DBRS Ratings GmbH (DBRS) confirmed its ratings on the Class A2 and Class B Notes at AAA (sf) and AA (high) (sf), respectively, issued by Voba N.6 S.r.l.
The rating on the Class A2 Notes addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date, while the rating on the Class B Notes addresses the ultimate payment of interest and principal on or before the legal final maturity date.
The confirmation follows 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 May 2019 payment date.
-- Base case probability of default (PD), and updated default and recovery rates on the remaining collateral pool.
-- The current credit enhancement (CE) available to the notes to cover the expected losses at their respective rating levels.
The transaction is a cash flow securitisation collateralised by a portfolio of mortgage and non-mortgage loans to Italian small and medium-sized enterprises, entrepreneurs, artisans and producer families. The loans were mainly granted by Banca Popolare dell’Alto Adige S.C.p.A., but also by Banca Popolare di Marostica S.C.p.a.r.l. (BPM) and Banca di Treviso S.p.A. (Banca di Treviso) before they were merged into Banca Popolare dell'Alto Adige (BPAA) in 2015.
The portfolio is performing within DBRS’s expectations. As of May 2019, loans with two to three months in arrears represented 0.5% of the outstanding portfolio balance, down from 1.1% in May 2018. As of May 2019, the 90+ delinquency ratio was at 0.0%, the same as one year ago, and the cumulative default ratio was at 2.9%, up from 1.3% in May 2018.
DBRS conducted a loan-by-loan analysis on the remaining pool and updated its portfolio default and recovery assumptions. The annualised weighted-average base case PD was updated to 4.3%.
The CE available to the Class A2 and Class B Notes continues to increase as the transaction continues to deleverage. As of the May 2019 payment date, the CE available to the Class A2 Notes and Class B Notes were 82.5% and 58.3%, respectively. The increase in the CE prompted the upgrade of the ratings.
The transaction benefits from an amortising cash reserve (CR), which is maintained at 3.0% of the outstanding balance of the Rated Notes (initial balance EUR 12.0 million), with a floor of EUR 2.0 million. The CR is available to cover shortfalls in relation to senior fees and interest payable on the Class A2 Notes and Class B Notes and was funded with proceeds available from the issuance of the Class J Notes. The CR is currently at its target level of EUR 3,614,889.
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 ratings assigned to the Class A2 and Class B 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 20 July 2018, when DBRS upgraded the rating of the Class A2 Notes to AAA (sf) from AA (high) (sf) and upgraded the rating of the Class B Notes to AA (high) (sf) from A (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: the annualised weighted-average PD was updated to 4.3%, based on a PD of 3.9% to mortgage loans originated by BPAA, 2.5% to non-mortgage loans originated by BPAA, 8.0% to loans originated by BPM and Banca di Treviso and 22.3% to the top borrower of the portfolio, a 10% increase of the base case and a 20% increase of the base case PD.
-- Recovery rate used (Class A2 Notes): base case recovery rate of 40.7% at the AAA (sf) stress level, 10% and 20% decreases in the base case recovery rate.
-- Recovery rate used (Class B Notes): base case recovery rate of 46.8% at the AA (high) (sf) stress level, 10% and 20% decreases in the base case recovery rate.
For the Class A2 Notes, DBRS concluded that a hypothetical increase of the base case PD by 20%, ceteris paribus, would lead to a confirmation of the Class A2 Notes at AAA (sf), and a hypothetical decrease of the recovery rate by 20%, ceteris paribus, which would lead to a confirmation of the Series A2 Notes at AAA (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 A2 Notes at AAA (sf).
For the Class B Notes, DBRS concluded that a hypothetical increase of the base case PD by 20%, ceteris paribus, would lead to a confirmation of the Class B Notes at AA (high) (sf), and a hypothetical decrease of the recovery rate by 20%, ceteris paribus, which would lead to a confirmation of the Class B 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 B 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:
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: 22 September 2016
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: 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 firstname.lastname@example.org.