DBRS Ratings GmbH (DBRS Morningstar) confirmed its A (high) (sf) rating on the Class A Notes issued by Asti Group PMI S.r.l. (the Issuer or Asti Group PMI).
The confirmation follows an annual review of the transaction and is based on the following analytical considerations:
-- The overall portfolio performance as of the October 2019 payment date, particularly with regard to low levels of delinquencies and defaults;
-- No purchase termination events occurred;
-- Base case probability of default (PD), recovery rate, and expected loss assumptions considering the worst-case portfolio composition allowed under the eligibility criteria; and
-- The current available credit enhancement to the Class A Notes to cover expected losses assumed in line with the A (high) (sf) rating level.
The rating addresses the timely payment of interest and ultimate repayment of principal payable on or before the maturity date in April 2082.
Asti Group PMI is a securitisation collateralised by a portfolio of secured and unsecured loans to Italian small and medium-size enterprises (SMEs), entrepreneurs, artisans, and producer families granted by Cassa di Risparmio di Asti S.p.A. (CR Asti) and Cassa di Risparmio di Biella e Vercelli S.p.A. (BiverBanca). CR Asti and BiverBanca (the Originators) also act as the Servicers of their respective portfolios. BiverBanca is part of the CR Asti banking group and the transaction comprises a single waterfall with full cross-collateralisation between the two portfolios since the closing date in March 2017.
In December 2018 the transaction was amended, including an extension of the revolving period by 18 months until April 2020 and change of certain concentration limits; an increase of the Class A Notes balance by EUR 11.2 million to their original EUR 700.0 million balance; and repurchase of all defaulted loans, as well as loans in arrears by 31 days or more.
During the revolving period, each Originator may sell new receivables to the Issuer subject to certain conditions and limitations. The revolving period will end prematurely upon the occurrence of a purchase termination event, which includes gross cumulative defaults exceeding certain thresholds, the inability of the Issuer to fully replenish the cash reserve, and the insolvency of one of the Originators. Additionally, if the Issuer terminates the appointment of either CR Asti or BiverBanca as Servicer, or if one of the two banks does not fulfil its own obligations under the transaction documents, the revolving period will end prematurely only for the affected Servicer/Originator. However, the unaffected Originator will have to fulfil all the revolving conditions and limitations, as these are based on the overall portfolio and not on the single pools. The purchase of new receivables is funded through principal collections as well as excess spread to make up for any defaulted loans. To date, no purchase termination event has occurred.
On 13 November 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 has 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.
As at the October 2019 payment date, the overall portfolio consisted of an aggregate principal balance of EUR 1,187.0 million. Loans more than three-months delinquent represented 1.6% of the portfolio balance. The cumulative default loans stood at 0.3%.
DBRS Morningstar maintained its assumptions based on the worst-case portfolio allowed by the eligibility criteria and portfolio limits, as well as the maximum loan-term modifications that allow loans’ maturities extensions. At the A (high) (sf) rating level, the portfolio default and recovery assumptions applied in the analysis were 57.6% and 31.0%, respectively.
Credit enhancement for the Class A Notes remained stable at 42.1% given the revolving period and is provided by the subordination of the more junior obligations and the cash reserve account.
A cash reserve account, funded at closing with EUR 14.0 million through the proceeds of the subordinated loan granted by the Originators, is available to cover senior expenses and missed interest payments on the Class A Notes. The required level for the cash reserve is set at 2.0% of the Class A Notes balance, subject to a EUR 7.0 million floor. On the payment date, the Class A Notes will be redeemed in full and the cash reserve amount will be reduced to EUR 0.0.
An additional cash reserve with an amount of EUR 3.5 million, is also available during the revolving period to cover senior expenses, missed interest payments on the Class A Notes, and the acquisition of additional receivables.
The structure also benefits from a set-off reserve account, funded at closing with EUR 17.8 million (1.5% of the initial portfolio balance), which will be available immediately following the occurrence of an insolvency event with respect to either of the Originators. The target set-off reserve amount is EUR 17.8 million during the revolving period, and 1.5% of the portfolio balance afterward.
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.
DBRS Morningstar analysed the transaction structure in its proprietary Excel-based cash flow engine.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the rating is: “Rating CLOs Backed by Loans to European SMEs”.
DBRS Morningstar has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.
An asset and a cash flow analysis were both conducted. Due to the inclusion of a revolving period in the transaction, the analysis continues to be based on the worst-case replenishment criteria set forth in the transaction legal documents.
A review of the transactions 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 servicer and investor reports provided by the Originators and BNP Milan, and loan-by-loan data from 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 the transaction took place on 14 December 2018, when DBRS Morningstar confirmed the rating of the Class A Notes at A (high) (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 on www.dbrs.com.
To assess the impact of changing the transaction parameters on the ratings, DBRS Morningstar considered the following stress scenarios, as compared to the parameters used to determine the rating (the Base Case):
-- PD Rates Used: Base case PD of 4.8%, a 10% and 20% increase on the base case PD.
-- Recovery Rates Used: Base case recovery rate of 31.0% at the A (high) (sf) rating level, and a 10% and 20% decrease in the base case recovery rate. Note that the percentage decreases in the recovery rates are assumed for the other stress recovery rate levels.
DBRS Morningstar concludes that a hypothetical increase of the base case PD by 20%, ceteris paribus, would lead to a downgrade of the Class A Notes to A (sf). A hypothetical decrease of the recovery rate by 20%, ceteris paribus, would lead to a confirmation of the Class A Notes rating at A (high) (sf). A scenario combining both a hypothetical increase in the PD by 20% and a hypothetical decrease in the recovery rate by 20% would lead to a downgrade of the Class A Notes to BBB (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: Alfonso Candelas, Senior Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 16 March 2017
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Ratings issued and monitored by DBRS Ratings GmbH are noted as such on the DBRS Morningstar 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 Morningstar’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.
-- Rating CLOs Backed by Loans to European SMEs
-- Rating CLOs and CDOs of Large Corporate Credit
-- Cash Flow Assumptions for Corporate Credit Securitizations
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Legal Criteria for European Structured Finance Transactions
-- Interest Rate Stresses for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Originators
-- Operational Risk Assessment for European Structured Finance Servicers
-- Master European Structured Finance Surveillance Methodology
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.