DBRS Ratings GmbH (DBRS) confirmed its rating on the Class A Notes issued by Marzio Finance S.r.l. - Series 3-2018 (the Issuer or Series 3-2018) at AA (low) (sf).
The rating addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date falling in January 2043.
The confirmation 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 April 2019 payment date.
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables.
-- Current available credit enhancement to the Class A Notes to cover the expected losses at the AA (low) (sf) rating level.
Marzio Finance S.r.l. is a securitisation programme of which the Series 3-2018 notes are part; the notes are backed by a pool of receivables related to salary and pension assignment loans as well as payment delegation loans granted by IBL – Istituto Bancario del Lavoro S.p.A. (IBL) to Italian employees and pensioners.
The Series 3-2018 receivables are segregated from other series’ receivables that may be assigned to back the issuance of further series. The Series 3-2018 receivables and the other receivables that may be assigned in the context of the Programme are serviced by IBL with Zenith Service S.p.A. appointed as the backup servicer. The transaction closed in May 2018 when the special-purpose vehicle issued one class of fixed-rate notes and one class of variable-return notes, namely the Class A Notes and Class B Notes.
As of April 2019, loans that were two- to three-months in arrears represented 0.3% of the outstanding portfolio balance. The 90+ delinquency ratio was 0.6% and the cumulative default ratio was 0.9% in April 2019.
DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and has updated its base case PD and LGD assumptions to 6.7% and 7.8%, respectively.
As of the April 2019 payment date, credit enhancement to the Class A Notes was 13.3%, up from 11.0% at the DBRS initial rating in May 2018. The credit enhancement to the Class A Notes is provided by the overcollateralisation of the outstanding collateral portfolio. The transaction benefits from a cash reserve of EUR 11.0 million which is available to cover any shortfall of senior fees, expenses, and interest on the Class A Notes.
Citibank NA, Milan Branch acts as the account bank for the transaction. Based on the reference private rating of Citibank NA, Milan Branch, 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 rating assigned to the Class A Notes, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology.
The transaction´s structure was analysed in Intex DealMaker.
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.
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 this rating include payment, investor and servicer reports provided by IBL 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 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.
This is the first rating action since the Initial Rating Date.
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 loans for the Issuer are 6.7% and 7.8%, respectively. At the AA (low) (sf) rating level, the corresponding PD and LGD are 28.9% and 56.5%, 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 on the Class A Notes would be expected to fall to A (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Class A Notes would be expected to fall to A (high) (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating on the Class A Notes would be expected to fall to A (sf).
Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD, expected rating of A (high) (sf)
-- 50% increase in PD, expected rating of A (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (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: 24 May 2018
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Geschäftsführer: Detlef Scholz
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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
-- Rating European Consumer and Commercial Asset-Backed Securitisations
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.