Press Release

DBRS Upgrades Rating on Class A Notes Issued by Annette S.r.l.

Consumer Loans & Credit Cards
July 04, 2019

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

The rating on the Class A Notes addresses the timely payment of interest and ultimate payment of principal on or before the final maturity date in December 2032

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;
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables;
-- Current available credit enhancement (CE) to the notes to cover the expected losses at their respective rating levels.

The Issuer is an Italian securitisation of salary assignment loans and payment delegation receivables granted and serviced by Pitagora S.p.A. (Pitagora) to both private and public employees, as well as pension assignment receivables.

The transaction closed in December 2015 and had a ramp-up period, which ended on the June 2018 payment date, when the Class A Notes reached a balance of EUR 302.8 million and the Class B Notes an outstanding balance of EUR 105.1 million.

As of the June 2019 payment date, loans that were delinquent by one, two and three months represented 5.5%, 1.5% and 0.4% of the outstanding principal balance of the portfolio, respectively, while delinquencies greater than three months were 1.0%. Gross cumulative defaults amounted to 3.9% of the original portfolio balance, with cumulative recoveries of 83.3% to date.

DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and updated its base case PD and LGD assumptions to 8.3% and 23.9%, respectively.

CE is provided by the subordination of the junior obligations and the cash reserve account. As of the June 2019 payment date, CE to the Class A Notes was 19.9%, up from 15.3% at the DBRS initial rating.

The cash reserve account, currently funded with EUR 6.6 million, is available to cover senior expenses and missed interest payments on the Class A Notes. The required level of the cash reserve is set at 2.4% of the portfolio balance, subject to a EUR 3.2 million floor.

Additionally, a prepayment reserve is available to cover prepayment losses related to capitalised fees that may be retained upon prepayment. The prepayment reserve target amount is equal to 1.25% of the portfolio balance and is currently funded with EUR 3.4 million.

BNP Paribas Securities Services SCA, Milan Branch (BNP-Milan) acts as the account bank for the transaction. Based on the DBRS private rating of BNP-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 Class A Notes, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology.

The transaction 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.

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 Zenith Service S.p.A. and loan-level data provided by Pitagora.

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 purpose 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 6 July 2018, when DBRS upgraded the rating of the Class A Notes to A (high) (sf).

The lead analyst responsibilities for this transaction have been transferred to Daniel Rakhamimov.

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):

-- 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 8.3% and 23.9%, 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 remain at AA (low) (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 (low) (sf).

Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in LGD, expected rating of AA (low) (sf)
-- 25% increase in PD, expected rating of AA (low) (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 (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (low) (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: Daniel Rakhamimov, Senior Financial Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 7 July 2017

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
-- Operational Risk Assessment for European Structured Finance Servicers
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- 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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