DBRS Ratings GmbH (DBRS) upgraded to AA (high) (sf) from AA (sf) its rating on the Series 2012-2-A notes (Class A Notes) issued by Civitas SPV S.r.l. (SME) (the Issuer).
The rating on the Class A Notes addresses the timely payment of interest and the ultimate payment of principal on or before the legal final maturity date.
The upgrade 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 the April 2019 payment date.
-- Base Case Probability of Default (PD), and updated default rates and recovery rates on the remaining collateral pool.
-- The current level credit enhancement (CE) available to the Class A Notes to cover the expected losses at the AA (high) (sf) rating level.
Civitas SME is the first SME CLO originated by Banca di Cividale SpA, which later merged with Banca Popolare di Cividale ScpA (the Originator or BP Cividale). The transaction originally closed on 1 August 2012 and the securitised portfolio consists of secured and unsecured loans to Italian small and medium-sized enterprises (SMEs), entrepreneurs, artisans and producer families. Following an amendment effective from 25 October 2016, the Issuer acquired a further portfolio of performing loans (EUR 236.7 million) from BP Cividale. Additionally, the Originator repurchased the loans classified as defaulted as per the transaction definition, but which had not been classified as “sofferenza” yet, for a total repurchase price of EUR 28.1 million.
The portfolio is performing within DBRS’s expectations. As of April 2019, the 90+ delinquency ratio was at 0.9%, slightly down from 1.0% as of April 2018, and the cumulative defaults were at 16.7%.
DBRS conducted a loan-by-loan analysis on the remaining pool and updated its portfolio default and recovery assumptions. The base case PD was maintained at 7.2% for mortgage loans and 4.0% for non-mortgage loans.
The CE available to the Class A Notes continued to increase as the transaction continued to deleverage. As of the April 2019 payment date, the CE available to the Class A Notes was 65.4%, up from 50.3% as of April 2018.
BNP Paribas Securities Services SCA/Milan holds the Transaction Account for the transaction. Based on the private rating of the Account Bank, 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 structure was analysed in DBRS’s proprietary excel-based cash flow engine.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the rating is: “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 surveillance section of 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 this rating include reports provided by Securitisation Services S.p.A., and loan-level data from 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 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.
The last rating action on this transaction took place on 19 July 2018 when DBRS confirmed its rating on the Class A Notes at AA (sf).
The lead analyst responsibilities for this transaction have been transferred to Alfonso Candelas.
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):
-- Probability of Default Rates Used: base case PD of 7.2% for mortgage loans and 4.0% for non-mortgage loans, a 10% increase of the base case and a 20% increase of the base case PD.
-- Recovery Rates Used: base case recovery rate of 53.0% at the AA (high) (sf) stress level for the Class A Notes, 10% and 20% decreases in the base case recovery rates. Note that the percentage decreases in the recovery rates are assumed for the other stress recovery rate levels.
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 Class A Notes at AA (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 A Notes at AA (high) (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: Alfonso Candelas, Senior Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 1 August 2012
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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
-- Rating CLOs Backed by Loans to European SMEs
-- Rating CLOs and CDOs of Large Corporate Credit
-- Operational Risk Assessment for European Structured Finance Servicers
-- Interest Rate Stresses for European Structured Finance Transactions
-- Cash Flow Assumptions for Corporate Credit Securitisations
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.