DBRS Ratings Limited (DBRS) confirmed the ratings of the Class A and Class B notes issued by 2Worlds S.r.l. as follows:
-- Class A at BBB (low) (sf)
-- Class B at B (low) (sf)
At issuance the notes were backed by a EUR 1.0 billion portfolio by gross book value (GBV) consisting of unsecured and secured non-performing loans originated by Banco di Desio e della Brianza S.p.A. and Banca Popolare di Spoleto S.p.A. (the Originators). The majority of loans in the portfolio defaulted between 2014 and 2017 and are in various stages of resolution. The receivables are serviced by Cerved Credit Management S.p.A. as Special Servicer and Cerved Master Services S.p.A. as Master Servicer. Securitisation Services S.p.A. also operates as the Backup Servicer in the transaction. As of May 2019, the portfolio’s GBV totalled EUR 926.3 million.
At issuance, approximately 71.6% of the pool by GBV was secured and 58.1% of the pool by GBV benefited from a first-ranking lien. Almost a year later, as of May 2019, 70.9% of the portfolio by GBV was secured and 56.8% of the portfolio by GBV benefited from a first-ranking lien. In its analysis, DBRS assumed that all loans are worked out through an auction process, which generally has the longest resolution timeline.
The secured loans in the portfolio are backed by properties distributed across Italy, with concentrations in the regions of Umbria, Lombardy and Lazio. According to the latest information provided by the Special Servicer, the portfolio is still homogeneously distributed across Italy with concentrations in Umbria (40.5% by open market value (OMV)), Lombardy (31.5% by OMV) and Lazio (11.2% by OMV). The main asset type in the portfolio remains residential (40.0% by OMV).
As of March 2019, the actual cumulative gross disposal proceeds (GDP) accounted for EUR 62.0 million in the first nine-month period after closing. The Servicer’s initial business plan assumed cumulative GDP of EUR 54.8 million, which is 11.7% lower than the actual amount collected so far.
At issuance, DBRS estimated a GDP for the same nine-month period of approximately EUR 19.2 million at a BBB (low) stressed scenario, which is EUR 42.8 million lower than the actual cumulative GDP to date. Furthermore, at a B (low) stressed scenario, DBRS estimated a GDP for the same nine-month period of approximately EUR 26.1 million, which is EUR 35.8 million lower than the actual cumulative GDP to date.
Interest on the Class B notes, which represent mezzanine debt, may be repaid prior to the principal of the Class A notes unless certain performance-related triggers are breached. Per the latest investor report from January 2019, no triggers have been breached and there is no interest in arrears for any of the Class A and B notes.
The securitisation includes the possibility to implement a ReoCo structure.
The ratings are based on DBRS’s analysis of the projected recoveries of the underlying collateral, the historical performance and expertise of the Special Servicer, the availability of liquidity to fund interest shortfalls and special-purpose vehicle expenses, the cap agreement and the transaction’s legal and structural features. At issuance, DBRS’s BBB (low) (sf) and B (low) (sf) rating stresses assumed haircuts of 21.9% and 10.6%, respectively, to the Special Servicer’s business plan for the portfolio.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the rating is “Rating European Non-Performing Loans Securitisations”.
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/319564/rating-sovereign-governments.pdf.
The source of data and information used for these ratings includes the Special Servicer.
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.
This is the first rating action since the Initial Rating Date.
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 concludes that a hypothetical decrease of the Recovery Rate by 5%, ceteris paribus, would lead to a downgrade of the Class A notes to B (high) (sf).
-- DBRS concludes that a hypothetical decrease of the Recovery Rate by 10%, ceteris paribus, would lead to a downgrade of the Class A notes to B (low) (sf).
-- DBRS concludes that a hypothetical decrease of the Recovery Rate by 5%, ceteris paribus, would lead to a downgrade of the Class B notes to below B (low) (sf).
-- DBRS concludes that a hypothetical decrease of the Recovery Rate by 10%, ceteris paribus, would lead to a downgrade of the Class B notes to below B (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 Limited are subject to EU and US regulations only.
Lead Analyst: Mattia Pauciullo, Senior Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 25 June 2018
DBRS Ratings Limited
20 Fenchurch Street, 31st Floor, London EC3M 3BY United Kingdom
Registered in England and Wales: No. 7139960
The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies.
-- Rating European Non-Performing Loans Securitisations
-- Master European Structured Finance Surveillance Methodology
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- European CMBS Rating and Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Servicers
-- Legal Criteria for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions
-- 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.