DBRS Ratings GmbH (DBRS Morningstar) confirmed its A (high) (sf) rating on the Class A notes issued by Brera SEC S.r.l. (the Issuer).
The rating addresses the timely payment of interest and ultimate payment of principal payable on or before the final legal maturity date in November 2071.
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 A (high) (sf) rating level.
Brera SEC S.r.l. is a securitisation of Italian residential mortgage loans originated by Intesa Sanpaolo S.p.A. and the following subsidiaries: Banco di Napoli S.p.A., Cassa di Risparmio in Bologna S.p.A., Cassa di Risparmio del Friuli Venezia Giulia S.p.A. and Cassa dei Risparmi di Forli' e della Romagna S.p.A., which at closing were also the servicers, sellers and receivables account banks of this transaction. Since then, the aforementioned subsidiaries have been incorporated into Intesa Sanpaolo S.p.A. The transaction, which follows the standard structure under Italian securitisation law, closed in December 2017 when the special-purpose vehicle issued one senior class of floating-rate notes (the Class A notes) and one junior class of fixed-rate and additional-return notes (the Class B notes).
As of the August 2019 payment date, loans that were one- to two-months and two- to three-months delinquent represented 0.04% and 0.1% of the portfolio balance, respectively, while loans more than three-months delinquent represented 0.3%. Gross cumulative defaults amounted to 0.3% of the original collateral balance, of which 3.8% has been recovered to date.
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 7.1% and 14.1% respectively.
The Class A notes benefit from credit enhancement provided by the outstanding performing portfolio balance. The credit enhancement has increased as the transaction deleverages. As of the August 2019 payment date, credit enhancement to the Class A notes was 17.8%, up from 16.1% at the last rating action.
The transaction benefits from an amortising liquidity reserve, which is available to provide support to the Class A notes throughout the life of the transaction by covering senior fees and shortfall of interest payments (and principal at the final maturity date or redemption date). The liquidity reserve is replenished up to 2.5% of the principal outstanding amount of the Class A notes at the previous calculation date. The reserve is currently at its target level of EUR 126.7 million and has been at its target since closing.
Intesa Sanpaolo SpA acts as the account bank for the transaction. Based on the account bank reference rating of Intesa Sanpaolo SpA at A (low), which is one notch below its DBRS Morningstar Long-Term Critical Obligations Rating of “A”’, 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 investor and payment reports provided by Securitisation Services S.p.A., servicer reports provided by Intesa Sanpaolo 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 purpose 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 16 November 2018, when DBRS Morningstar confirmed its rating on the Class A notes at A (high) (sf).
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 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 5.1% and 12.6%, 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 BBB (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 BBB (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 BBB (sf).
Class A Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD, expected rating of BBB (high) (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 (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (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: 11 December 2017
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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
-- 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 email@example.com.