DBRS Ratings GmbH (DBRS Morningstar) upgraded its rating on the Class A notes issued by Multi Lease AS S.r.l. (the Issuer) to AA (sf) from A (high) (sf).
The rating addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date in July 2044.
The upgrade follows an annual review of the transaction and is based on the following analytical considerations:
-- The portfolio performance, in terms of delinquencies, defaults and losses as of the October 2019 payment date.
-- Probability of default (PD), loss given default (LGD) rates and expected loss assumptions.
-- Current available credit enhancement to the Class A notes to cover the expected losses at the AA (sf) rating level.
The Issuer is a securitisation of financial lease contracts granted by Sardaleasing S.p.A. to retail and corporate customers in Italy. The securitised receivables are financial claims towards the payment of regular installments by lessees but exclude the final optional instalments that include residual value.
As of the October 2019 payment date, the balance of the Class A notes was EUR 504.8 million and the balance of the Class B notes was EUR 340.5 million. The EUR 878.3 million securitised portfolio consisted of real estate leasing (74.9% by loan balance), equipment leases (13.1%), vehicle leases (4.1%), energetic (3.0%) and naval receivables (4.9%).
On 22 October 2019, DBRS Morningstar transferred the ongoing coverage of the rating assigned to the Issuer to DBRS Ratings GmbH from DBRS Ratings Limited. The lead analyst responsibilities for this transaction have been transferred to Petter Wettestad.
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.
As of the October 2019 payment date, loans that were one- to two-months and two- to three-months delinquent represented 0.01% and 0.25% of the portfolio balance, respectively, while loans more than three-months delinquent represented 0.24%. There are no gross cumulative defaults reported so far.
DBRS Morningstar conducted a loan-by-loan analysis of the pool of receivables and has updated its base case PD and LGD assumptions to 21.4% and 65.4%, respectively.
Credit enhancement for the Class A notes is provided by the subordination of the Class B notes. As of the October 2019 payment date, credit enhancement to the Class A notes was 42.5%, up from 30.0% at closing.
The transaction benefits from an amortising cash reserve account, which is available to cover senior expenses and missed interest payments on the Class A notes. This account was funded at closing with EUR 11.4 million, and its target balance is equal to 1.0% of the outstanding principal of the portfolio as at the beginning of the preceding collection period, with a floor of EUR 5.7 million. The reserve currently stands at EUR 9.3 million and has been at its target since closing.
BNP Paribas Securities Services, Milan branch (BNP Milan) acts as the account bank for the transaction. Based on the DBRS Morningstar 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 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 rating 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 quarterly reports provided by Zenith Service S.p.A. (the Master Servicer) 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.
This is the first rating action since the Initial Rating Date.
The lead analyst responsibilities for this transaction have been transferred to Petter Wettestad.
Information regarding DBRS Morningstar ratings, including definitions, policies and methodologies, is available on www.dbrs.com.
To assess the impact of changing the transaction parameters on the rating, DBRS Morningstar considered the following stress scenarios, as compared to the parameters used to determine the rating (the Base Case):
-- DBRS Morningstar expected a 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 receivables are 21.4% and 65.4%, respectively.
-- The risk sensitivity overview below illustrates the ratings expected for the Class A notes if the PD and LGD increase by a certain percentage over the base case assumptions. For example, if the LGD increases by 50%, the rating of the Class A notes would be expected to decrease to A (sf), ceteris paribus. If the PD increases by 50%, the rating of the Class A notes would be expected to decrease to BBB (high) (sf), ceteris paribus. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A notes would be expected to decrease to BB (high) (sf), ceteris paribus.
Class A notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in LGD, expected rating of A (sf)
-- 25% increase in PD, expected rating of A (sf)
-- 50% increase in PD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BB (high) (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: Petter Wettestad, Financial Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 6 November 2018
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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.
-- Master European Structured Finance Surveillance Methodology
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Legal Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
-- Interest Rate Stresses for European Structured Finance Transactions
-- Rating CLOs Backed by Loans to European SMEs
-- Rating CLOs and CDOs of Large Corporate Credit
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 firstname.lastname@example.org.