DBRS Ratings GmbH (DBRS) confirmed its AA (high) (sf) ratings on the Class A1 Notes and Class A2 Notes (together, the Class A Notes) issued by Leone Arancio RMBS S.r.l. (the Issuer).
The ratings of the Class A Notes address the timely payment of interest and ultimate payment of principal on or before the legal final maturity date.
The confirmations follow an annual review of the transaction and are 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 of the worst-case portfolio composition.
-- Current available credit enhancement to the Class A Notes to cover the expected losses at their respective rating levels.
-- No revolving termination events have occurred.
The Issuer is a securitisation of Italian residential mortgage loans originated by ING Bank N.V., Milan Branch, which also acts as the servicer and liquidity facility provider in the transaction.
At closing, the notes were issued on a partly paid basis. During the three-year revolving period, principal collections along with further proceeds from the Class A Notes and Class J Notes can be used to purchase additional portfolios, which will allow the notes to increase their total nominal amounts subject to portfolio limits and eligibility criteria. As of April 2019, the subscribed amounts for the Class A1 Notes, Class A2 Notes and Class J Notes remained the same as at closing at EUR 4,164,615,000, EUR 2,242,485,000 and EUR 1,552,030,000, respectively.
The Replenishment Criteria, which allows the continuation of replenishment of receivables during the revolving period, stipulates that the Quarterly Delinquency Ratio is less than 0.75% (currently 0.32%), the Cumulative Gross Default Ratio is less than 2.25% of the original portfolio balance (currently 0.11%), the Principal Deficiency Ledger is equal to zero and the Amortisation Amount Limit is less then 10% (currently 0.01%). All criteria are currently met.
As of April 2019, loans in arrears more than 90 days represented 0.11%, up from 0.01% as of August 2018, while the cumulative default ratio stood at 0.11%, one year after closing.
DBRS conducted a loan-by-loan analysis of the portfolio of receivables and maintained its PD and LGD assumptions at 33.96% and 42.86%, respectively at the AA (high) (sf) stress scenario.
Credit enhancement is provided in form of subordination of the Class J Notes to the Class A Notes and remained stable at 19.50% as of April 2019.
The transaction benefits from liquidity support for the Class A Notes provided by the Cash Advance Facility, which is sized and floored at 1.5% and 0.75%, respectively, of the total nominal amounts of the Class A Notes.
ING Bank N.V. (ING) acts as the account bank for the transaction. Based on ING’s reference rating of AA, which is one notch below DBRS’s Long-Term Critical Obligations Rating (COR) of AA (high), 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 ratings 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.
An asset and a cash flow analysis were both conducted. Due to the inclusion of a revolving period in the transaction, the analysis is 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 initial 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 these ratings include investor reports provided by ING 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 these ratings 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 assigned AA (high) (sf) ratings to the Class A Notes.
The lead analyst responsibilities for this transaction have been transferred to Shalva Beshia.
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 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 10.5% and 18.6%, 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 A (high) (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 BBB (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 BBB (sf).
Class A Notes Risk Sensitivity:
-- 25% increase in PD, expected rating of A (high) (sf).
-- 50% increase in PD, expected rating of BBB (high) (sf).
-- 25% increase in LGD, expected rating of AA (sf).
-- 50% increase in LGD, expected rating of A (high) (sf).
-- 25% increase in PD and 25% increase in LGD, expected rating of A (high) (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating of A (low) (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (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: Shalva Beshia, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 6 July 2018
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:
-- Legal Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators
-- Interest Rate Stresses for European Structured Finance Transactions
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Master European Structured Finance Surveillance Methodology
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.