUR 232,000,000 Class A notes
-- B (sf) to the EUR 13,000,000 Class B notes
The notes are backed by a EUR 1.04 billion (by gross book value, GBV) portfolio consisting of unsecured and secured non-performing loans originated by Banco di Sardegna S.p.a. (the Originator). Most of the loans in the portfolio defaulted between 2008 and 2017 and are in various stages of resolution. The receivables are currently serviced and will continue to be serviced by Prelios Credit Servicing S.p.A. (Prelios or the Servicer). A back-up servicer, Securitisation Services S.p.A., has also been appointed and will act as a servicer in case of termination of the appointment of Prelios.
Approximately 53% (by GBV) of the pool is secured and 94.4% (by GBV) of the secured loans benefit from a first-ranking lien. The secured loans included in the portfolio are backed by properties distributed mainly in the regions of Sardinia 87% and Lazio 9%. In its analysis, DBRS assumed that all loans are worked out through an auction process, which generally has the longest resolution timeline.
The coupon on the Class B notes, which represent the mezzanine debt, may be repaid prior to principal of the Class A notes unless certain performance-related triggers are breached.
The ratings are based on DBRS’s analysis of the projected recoveries of the underlying collateral, the historical performance and expertise of the Servicer, Prelios, the availability of liquidity to fund interest shortfalls and special-purpose vehicle expenses, the cap agreement with Banca IMI and the transaction’s legal and structural features. DBRS’s BBB (low) and B rating stresses assume a haircut of approximately 23.8% and 15.4% respectively, to Prelios’s business plan for the portfolio.
DBRS analysed the transaction structure using Intex Deal Maker.
All figures are in euros unless otherwise noted.
The principal methodology applicable is: “Rating European Non-Performing Loans Securitisations”.
DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.
Other methodologies referenced in this transaction are listed at the end of this press release. These may be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies.
For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Rating Sovereign Governments” methodology at: http://dbrs.com/research/319564/rating-sovereign-governments.pdf.
The sources of data and information used for these ratings include the Originators and the Special Servicers.
DBRS did not rely upon third-party due diligence to conduct its analysis.
DBRS was supplied with third-party assessments. However, this did not impact the rating analysis.
DBRS considers the data and information available to it for the purposes of providing these ratings were of satisfactory quality.
DBRS does not audit or independently verify the data or information it receives in connection with
the rating process.
These ratings concern a newly issued financial instrument.
These are the first DBRS ratings on this financial instrument.
Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.
To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared with the parameters used to determine the rating (the Base Case):
-- Recovery Rates Used: Cumulative Base Case Recovery Amount of approximately EUR 307 million at the BBB (low) stress level, a 5% and 10% decrease of the Cumulative Base Case Recovery Rate.
-- DBRS concludes that a hypothetical decrease of the Recovery Rate by 5%, ceteris paribus, would lead to a downgrade of the Class A notes to BB (sf).
-- DBRS concludes that a hypothetical decrease of the Recovery Rate by 10%, ceteris paribus, would lead to a downgrade of the Class A notes to B (sf).
-- DBRS concludes that a hypothetical decrease of the Recovery Rate by 5%, ceteris paribus, would lead to a downgrade of the Class B notes to B (low) (sf).
-- DBRS concludes that a hypothetical decrease of the Recovery Rate by 10%, ceteris paribus, would lead to a downgrade of the Class B notes to CCC (high) (sf).
For further information on DBRS historic default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see:
Ratings assigned by DBRS Ratings Limited are subject to EU and US regulations only.
Lead Analyst: Mirco Iacobucci, Vice President, Global Structured Finance
Initial Rating Date: 22 June 2018
Rating Committee Chair: Christian Aufsatz, Head of European Structured Finance, Global Structured Finance
DBRS Ratings Limited
20 Fenchurch Street, 31st Floor, London EC3M 3BY United Kingdom
Registered in England and Wales: No. 7139960
The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies
-- Rating European Non-Performing Loans Securitisations
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- European CMBS Rating and Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Servicers
-- Legal Criteria for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions
-- Interest Rate Stresses for European Structured Finance Transactions
A description of how DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375
For more information on this credit or on this industry, visit www.dbrs.com or contact us at email@example.com.