DBRS Ratings GmbH (DBRS) upgraded its rating on the Class C Notes issued by Siena PMI 2016 S.r.l. (the Issuer) to A (high) (sf) from BBB (low) (sf).
Additionally, DBRS discontinued its AA (high) (sf) rating on the Class B Notes, following the full repayment of the EUR 144,944,202.47 outstanding principal balance of the Class B Notes as at the 27 May 2019 payment date.
The upgrade on the Class C Notes follows an annual review of the transaction and is based on the following analytical considerations:
-- Portfolio performance in terms of delinquencies and defaults, as of May 2019.
-- Base case probability of default (PD), and updated default and recovery rates on the remaining collateral pool.
-- The credit enhancement (CE) available to the Class C Notes to cover the expected losses at the A (high) (sf) rating level.
The rating on the Class C Notes addresses the ultimate payment of interest and principal on or before the legal final maturity date.
The Issuer is an Italian cash flow securitisation transaction backed by a portfolio of bank loans to large Italian corporations, small and medium-sized enterprises, entrepreneurs, self-employed individuals and associations. The loans were mainly granted by Banca Monte dei Paschi di Siena SpA (BMPS) but also by Banca Antonveneta, Banca Agricola Mantovana and Banca Toscana before being merged into BMPS. BPMS is also the servicer of the portfolio.
As of May 2019, loans with two- to three-months in arrears represented 0.3% of the outstanding portfolio balance, down from 0.4% in May 2018. As of May 2019, the 90+ delinquency ratio was 1.0%, down from 1.2% in May 2018, and the cumulative default ratio was 0.3%, almost same as one year ago.
DBRS conducted a loan-by-loan analysis on the remaining pools and updated its portfolio default and recovery assumptions on the remaining portfolio at the respective rating level. The base case PD was maintained at 4.3%.
The CE continues to increase as the transaction is quickly deleveraging: the performing portfolio decreased to EUR 585.7 million from EUR 929.6 million one year ago. As a result, the CE available to Class C Notes increased to 48.7% as of May 2019, compared with 37.9% as of May 2018. The increase in the CE prompted the upgrade on the rating of the Class C Notes.
The transaction benefits from an amortising cash reserve of EUR 1.1 million, which provides liquidity support to the covered senior fees as well as principal shortfalls at the final maturity date for the rated notes.
BNP Paribas Securities Services S.C.A., Milan branch (BNP Paribas) holds the transaction account bank.
Based on DBRS BNP Paribas’ private rating, 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 C Notes, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology.
The transaction structure was analysed in Callisto, DBRS’s proprietary cash flow engine.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the ratings is the “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 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 Securitisation Services 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 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 19 March 2019, when DBRS discontinued the rating of the Class A2 Notes due to full repayment. Prior to that, on 19 July 2019, DBRS confirmed the rating on the Class A2 Notes at AAA (sf), confirmed the rating on the Class B Notes at AA (high) (sf) and upgraded the rating on the Class C Notes to BBB (low) (sf) from BB (high) (sf).
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 with the parameters used to determine the rating (the “Base Case”):
-- PD Rates Used: Base case PD of 4.3%, a 10% and a 20% increase of the base case PD.
-- Recovery Rates Used: Base case recovery rates of 42.7% at the A (high) (sf) stress level, a 10% and 20% decrease in the base case recovery rates.
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 rating of Class C Notes at A (high) (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 Class C Notes at A (high) (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: Shalva Beshia, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 2 November 2016
DBRS Ratings GmbH
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Geschäftsführer: Detlef Scholz
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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 Servicers
-- Rating CLOs Backed by Loans to European SMEs
-- Interest Rate Stresses for European Structured Finance Transactions
-- Rating CLOs and CDOs of Large Corporate Credit
-- Cash Flow Assumptions for Corporate Credit Securitization
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
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 email@example.com.