DBRS Ratings Limited (DBRS) confirmed its BBB (low) (sf) rating of the Class A notes issued by Maggese S.r.l.
The notes were backed by a EUR 697 million portfolio by gross book value (GBV) consisting of secured and unsecured non-performing loans (NPLs) originated by Cassa di Risparmio di Asti S.p.A. and Cassa di Risparmio di Biella e Vercelli S.p.A. (Biver), together Gruppo Cassa di Risparmio di Asti S.p.A. (the Originator). The majority of loans in the portfolio defaulted between 2011 and 2015 and are in various stages of resolution. The receivables are serviced by Prelios Credit Servicing S.p.A. (Prelios or the Servicer). A Backup Servicer, Securitisation Services S.p.A., was appointed and will act as a servicer in case of termination of the appointment of Prelios.
At cut-off, approximately 63% of the pool by GBV was secured and 57% of the secured loans by GBV benefitted from a first-ranking lien. According to the latest information provided by the Servicer in June 2019, the percentage of secured GBV of the portfolio remains almost equal at 63%, of which 56% benefits from a first-rank lien. At cut-off, the secured collateral was highly concentrated in the northern regions of Italy (98% of secured GBV as of cut-off), particularly in Piedmont (77% of secured GBV as of cut-off) and Lombardy (19% of secured GBV as of cut-off), and continues to be mainly concentrated in the same regions as at the cut-off date. In its analysis, DBRS assumed that all loans are worked out through an auction process, which generally has the longest resolution timeline.
According to the most recent semi-annual payment report provided by KPMG Fides Servizi di Amministrazione S.p.A. (the Computation Agent), the actual cumulative collections totalled EUR 27.3 million for the first year after closing. The initial business plan (BP) provided by the Servicer assumed cumulative gross disposition proceeds (GDP) of EUR 25.9 million during the relevant collection period, which is 5.1% lower than the amount collected so far. Therefore, the transaction is overperforming by an amount of roughly EUR 1.4 million as compared with the Servicer’s initial BP. In 2019, Prelios reviewed the original BP and reduced the initial GDP to EUR 236.1 million from EUR 245.1 million (-3.7%, a EUR 9.0 million reduction). The BP provided in 2019 assumed a cumulative GDP of EUR 24.5 million as per the payment report as of June 2019, which is 10.3% lower than the actual amount collected so far; therefore, the transaction is overperforming for an amount equal to EUR 2.8 million as compared with the Servicer´s BP 2019 expectations. Prelios justified the reduction of the initial BP highlighting three main causes: (1) no bids at auction (2) potential indemnity (3) lower collections because of accelerated recovery (extra-judicial approach). Prelios mentioned that such discrepancy might reduce in the future. DBRS will continue to monitor the Servicer´s performance and potential future revisions of the Servicer’s recovery expectations.
At issuance, DBRS estimated a GDP for the same one-year period of EUR 21.0 million at a BBB (low) (sf) stressed scenario, which is EUR 6.3 million lower as compared with the initial BP estimate provided by the Servicer during the same period (-23.0%).
The coupon on the Class B notes, which represent the mezzanine debt, may be repaid prior to principal of the Class A notes unless certain performance-related triggers are breached. As per the latest payment report from July 2018, no subordination events have occurred.
The rating is based on DBRS’s analysis of the projected recoveries of the underlying collateral, the historical performance and expertise of the Servicer, Prelios, the availability of liquidity to fund interest shortfalls and special-purpose vehicle expenses, the cap agreement with Mediobanca Banca di Credito Finanziario S.p.A. and the transaction’s legal and structural features.
Both the DBRS timing and value stresses are based on the historical repossessions data of the Servicer, Prelios. DBRS’s BBB (low) (sf) rating assumes a haircut of 16.6% to Prelios’s initial BP for the portfolio.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the rating 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.
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 the Servicer and the Computation Agent.
DBRS did not rely upon third-party due diligence 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 this rating were of satisfactory quality.
DBRS does not audit or independently verify the data or information it receives in connection with the rating process.
This is the first rating action since the Initial Rating Date.
The lead analyst responsibilities for this transaction have been transferred to Alessio Pignataro.
Information regarding DBRS ratings, including definitions, policies and methodologies are 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 with the parameters used to determine the rating (the Base Case):
-- Recovery Rates Used: Cumulative Base Case Recovery Amount of EUR 201.8 million at the BBB (low) stress level, a 5% and 10% decrease of the Cumulative Base Case Recovery Rate.
-- DBRS concludes that a hypothetical decrease of the Recovery Rate by 5%, ceteris paribus, would lead to a downgrade of the Class A notes to B (low) (sf).
-- DBRS concludes that a hypothetical decrease of the Recovery Rate by 10%, ceteris paribus, would lead to a downgrade of the Class A notes to CCC (sf).
For further information on DBRS historic 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 Limited are subject to EU and US regulations only.
Lead Analyst: Alessio Pignataro, Senior Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 26 July 2018
DBRS Ratings Limited
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The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies.
-- Rating European Non-Performing Loans Securitisations
-- Master European Structured Finance Surveillance Methodology
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- European CMBS Rating and Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Servicers
-- Legal Criteria for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions
-- 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: 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.