DBRS Ratings GmbH (DBRS) confirmed its AA (sf) rating on the Class A Notes issued by Cassa Centrale Finance 3 S.r.l. (the Issuer).
The rating addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date in October 2049.
The confirmation follows an entire review of the transaction and is based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults and losses as of the October 2018 payment date.
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables.
-- Current available credit enhancement to the Class A Notes to cover the expected losses at the AA (sf) rating level.
The Issuer is a securitisation of Italian residential mortgage loans (77.9% of the current portfolio) and agrarian loans (22.1%), originated and serviced by several Italian cooperative banks. The transaction, which follows the standard structure under the Italian securitisation law, is static and closed in December 2009.
As of October 2018, loans that were more than one month in arrears represented 1.4% of the outstanding portfolio balance, down from 3.2% as of October 2017. No defaulted loans were recorded so far.
DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and has updated its base case PD and LGD assumptions to 8.4% and 0.3%, respectively.
The Class A Notes benefit from credit enhancement provided by the outstanding performing portfolio balance. The credit enhancement has increased as the transaction deleverages. As at the October 2018 payment date, credit enhancement to the Class A Notes was 48.8%, up from 40.0% 12 months prior.
The transaction benefits from a non-amortising liquidity reserve, which is available to provide support to the Class A Notes throughout the life of the transaction by covering senior fees and shortfall of interest payments. The reserve was established at closing for an amount of EUR 25.6 million, which is 6% of the original portfolio balance. It is currently at its target level.
Deutsche Bank S.p.A. acts as the account bank for the transaction. Based on the reference private rating of the account bank and the mitigants outlined in the transaction documents, and structural mitigants, DBRS considers the risk arising from the exposure to Deutsche Bank S.p.A. to be consistent with the rating assigned to the Class A Notes, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology.
J.P. Morgan Securities plc (JP Morgan) and Mediocredito Trentino Alto Adige S.p.A. (Mediocredito) act as the swap counterparties in the transaction. DBRS does not rate Mediocredito. As a result, DBRS did not give any credit to the hedging arrangement in the cash flow analysis. DBRS’s private rating of JP Morgan complies with the first rating threshold as described in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology, given the rating assigned to the Class A Notes.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the rating is: “Master European Structured Finance Surveillance Methodology”.
DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.
A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent rating action.
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: https://www.dbrs.com/research/333487/rating-sovereign-governments.
The sources of data and information used for this rating include investor reports provided by Deutsche Bank AG and loan-by-loan data provided by European DataWarehouse GmbH.
DBRS did not rely upon third-party due diligence in order to conduct its analysis.
At the time of the initial rating DBRS was not 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 this rating to be of satisfactory quality.
DBRS does not audit or independently verify the data or information it receives in connection with the rating process.
The last rating action on this transaction took place on 12 January 2018, when DBRS confirmed its rating on the Class A Notes at AA (sf).
The lead analyst responsibilities for this transaction have been transferred to Ilaria Maschietto.
Information regarding DBRS ratings, including definitions, policies and methodologies, is 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 to the parameters used to determine the rating (the Base Case):
-- DBRS expected a lifetime base case PD and LGD for the pool based on a review of the current assets. Adverse changes to asset performance may cause stresses to base case assumptions and therefore have a negative effect on credit ratings.
-- The base case PD and LGD of the current pool of loans for the Issuer are 8.4% and 0.3%, respectively.
-- The Risk Sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base case assumption. For example, if the LGD increases by 50%, the rating of the Class A Notes would be expected to be at AA (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A Notes would be expected to be at AA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected to be at AA (sf).
Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD, expected rating of AA (sf)
-- 50% increase in PD, expected rating of AA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (sf)
For further information on DBRS historical 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 GmbH are subject to EU and US regulations only.
Lead Analyst: Ilaria Maschietto, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 5 May 2011
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Geschäftsführer: Detlef Scholz
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The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies.
-- Legal Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Derivative Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
-- 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 firstname.lastname@example.org.