DBRS Ratings GmbH (DBRS) confirmed its rating on the Class A Notes issued by Marzio Finance S.r.l. - Series 1-2017 (the Issuer or Series 1-2017) at AA (low) (sf).
The rating addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date falling in May 2042.
The confirmation follows an annual review of the transaction and is based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults and losses as of the August 2019 payment date.
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables.
-- Current available credit enhancement to the Class A Notes to cover the expected losses at the AA (low) (sf) rating level.
Marzio Finance S.r.l. is a securitisation programme, of which the Series 1-2017 notes are part. The notes are backed by a pool of receivables related to salary and pension assignment loans as well as payment delegation loans granted by Istituto Bancario del Lavoro S.p.A. (IBL) to Italian employees and pensioners. IBL also acts as servicer of the portfolio.
The Series 1-2017 receivables are segregated from other series’ receivables that may be assigned to back the issuance of further series. The Series 1-2017 receivables and the other receivables that may be assigned in the context of the programme are serviced by IBL with Zenith Service S.p.A. appointed as the backup servicer. The transaction closed in September 2017, when the special-purpose vehicle issued one class of fixed-rate notes and one class of variable-return notes, namely the Class A Notes and Class J Notes.
As of July 2019, loans that were two- to three-months in arrears represented 0.4% of the outstanding portfolio balance, up from 0.3% in July 2018. The 90+ delinquency ratio was 1.1%, up from 0.6% in July 2018. The cumulative default ratio was 2.5%, increasing from 1.0 % in July 2018.
DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and has updated its base case PD and LGD assumptions to 6.7% and 3.9%, respectively.
As of the August 2019 payment date, credit enhancement to the Class A Notes was 9.2%, up from 6.5% at the DBRS initial rating in September 2017. The credit enhancement to the Class A Notes is provided by the overcollateralisation of the outstanding collateral portfolio. The transaction benefits from a cash reserve of EUR 6 million, which is available to cover any shortfall of senior fees, expenses, and interest on the Class A Notes.
Citibank NA, Milan branch acts as the account bank for the transaction. Based on the private rating of Citibank NA, Milan branch, 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 rated notes, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology.
The transaction structure was analysed in Intex DealMaker.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the rating is the “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 “Global Methodology for Rating Sovereign Governments” at: http://www.dbrs.com/research/350410/global-methodology-for-rating-sovereign-governments.
The sources of data and information used for this rating include payment, investor and servicer reports provided by IBL 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 purpose 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 28 September 2018, when DBRS upgraded the rating of the Class A Notes to AA (low) (sf) from A (high) (sf).
The lead analyst responsibilities for this transaction have been transferred to Daniele Canestrari.
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):
-- DBRS expected a lifetime base case PD and LGD for the pool based on a review of the current assets. Adverse changes to asset performance may cause stresses to base case assumptions and therefore have a negative effect on credit ratings.
-- The base case PD and LGD of the current pool of loans for the Issuer are 6.7% and 3.9%, respectively.
-- The risk sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base case assumption. For example, if the LGD increases by 50%, the rating of the Class A Notes would be expected to fall to A (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A Notes would be expected to fall to A (high) (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected to fall to A (sf).
Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD, expected rating of A (high) (sf)
-- 50% increase in PD, expected rating of A (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (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: Daniele Canestrari, Financial Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 28 September 2017
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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 European Consumer and Commercial Asset-Backed 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 firstname.lastname@example.org.