DBRS Ratings GmbH (DBRS) confirmed its rating on the Class A Notes issued by Emilia SPV S.r.l. (the Issuer) at A (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 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 at the May 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 current rating level.
-- No revolving termination events have occured.
Emilia SPV S.r.l. is an Italian securitisation of first-lien, fully amortising mortgage loans originated and serviced by Credito Emiliano S.p.A. The transaction closed in April 2015 and was structured with a five-year revolving period, expected to end in May 2020. During the revolving period, the Originator has the option to sell new receivables, funded through either collections or further partial payment on the notes, and subject to certain conditions and limitations.
As of May 2019, loans that were two- to three-months in arrears represented 0.1% of the outstanding portfolio balance, in line with arrears levels of 0.1% in May 2018. The 90+ delinquency ratio was 0.4%, slightly up from 0.3% in May 2018. No loans have defaulted so far.
PORTFOLIO ASSUMPTIONS AND REVOLVING PERIOD
DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and has maintained its base case PD and LGD assumptions at 18.3% and 30.8%, respectively, based on a worst-case portfolio composition given the transaction is still within its envisaged revolving period and no termination events have occurred so far.
Credit enhancement for the Class A Notes at the issue date was 18.5%, consisting of subordination of the Class B Notes. On each payment date during the revolving period, and following the purchase of new portfolios, the credit enhancement for the Class A Notes is adjusted and its calculation is determined by the current loan-to-value and coupon of each loan in the portfolio at the valuation date. The current credit enhancement is above the floor of 18.5%.
The transaction benefits from a reserve fund of EUR 36.3 million, which is available to pay senior fees and interest on the Class A Notes.
Credito Emiliano S.p.A. is the Account Bank of the transaction. Based on the private rating of Credito Emiliano S.p.A., 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 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.
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.
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 this rating include payment and investor reports provided by Securitisation Services S.p.A., servicer reports provided by Credito Emiliano 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 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 15 June 2018, when DBRS confirmed the rating of the Class A Notes at A (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 18.3% and 30.8%, 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 fall to BBB (low) (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A Notes would be expected to fall to BB (high) (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 fall to BB (low) (sf).
Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in LGD, expected rating of BBB (low) (sf)
-- 25% increase in PD, expected rating of BBB (low) (sf)
-- 50% increase in PD, expected rating of BB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BB (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BB (low) (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: 22 April 2015
DBRS Ratings GmbH
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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 Originators
-- 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 firstname.lastname@example.org.