DBRS Ratings GmbH (DBRS) upgraded its ratings on the following notes issued by Alchera SPV S.r.l. (the Issuer):
-- Series A-2013 Notes upgraded to AAA (sf) from AA (sf)
-- Series A-2017 Notes upgraded to AAA (sf) from AA (sf)
-- Series M-2017 Notes upgraded to A (high) (sf) from BBB (high) (sf)
The ratings on the Series A-2013 Notes and Series A-2017 Notes (Series A Notes) address the timely payment of interest and the ultimate payment of principal on or before the Final Maturity Date in November 2048, while the rating on the Series M-2017 Notes (Series M Notes) addresses the ultimate payment of interest and principal on or before the Final Maturity Date in November 2050.
The upgrades follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of level of delinquencies and defaults, as of November 2018;
-- Portfolio default rates, recovery rates and expected loss assumptions for the remaining collateral pool; and
-- The current available credit enhancement (CE) to the Series A Notes and Series M Notes to cover the expected losses assumed in line with the AAA (sf) and A (high) (sf) rating levels, respectively.
Alchera SPV S.r.l. is a cash flow securitisation collateralised by a portfolio of bank loans to Italian small and medium-sized enterprises, entrepreneurs, artisans and self-employed individuals that were originally granted by Banca Cassa di Risparmio di Savigliano S.p.A. (CR Savigliano), Cassa di Risparmio di Saluzzo S.p.A. (CR Saluzzo) and Banca Mediocredito del Friuli Venezia Giulia S.p.A. (MCFVG).
The transaction closed in June 2013 and was restructured in February 2017. Following the restructuring, CR Saluzzo withdrew from the transaction and Banca Alpi Marittime Credito Cooperativo Carrù Società Cooperativa per Azioni (BAM) and Cassa di Risparmio di Cento (CR Cento) were incorporated as new Originators. Together, BAM and CR Cento serve with CR Savigliano and MCFVG as the Originators. They each act as the Servicer for their respective loans in the portfolio.
As of the 30 September 2018 cut-off date, the overall portfolio consisted of 3,190 loans with an aggregate principal balance of EUR 533.3 million. The portfolio is performing within DBRS’s expectations. As of the cut-off date, loans in arrears for more than 90 days represented 2.2% of the outstanding portfolio balance.
DBRS conducted a loan-by-loan analysis on the remaining pool and updated its portfolio default rate and recovery assumptions on the outstanding portfolio to 55.3% and 37.5%, respectively, at the AAA (sf) rating level, and 44.6% and 45.9%, respectively, at the A (high) (sf) rating level.
As of November 2018, the CE to the Series A Notes was 55.5% and 34.2% to the Series M Notes, respectively up from 35.7% and 22.0% since restructuring.
The Series A Notes benefit from four amortising cash reserves, with an aggregate balance of EUR 11.1 million, which corresponds to 2% of the initial balance of the Series A Notes. Each of the cash reserves is available to cover senior expenses and interest shortfalls on the Series A Notes throughout the life of the transaction and they will only be available as credit support when the Series A Notes will be redeemed, or at the Final Maturity Date.
The Series A Notes benefit also from four non-amortising additional cash reserves, with an aggregate balance of EUR 11.1 million, which corresponds to 2% of the initial balance of the Series A Notes. Each of the Cash Reserves is available to cover senior expenses, interest and principal shortfalls on the Series A Notes throughout the life of the transaction.
Citibank N.A., Milan Branch and Citibank N.A., London Branch act as the Italian and English Account Banks for the transaction, respectively. Based on the reference private ratings of the Account Banks, the downgrade provisions outlined in the transaction documents, and structural mitigants, DBRS considers the risk arising from the exposure to the Account Banks to be consistent with the ratings assigned to the Series A Notes, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the ratings is: “Rating CLOs Backed by Loans to European SMEs”.
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 these ratings include payments and investors reports provided by Accounting Partners S.r.l., and 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 restructuring, 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 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 upgraded the Series A-2013 and Series A-2017 Notes to AA (sf) from AA (low) (sf) and upgraded the Series M-2017 Notes to BBB (high) (sf) from BBB (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):
-- Probability of Default (PD) Rates Used: Base case PD of 4.3%, a 10% increase of the base case and a 20% increase of the base case PD.
-- Recovery Rates Used: Base case recovery rate of 37.5% at the AAA (sf) stress level for the Series A Notes and a base case recovery rate of 45.9% at the A (high) (sf) stress level for the Series M Notes, 10% and 20% decrease in the base case recovery rates. Note that the percentage decreases in the recovery rates are assumed for the other stress recovery rate levels.
DBRS concludes that a hypothetical increase of the base case PD by 20% or a hypothetical decrease of the Recovery Rate by 20%, ceteris paribus, would each lead to a confirmation of the Series A Notes at AAA (sf). A scenario combining both an increase in the PD by 10% and a decrease in the Recovery Rate by 10% would lead to a confirmation of the Series A Notes at AAA (sf).
DBRS concludes that a hypothetical increase of the base case PD by 20% or a hypothetical decrease of the Recovery Rate by 20%, ceteris paribus, would each lead to a confirmation of the Series M Notes at A (high) (sf). A scenario combining both an increase in the PD by 10% and a decrease in the Recovery Rate by 10% would lead to a confirmation of the Series M Notes at A (high) (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: 27 June 2013
DBRS Ratings GmbH
Neue Mainzer Straße 75
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.
-- Rating CLOs Backed by Loans to European SMEs
-- Legal Criteria for European Structured Finance Transactions
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Interest Rate Stresses for European Structured Finance Transactions
-- Rating CLOs and CDOs of Large Corporate Credit
-- Cash Flow Assumptions for Corporate Credit Securitizations
-- Operational Risk Assessment for European Structured Finance Servicers
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.