DBRS Ratings Limited (DBRS) confirmed its BBB (low) (sf) rating of the Class A notes issued by Maior SPV S.r.l.
The notes were backed by a EUR 2.75 billion gross book value (GBV) portfolio consisting of Italian unsecured and secured non-performing loans (NPLs) originated by Unione di Banche Italiane S.p.A. (UBI) and IWBank S.p.A. (IWB; collectively, with UBI, the Originators). 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 46.6% of the pool by GBV was secured and 89.4% 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 slightly decreased to 45.2%, of which approximately 83% benefits from a first-rank lien. At cut-off, the secured collateral was highly concentrated in the northern regions of Lombardia (46.4% of secured GBV as of cut-off). The other regions with the highest concentration of properties in terms of secured GBV were in Marche (9.4%), Piemonte (8.2%) and Lazio (7.7%). The portfolio 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.
The transaction benefited from EUR 51.7 million in cash from recoveries collected between 1 January 2018 and 20 July 2018, which were distributed in accordance with the priority of payments on the first interest payment date.
The securitisation includes the possibility to implement a Real Estate Owned Company (ReoCo) structure.
According to the most recent semi-annual payment report provided by Securitisation Services S.p.A. (the Computation Agent), the actual cumulative collections totalled EUR 130.5 million for the first year after closing. The initial business plan (BP) provided by the Servicer assumed cumulative gross disposition proceeds (GDP) of EUR 128.5 million during the relevant collection period, which is 1.6% lower than the amount collected so far. Therefore, the transaction is overperforming by an amount of roughly EUR 2.0 million as compared with the Servicer’s initial BP. In November 2019, Prelios will review the original BP. DBRS will continue to monitor the Servicer´s performance expectations.
At issuance, DBRS estimated a GDP for the same one-year period of EUR 94.1 million at a BBB (low) (sf) stressed scenario, which is EUR 36.4 million lower as compared with the initial BP estimate provided by the Servicer during the same period (-27.9%).
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 August 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 Société Générale 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 22.0% to Prelios’ 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 752.1 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 BB (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 B (low) (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 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: 1 August 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 firstname.lastname@example.org.