DBRS Ratings Limited (DBRS) assigned a BBB (low) (sf) rating to the EUR 478,000,000 Class A notes and a CCC (sf) rating to the EUR 60,129,000 Class B notes issued by BCC NPLs 2018-2 S.r.l. (the Issuer).
The notes are backed by a EUR 2.004 million gross book value (GBV) portfolio consisting of unsecured and secured non-performing loans originated by 73 Italian banks (the Originators). The majority of loans in the portfolio defaulted between 2013 and 2018 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 and will act as a servicer in case of termination of the appointment of Italfondiario.
Approximately 80.3% of the pool by GBV is secured and 60.3% of the portfolio benefits from a first-ranking lien. The secured loans included in the portfolio are backed by properties distributed mainly in the Italian regions of Marche (20.1% by market value or MV), Tuscany (14.1% by MV) and Lombardy (13.9% by MV). In its analysis, DBRS assumed that all loans are disposed through a judicial resolution strategy.
The transaction benefits from EUR 13.1 million in cash from recoveries collected between 1 April 2018 and 12 December 2018, part of which will be used to pay the upfront costs of the cap counterparty while the remaining will be distributed in accordance with the priority of payments on the first interest payment date.
The securitisation includes the possibility to implement a 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 UniCredit Bank AG and JP Morgan AG; and the transaction’s legal and structural features.
DBRS’s BBB (low) rating stress assumes a haircut of 23.5% and its CCC (sf) rating stress assumes a 0% haircut to Italfondiario’s business plan for the portfolio.
The transaction’s final maturity date is in July 2042.
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 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.
These ratings concerns 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 636 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 (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 831 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, Global Structured Finance
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 20 December 2018
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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.