DBRS Ratings GmbH (DBRS) took the following rating actions on the notes issued by 2017 Popolare Bari SME S.r.l. (the Issuer):
--Series 1 Class A1 Notes confirmed at AAA (sf)
--Series 2 Class A1 Notes (together with the Series 1 Class A1 Notes, the Class A1 Notes) confirmed at AAA (sf)
--Series 2 Class A2 Notes (together with the Class A1 Notes, the Senior Notes) upgraded to AAA (sf) from AA (high) (sf)
--Series 2 Class M Notes (together, the Notes) upgraded to AA (low) (sf) from A (low) (sf)
The ratings on the Senior Notes address the timely payment of interest and the ultimate payment of principal on or before the final maturity date in December 2057. The rating of the Series 2 Class M Notes addresses the ultimate payment of principal and interest in accordance with documentation on or before the final maturity date.
The rating actions follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults and losses as of the December 2018 payment date.
-- Portfolio default rates, recovery rates and expected loss assumptions for the remaining collateral pool.
-- Current available credit enhancement (CE) to the Notes to cover the expected losses at their respective rating levels.
2017 Popolare Bari SME S.r.l. is a securitisation transaction collateralised by a portfolio of term loans originated by Banca Popolare di Bari S.C.p.A. (BPB) and Cassa di Risparmio di Orvieto S.p.A. (CRO and, together with BPB, the Originators) to small and medium-sized enterprises and self-employed individuals based in Italy. The portfolio also contains loans originated by Banca Tercas S.p.A. and Banca Caripe S.p.A. prior to their merger into BPB in July 2016.
As of December 2018, loans that were two-to three-months in arrears represented 3.0% of the outstanding portfolio balance, increasing from 0.1% as of February 2018 while the 90+ delinquency ratio was 2.7% and the cumulative gross default ratio was 0.02%, unchanged from February 2018.
DBRS conducted a loan-by-loan analysis on the remaining pool of receivables and updated its portfolio default rate and recovery rate assumptions on the outstanding portfolio to 65.8% and 32.0%, respectively, at the AAA (sf) rating level, and 59.4% and 36.3%, respectively, at the AA (low) (sf) rating level.
CE to the Notes is provided by the overcollateralisation of the outstanding collateral portfolio balance. As of the December 2018 payment date, CE to the Class A1 Notes was 84.3%, CE to the Series 2 Class A2 Notes was 62.9% and CE to the Series A2 Class M Notes was 52.9%. The fast deleveraging of the transaction and increases in CE prompted the upgrades on Series 2 Class A2 and Class M Notes. The Cash Reserve, which is currently at its target level of EUR 12.5 million, is available to cover any shortfalls of senior fees and expenses as well as interest payments on the Senior Notes.
BNP Paribas Securities Services, Milan branch is the Account Bank for the transaction. Based on the reference private rating of the Account Bank, the downgrade provisions outlined in the transaction documents, and structural mitigants, DBRS considers the risk arising from the exposure to the Account Bank to be consistent with the ratings assigned to the 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: http://dbrs.com/research/333487/rating-sovereign-governments.pdf.
The sources of data and information used for these ratings include servicer reports provided by BPB, payment and investor 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 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.
This is the first rating action since the Initial Rating Date.
The lead analyst responsibilities for this transaction have been transferred to Ilaria Maschietto.
Information regarding DBRS ratings, including definitions, policies and methodologies is available at www.dbrs.com.
To assess the impact of changing the transaction parameters on the ratings, DBRS considered the following stress scenarios as compared with the parameters used to determine the rating (the “Base Case”):
-- Probability of Default (PD) Rates Used: Base case PD of 6.9%, a 10% and 20% increase on the base case PD.
-- Recovery Rates Used: Base case recovery rate of 32.0% at the AAA (sf) stress level for the Senior Notes and a base case recovery rate of 36.3% at the AA (low) (sf) stress level for the Series 2 Class M Notes, a 10% and 20% decrease in the base case recovery rate. 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 Class A1 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 also lead to a confirmation of the Class A1 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 2 Class A2 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 also lead to a confirmation of the Series 2 Class A2 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 2 Class M Notes at AA (low) (sf). A scenario combining both an increase in the PD by 10% and a decrease in the recovery rate by 10% would also lead to a confirmation of the Series 2 Class M Notes at AA (low) (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 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: 28 February 2018
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
-- Master European Structured Finance Surveillance Methodology
-- 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 firstname.lastname@example.org.