DBRS Upgrades Rating on Dominato Leonense S.r.l.

DBRS Ratings GmbH (DBRS) upgraded its rating on the Class A Notes issued by Dominato Leonense S.r.l. (the Issuer) to AAA (sf) from AA (high) (sf).

The rating on the Class A Notes addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date.

The upgrade follows an annual review of the transaction and is based on the following analytical considerations:

-- Portfolio performance, in terms of delinquencies, defaults and losses as of the March 2019 payment date.
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions on the remaining collateral portfolio.
-- Current available credit enhancement to the Class A Notes to cover the expected losses at the AAA (sf) level.

Dominato Leonense S.r.l. is a securitisation of prime Italian residential mortgage loans, originated by Cassa Padana Banca di Credito Cooperativo S.C. (Cassa Padana) and three other co-operative banks that later merged into Cassa Padana. The mortgage portfolio is serviced by Cassa Padana. The transaction closed in June 2014.

PORTFOLIO PERFORMANCE
As of March 2019 payment date, loans that were two- to three- months in arrears represented 0.2% of the outstanding portfolio balance, down from 0.6% in March 2018, and the 90+ delinquency ratio was 0.7%, up from 0.2% in March 2018. No loans have defaulted so far.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and has updated its base case PD and LGD assumptions to 8.9% and 16.8%, respectively.

CREDIT ENHANCEMENT
As of the March 2019 payment date, credit enhancement to the Class A Notes was 51.2%, up from 23.0% at the DBRS initial rating. The transaction benefits from a non-amortising reserve fund of EUR 5.4 million, equal to 3.0% of the original balance of the Class A Notes. It is available to cover senior fees, expenses and any interest shortfall on the Class A Notes.

BNP Paribas Securities Services SCA, Milan branch and BNP Paribas Securities Services SCA, London branch act as the Italian and English account banks for the transaction, respectively. Based on the 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 rating assigned to the Class A Notes, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology.

The transaction structure was analysed in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

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

The sources of data and information used for the rating includes investor reports provided by Accounting Partners S.r.l., servicer reports provided by Cassa Padana and loan-level data provided by 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 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 30 May 2018, when DBRS upgraded its rating of the Class A Notes to AA (high) (sf) from AA (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 at www.dbrs.com.

To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios as compared with 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 8.9% and 16.8%, 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 remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A Notes would be expected to remain at AAA (sf), assuming no change in the PD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would also be expected to remain at AAA (sf).

Class A 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 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: Ettore Grassini, Financial Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 6 June 2014

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
-- Operational Risk Assessment for European Structured Finance Servicers
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- 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 info@dbrs.com.