Press Release

DBRS Confirms Rating on Lanterna Finance S.r.l.

Structured Credit
May 28, 2019

DBRS Ratings GmbH (DBRS) confirmed the AAA (sf) rating on the Class A Notes (the Notes) issued by Lanterna Finance S.r.l. (the Issuer).

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

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.
-- Portfolio default rates, recovery rates and expected loss assumptions on the remaining receivables.
-- Current available credit enhancement to the Notes to cover the expected losses at their AAA (sf) rating level.

The Issuer is a cash flow securitisation carried out by the Banca Carige S.p.A. banking group and collateralised by a portfolio of bank loans to Italian small and medium-sized enterprises.

As of the 31 March 2019, the outstanding portfolio balance was EUR 296.2 million. Loans that were 90+ days in arrears represented 6.2% of the outstanding portfolio balance. The cumulative net default ratio was 2.1%.

DBRS conducted a loan-by-loan analysis on the remaining pool and updated its default rate and recovery assumptions. The base-case probability of default (PD) has been maintained at 6.6%.

As of the 31 March, credit enhancement to the Notes was 60.2%, an increase from 47.4% a year ago after restructuring of the transaction. Credit enhancement is provided by subordination of the Class B Notes and the cash reserve (CR). The amortising CR is available to cover shortfalls in relation to senior fees and the Notes’ interest.

BNP Paribas Securities Services SCA/Milan acts as the Account Bank for the transaction. Based on DBRS’s private rating on BNP Paribas Securities Services SCA/Milan, the downgrade provisions outlined in the transaction documents and other mitigating factors inherent in the transaction structure, DBRS considers the risk arising from the exposure to the 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: “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 at:

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:

The sources of data and information used for this rating include investor reports provided by Banca Carige S.p.A. 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 the 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 28 May 2018, when DBRS confirmed the rating on the Notes at AAA (sf) following the transaction restructuring.

Information regarding DBRS ratings, including definitions, policies and methodologies, is available at

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):

-- PD Rates Used: Base-case PD of 6.6%, a 10% increase of the base case and a 20% increase of the base-case PD.

-- Recovery Rates Used: Base-case recovery rates of 48.4% at the AAA (sf) stress level for the Notes, a 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 lead to a confirmation of the Notes at AAA (sf). A scenario combining both an increase in the base-case PD by 10% and a decrease in the base-case recovery rate by 10%, ceteris paribus, would also lead to a confirmation of the Notes at AAA (sf).

For further information on DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see:

Ratings assigned by DBRS Ratings GmbH are subject to EU and US regulations only.

Lead Analyst: Alfonso Candelas, Senior Vice President
Rating Committee Chair: Gareth Levington, Managing Director
Initial Rating Date: 2 December 2015

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:

-- Legal Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Rating CLOs Backed by Loans to European SMEs
-- Rating CLOs and CDOs of Large Corporate Credit
-- Operational Risk Assessment for European Structured Finance Servicers
-- 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:

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