DBRS Confirms Ratings on MARCHE M6 S.r.l.

DBRS Ratings GmbH (DBRS) confirmed its AAA (sf) ratings on the Class A2 Notes and Class A3 Notes (the Class A Notes) issued by MARCHE M6 S.r.l. (MM6 or the Issuer).

The confirmations follow a review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies and defaults, as of the January 2019 payment date;
-- Probability of default (PD), loss given default (LGD) and expected loss (EL) assumptions for the outstanding collateral pool; and
-- Current available credit enhancement (CE) to the Class A Notes to cover the expected losses at the AAA (sf) rating levels.

MM6 is a securitisation of first-lien residential mortgage loans originated in Italy by Nuova Banca delle Marche S.p.A. (NBDM), the former Banca delle Marche S.p.A. In May 2017, NBDM was acquired by Unione di Banche Italiane S.p.A. (UBI). Once NBDM fully merged into UBI, UBI began servicing the portfolio in October 2017. The process of transferring the servicing activities was smooth and did not negatively impact the transaction.

PORTFOLIO PERFORMANCE
The portfolio is performing well and within DBRS’s expectations. As of December 2018, loans more than 90 days delinquent accounted for 0.3% of the outstanding collateral portfolio balance, down from 0.8% in December 2017. Cumulative defaulted loans stood at 4.0% of the initial portfolio balance, up from 3.5% in December 2017.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis on the outstanding pool of receivables and updated the base case PD and LGD assumptions on the outstanding collateral portfolio to 4.2% and 6.7%, respectively.

CREDIT ENHANCEMENT
CE to the Class A Notes is provided by the overcollateralisation of the outstanding collateral portfolio balance and includes the reserve fund. As of January 2019, CE to the Class A Notes was 48.9%, up from 40.9% as of January 2018. The reserve fund, which is currently at its target level of EUR 34.0 million, is available to pay senior fees, expenses and missed interest on the Class A Notes.

BNP Paribas Securities Services’ Milan and London branches are the Italian and English account banks for the transaction. Based on the reference private ratings of the account banks, the downgrade provisions outlined in the transaction documents, and structural mitigants, DBRS considers the risks arising from the exposure to the Italian and English account bank to be consistent with the ratings assigned to the Class A Notes, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology.

J.P. Morgan Securities plc is the Swap Counterparty to the transaction and its DBRS private rating is consistent with the First Rating Threshold defined in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology. Its obligations under the swap agreement are guaranteed by J.P. Morgan Chase Bank N.A.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings 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 transactions 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: http://dbrs.com/research/ 333487/rating-sovereign-governments.pdf.

The sources of data and information used for the ratings include the servicer reports provided by UBI, payments and investors reports provided by Securitisation Services S.p.A. and loan-by-loan level data from the 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 these ratings 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 6 February 2018, when DBRS confirmed the Class A2 Notes and Class A3 Notes at AAA (sf).

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 base case PD and LGD for the portfolio 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 pool of mortgages for the Issuer are 4.2% and 6.7%, respectively. At the AAA (sf) rating level, the corresponding PD is 27.3% and the LGD is 22.7%.

--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 increased by 50%, the rating of the Class A2 Notes would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increased by 50%, the rating for the Class A2 Notes would be expected to remain at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increased by 50%, the rating of the Class A2 Notes would be expected to remain at AAA (sf).

Class A2 Notes risk sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AAA (sf)

Class A3 Notes risk sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AAA (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: 16 July 2013

DBRS Ratings GmbH
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60311 Frankfurt am Main Deutschland

Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

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
-- Operational Risk Assessment for European Structured Finance Servicers
-- Interest Rate Stresses for European Structured Finance Transactions Methodology
-- Derivative Criteria 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 info@dbrs.com.