DBRS Ratings GmbH (DBRS) confirmed its rating on the Class A Notes issued by UBI SPV Lease 2016 S.r.l. (the Issuer) at A (low) (sf).
The confirmation follows an annual review of the transaction and is based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies and defaults, as of the February 2019 payment date;
-- Updated probability of default (PD), loss given default (LGD) and expected loss assumptions for the remaining collateral pool;
-- No revolving termination events have occurred;
-- Current available credit enhancement (CE) to the Class A Notes to cover the expected losses at the A (low) (sf) rating level.
The rating on the Class A Notes addresses timely payment of interest and ultimate payment of principal by the legal maturity date.
The transaction structure was analysed in Intex DealMaker, considering the default rates at which the rated notes did not return all specified cash flows.
UBI SPV Lease 2016 S.r.l. is a securitisation of lease receivables granted to corporates, small businesses and individual enterprises originated by UBI Leasing S.p.A. and serviced by Unione di Banche Italiane S.p.A. (UBI Banca). The pool comprises real estate, vehicle and equipment lease receivables. The transaction closed in July 2016.
Following an 18-month extension in April 2018, the transaction currently envisages a 36-month revolving period, expected to end on the August 2019 payment date (inclusive). The amortisation of the notes is expected to start on the payment date falling in November 2019, to the extent that certain conditions are not breached before. There are eligibility criteria, concentration limits and performance triggers in place to mitigate any potential portfolio deterioration during the revolving period, all being met to date.
The portfolio is performing within DBRS’s initial expectations. As of the February 2019 payment date, the 90+ delinquency arrears ratio stood at 1.0% of the collateral portfolio balance. The current gross cumulative default ratio is currently at 1.0% of the aggregate original portfolio balance. To date, the concentration limits and performance triggers in place because of the revolving period have been satisfied.
DBRS has maintained its PD and LGD assumptions based on the worst-case portfolio composition at 23.1% and 71.3%, respectively.
As of February 2019, because of the revolving period, the CE available to the Class A Notes remained stable at around 32.6%. The credit enhancement is provided by the collateralisation provided by the outstanding collateral portfolio and includes the Debt Reserve Amount and any residual cash.
The Debt Reserve Amount is currently at its target level of EUR 31.5 million. It covers senior fees and interest on the Class A Notes and starts to amortise after the end of the revolving period, being equal to 1.50% of the outstanding balance of the Class A Notes.
UBI Banca and BNP Paribas Securities Services, Milan Branch are the Account Bank and the Payment Account Bank, respectively, for the transaction. Based on the rating of the Account Bank and on the private rating of the Payment 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 and the Payment Account Bank to be consistent with the rating 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 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.
An asset and a cash flow analysis were both conducted. Due to the inclusion of a revolving period in the transaction, the analysis continues to be based on the worst-case replenishment criteria set forth in the transaction legal documents.
DBRS conducted a review of the amendment agreement provided in the context of a minor amendment to the cash allocation, management, payment and agency agreement executed in October 2018. A review of any other transaction’s legal documents was not conducted as the these 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.
The sources of data and information used for this rating include the servicer, payments and investors reports provided by UBI Banca and the loan-by-loan data obtained from 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 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 6 April 2018, when DBRS confirmed the Class A Notes at A (low) (sf).
The lead analyst responsibilities for this transaction have been transferred to Ettore Grassini.
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 receivables for the Issuer are 23.1% (including sovereign stress) and 71.3%, 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 downgraded to BBB (low) (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A Notes would be expected to be downgraded to BB (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 downgraded below B (sf).
Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (sf).
-- 50% increase in LGD, expected rating of BBB (low) (sf).
-- 25% increase in PD, expected rating of BBB (sf).
-- 50% increase in PD, expected rating of BB (sf).
-- 25% increase in PD and 25% increase in LGD, expected rating of BB (low) (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating of B (high) (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of B (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating below B (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: Ettore Grassini, Financial Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 28 July 2016
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.
-- Interest Rate Stresses for European Structured Finance Transactions
-- Legal Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Rating CLOs and CDOs of Large Corporate Credit
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.