DBRS Ratings Limited (DBRS) assigned a BBB (low) (sf) rating to the EUR 85,000,000 Class A notes and a CCC (sf) rating to the EUR 9,000,000 Class B notes issued by Ibla S.r.l. (the Issuer).
The notes are backed by a EUR 348.6 million gross book value (GBV) portfolio consisting of unsecured and secured non-performing loans originated by Banca Agricola Popolare di Ragusa S.C.p.A. (the Originator). The majority of loans in the portfolio defaulted between 2012 and 2016 and are in various stages of resolution. The receivables are serviced by Italfondiario S.p.A. (Italfondiario or the Servicer). A backup servicer, Securitisation Services S.p.A., has also been appointed to act as servicer in case of the termination of the appointment of Italfondiario.
Approximately 95.1% of the pool by GBV is secured and 87.2% of the portfolio benefits from a first-ranking lien. The secured loans included in the portfolio are backed by properties distributed mainly (99.3% of the portfolio by open market value) in Sicily. In its analysis, DBRS assumed that all loans are worked out through an auction process, which generally has the longest resolution timeline.
The transaction benefits from EUR 5.3 million in cash from recoveries collected between 31 December 2017 and 9 August 2018, part of which will be used to pay the upfront costs of the cap counterparty while the remainder will be distributed in accordance with the priority of payments on the first interest payment date.
The securitisation includes the possibility to implement a Real Estate Owned Company (ReoCo) structure.
The ratings are based on DBRS’s analysis of the projected recoveries of the underlying collateral; the historical performance and expertise of the Servicer, Italfondiario; the availability of liquidity to fund Class A interest payment shortfalls and special-purpose vehicle expenses in case of cash flow shortfalls; the cap agreement with Banca IMI S.p.A.; and the transaction’s legal and structural features. DBRS’s BBB (low) (sf) rating stress assumes a haircut of 26.4% and CCC (sf) rating stress assumes a haircut of 0% to Italfondiario’s business plan for the portfolio.
DBRS analysed the transaction structure using Intex DealMaker.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the ratings 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 the 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 the ratings were of satisfactory quality.
DBRS does not audit or independently verify the data or information it receives in connection with
the rating process.
The ratings concerns a newly issued financial instrument. This is the first DBRS rating 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 123 million at the BBB (low) (sf) 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 (high) (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 (high) (sf).
-- Recovery Rates Used: Cumulative Base Case Recovery Amount of approximately EUR 167 million at the CCC (sf) 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 B notes to below CCC (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 below CCC (sf).
For further information on DBRS historic default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.
Ratings assigned by DBRS Ratings Limited are subject to EU and US regulations only.
Lead Analyst: Alessio Pignataro, Senior Vice President
Initial Rating Date: 6 September 2018
Rating Committee Chair: Christian Aufsatz, Managing Director
DBRS Ratings Limited
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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.