DBRS Morningstar Confirms Ratings on Mars 2600 S.r.l. Series 5

DBRS Ratings GmbH (DBRS Morningstar) confirmed its AAA (sf) ratings on the Class A1 and Class A2 Notes (together, the Class A Notes) issued by Mars 2600 S.r.l. Series 5 (the Issuer).

The confirmations follow an annual review of the transaction and are based on the following analytical considerations:

-- Portfolio performance, in terms of delinquencies, defaults and losses.
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions on the remaining collateral pool.
-- Current available credit enhancement to the Class A Notes to cover the expected losses at the AAA (sf) rating level.

The Issuer is a securitisation of first-ranking Italian residential mortgages originated and serviced by Banca Sella S.p.A.

On 22 October 2019, DBRS transferred the ongoing coverage of the ratings assigned to the Issuer to DBRS Ratings GmbH from DBRS Ratings Limited. The lead analyst responsibilities for this transaction have been transferred to Alfonso Candelas.

Both DBRS Ratings Limited and DBRS Ratings GmbH are registered with the European Securities and Markets Authority (ESMA) under Regulation (EC) No. 1060/2009 on Credit Rating Agencies, as amended, and are registered Nationally Recognized Statistical Rating Organization (NRSRO) affiliates in the United States and Designated Rating Organization (DRO) affiliates in Canada.

PORTFOLIO PERFORMANCE
As of the July 2019 payment date, loans that were two- to three-months in arrears represented 0.5% of the outstanding portfolio balance and the 90+ delinquency ratio represented 0.6% of the outstanding portfolio balance; both figures are in line with the July 2018 numbers. The cumulative default ratio was 1.4%.

PORTFOLIO ASSUMPTIONS
DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of receivables and updated its base case PD and LGD assumptions to 3.5% and 0.4% from 3.7% and 0.6%, respectively.

CREDIT ENHANCEMENT
As of the July 2019 payment date, credit enhancement to the Class A Notes was 53.2%, up from 40.6% one year ago. Credit enhancement is provided by subordination of the Class D Notes.

The transaction benefits from an amortising reserve fund that is available to cover senior fees and interest shortfall on the Class A Notes. At the July 2019 payment date, the reserve fund was at its target level of EUR 4.2 million.

BNP Paribas Securities Services SCA/Milan (BNP Milan) acts as the account bank for the transaction. Based on DBRS Morningstar’s private rating of BNP Milan, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS Morningstar considers the risk arising from the exposure to BNP Milan to be consistent with the rating assigned to the Class A Notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

The transaction structure was analysed in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is the “Master European Structured Finance Surveillance Methodology”. DBRS Morningstar 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: https://www.dbrs.com/research/350410/global-methodology-for-rating-sovereign-governments.

The sources of data and information used for these ratings include investor reports provided by Securitisation Services S.p.A. (the Calculation Agent) and loan-level data provided by the European DataWarehouse GmbH.

DBRS Morningstar did not rely upon third-party due diligence in order to conduct its analysis.

At the time of the initial rating, DBRS Morningstar was not supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS Morningstar considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.

DBRS Morningstar 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 31 October 2018, when DBRS Morningstar upgraded the ratings of the Class A Notes to AAA (sf) from AA (sf).

The lead analyst responsibilities for this transaction have been transferred to Alfonso Candelas.

Information regarding DBRS Morningstar 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 Morningstar considered the following stress scenarios as compared with the parameters used to determine the rating (the Base Case):

-- DBRS Morningstar 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 3.5% and 0.4%, 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 remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A Notes would be expected to remain at AAA (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 remain at AAA (sf).

Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected ratings of AAA (sf)
-- 50% increase in LGD, expected ratings of AAA (sf)
-- 25% increase in PD, expected ratings of AAA (sf)
-- 50% increase in PD, expected ratings of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected ratings of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected ratings of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected ratings of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected ratings of AAA (sf)

For further information on DBRS Morningstar 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: Gareth Levington, Managing Director
Initial Rating Date: 28 May 2014

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Geschäftsführer: Detlef Scholz
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Ratings issued and monitored by DBRS Ratings GmbH are noted as such on the DBRS website; however, the language and related statements in previously published press releases in respect of the relevant ratings will not be changed retroactively and will remain as part of DBRS’s historical record. The ratings issued and monitored in the European Union are marked as such in their respective rating tables. As part of this transfer, these markings will remain unchanged on all active ratings related to the Issuer.

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
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Interest Rate Stresses for European Structured Finance Transactions

A description of how DBRS Morningstar 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 info@dbrs.com.