DBRS Ratings GmbH (DBRS Morningstar) upgraded its rating of the Class A notes issued by MCC RMBS S.r.l. (the Issuer) to AAA (sf) from AA (sf):
The rating addresses the timely payment of interest and ultimate payment of principal payable on or before the final maturity date in October 2065.
The upgrade follows an annual review of the transaction and is based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies and default, as of the October 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 AAA (sf) rating level.
MCC RMBS S.r.l. is a securitisation of first-lien residential mortgage loans originated in Italy by Banca del Mezzogiorno – MedioCredito Centrale S.p.A. (BdM). This is the first transaction originated by BdM, a small Italian bank currently owned by Invitalia S.p.A. (Invitalia). At the transaction’s closing, BdM was owned by Poste Italiane S.p.A., the Italian postal service provider, which transferred its ownership of BdM to Invitalia in August 2017. Invitalia is owned by the Italian Ministry of Economy. The transaction follows the standard structure under the Italian Securitisation Law nr. 130 and closed in November 2016.
The portfolio is performing within DBRS Morningstar’s initial expectations. As of October 2019, loans that were two- to three-months in arrears represented 0.4% of the outstanding portfolio balance, up from 0.3% in October 2018. The 90+ delinquency ratio was 0.4%, down from 0.5% in October 2018. The gross cumulative default ratio stood at 0.9% of the initial portfolio balance, slightly up from 0.7% in October 2018, with recoveries equal to 5.5% of the defaulted loans balance.
DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of receivables and has updated its base case PD and LGD assumptions to 9.3% and 5.8%, respectively.
As of the October 2019 payment date, credit enhancement to the Class A notes was 45.9%, up from 37.6% as at the October 2018 payment date. Credit enhancement to the Class A notes is provided by the overcollateralisation of the outstanding collateral portfolio balance and does not include the cash reserve.
The cash reserve, which is currently at its target level of EUR 5.0 million, is available to pay senior fees, expenses and missed interest payments on the Class A notes.
BNP Paribas Securities Services, Milan branch acts as the account bank for the transaction. Based on the private rating of BNP Paribas Securities Services, Milan branch, 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 the account bank 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.
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 this rating include investor reports provided by BNP Paribas Securities Services, Milan branch, servicer reports provided by Banca del Mezzogiorno – MedioCredito Centrale S.p.A., 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 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 this rating 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 7 November 2018, when DBRS Morningstar confirmed its rating on the Class A notes at AA (sf).
The lead analyst responsibilities for this transaction have been transferred to Daniele Canestrari.
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 9.3% and 5.8%, 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 Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating 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:
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: 7 November 2016
DBRS Ratings GmbH
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Geschäftsführer: Detlef Scholz
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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
-- Interest Rate Stresses for European Structured Finance Transactions
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
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 email@example.com.