DBRS Morningstar Takes Rating Actions on Grecale RMBS 2015 S.r.l.

DBRS Ratings GmbH (DBRS Morningstar) took the following rating actions on the notes issued by Grecale RMBS 2015 S.r.l. (the Issuer):

-- Class A Notes confirmed at AAA (sf)
-- Class B Notes confirmed at AA (high) (sf)
-- Class C Notes upgraded to AA (high) (sf) from AA (sf)

The rating of the Class A Notes addresses the timely payment of interest and ultimate payment of principal payable on or before the final maturity date in December 2067. The ratings of the Class B and Class C Notes address the ultimate payment of interest and principal payable on or before the final maturity date.

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

-- Portfolio performance, in terms of delinquencies, defaults and losses as of the September 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 notes to cover the expected losses at their respective rating levels.

Grecale RMBS 2015 S.r.l. is a securitisation of first-lien residential mortgage loans originated in Italy by Unipol Banca S.p.A. (Unipol Banca) and Banca SAI S.p.A. (merged by incorporation into Unipol Banca in 2014). Unipol Banca services the portfolio, with Zenith Services S.p.A. appointed as backup servicer. The transaction closed in December 2015, when the SPV issued one senior class of floating-rate notes (the Class A Notes), two mezzanine classes of floating-rate notes (the Class B and Class C Notes) and one junior class of floating-rate notes (the Class J Notes).

On 31 July 2019, 100% of the shares of Unipol Banca were sold from Unipol Gruppo S.p.A. and UnipolSai Assicurazioni S.p.A. (which held 85.24% and 14.76% of Unipol Banca’s shares, respectively) to BPER Banca S.p.A.
Unipol Banca continues to hold the following roles in the transaction: originator, servicer, corporate servicer, subordinated loan provider and cash manager.

PORTFOLIO PERFORMANCE
The portfolio is performing within DBRS Morningstar’s initial expectations. As of September 2019, loans that were two to three months in arrears represented 0.3% of the outstanding portfolio balance, unchanged from September 2018. The 90+ delinquency ratio was 0.8%, down from 0.9% in September 2018. the gross cumulative default ratio stood at 1.0%, up from 0.7% in September 2019.

PORTFOLIO ASSUMPTIONS
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 5.7% and 3.9%, respectively.

CREDIT ENHANCEMENT
Credit enhancement available to the notes, which is provided by the overcollateralisation of the outstanding portfolio, continued to increase as the transaction deleverages. As of the September 2019 payment date, credit enhancement to the Class A, Class B and Class C Notes was 53.8%, 39.5% and 32.4%, respectively, up from 44.6%, 32.1% and 25.9%, respectively, as at the September 2018 payment date. The amortising reserve fund, which is currently at its target level of EUR 6.1 million (or 3.0% of the outstanding balance of the Class A Notes), is available to cover senior fees, expenses and missed interest payments on the Class A Notes.

BNP Paribas Securities Services, Milan branch and BNP Paribas Securities Services, London branch are the Italian and English account banks for the transaction, respectively. Based on the private ratings of BNP Paribas Securities Services, Milan and London branch, the downgrade provisions outlined in the transaction documents, and structural mitigants, DBRS Morningstar considers the risk arising from the exposure to the account banks 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.

J.P. Morgan Securities plc is the swap counterparty for the transaction. The DBRS Morningstar private rating of J.P. Morgan Securities plc is consistent with the first rating threshold, as defined in DBRS Morningstar’s “Derivative Criteria for European Structured Finance Transactions” methodology. The swap counterparty’s obligations under the swap agreement are guaranteed by JPMorgan Chase Bank N.A.

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 payment and investor reports provided by Securitisation Services S.p.A., servicer reports provided by Unipol Banca and loan-level data provided by the European DataWarehouse GmbH.

DBRS Morningstar did not rely upon third-party due diligence 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 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 actions on this transaction took place on 15 November 2018, when DBRS Morningstar confirmed the ratings of the Class A, Class B and Class C Notes at AAA (sf), AA (high) (sf) and AA (sf), respectively.

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 5.7% 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. Taking the Class A Notes as 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 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)

Class B Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD, expected rating of AA (high) (sf)
-- 50% increase in PD, expected rating of AA (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf)

Class C Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD, expected rating of AA (sf)
-- 50% increase in PD, expected rating of AA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (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: Daniele Canestrari, Financial Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 27 November 2015

DBRS Ratings GmbH
Neue Mainzer Straße 75
60311 Frankfurt am Main - Deutschland
Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

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
-- Derivative Criteria 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.