DBRS Ratings Limited (DBRS Morningstar) assigned a BBB (sf) rating to the EUR 173,000,000 Class A Notes and a CCC (sf) rating to the EUR 25,000,000 Class B Notes issued by POP NPLs 2019 S.r.l. (the issuer).
As of the 31 December 2018 cut off date, the notes were backed by a EUR 826.7 million portfolio by gross book value (GBV) of Italian secured and unsecured nonperforming loans, sold by 12 Italian banks (the sellers) to the issuer. The receivables are serviced by Prelios Credit Servicing S.p.A. and Fire S.p.A. (together, the special servicers). A back-up servicer, Securitisation Services S.p.A., was also appointed and will act as a servicer in case of termination of the appointed servicers.
The majority of loans in the portfolio (approximately 79.8% by GBV) defaulted after 2010, in particular between 2014 and 2015 (23.2% by GBV). Approximately 58.6% of the pool by GBV is secured, of which approximately 95.6% by GBV benefits from a first-ranking lien mortgage. At cut off date, the secured collateral was highly concentrated in South and Islands regions of Italy, collectively representing 69.2% of first-lien real estate value.
The transaction benefits from EUR 19.6 million of collections recovered between the cut off date of 31 December 2018 and the 29 November 2019, which will be distributed in accordance with the priority of payments on the first interest payment date.
Interest on the Class B Notes, which represent mezzanine debt, will be paid ahead of the principal of the Class A Notes unless certain performance-related triggers are breached.
The securitisation includes the flexibility to implement a ReoCo structure.
DBRS Morningstar based its ratings on an analysis of the projected recoveries of the underlying collateral, the historical performance and expertise of the special servicers, the availability of liquidity to fund interest shortfalls and special-purpose vehicle expenses, and the transaction’s legal and structural features. DBRS Morningstar’s BBB (sf) rating stress assumes a haircut of approximately 25.7% to the special servicers’ business plan for the portfolio, while DBRS Morningstar’s CCC (sf) rating stress assumes 0% haircut to the special servicers’ business plan.
DBRS Morningstar analysed the transaction structure using Intex DealMaker.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the ratings is: “Rating European Non-Performing Loans Securitisations”.
DBRS Morningstar has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.
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 the ratings includes the special servicers.
DBRS Morningstar did not rely upon third-party due diligence to conduct its analysis. DBRS Morningstar was supplied with third-party assessments. However, this did not impact the rating analysis.
DBRS Morningstar considers the information available to it for the purposes of providing the ratings was of satisfactory quality.
DBRS Morningstar does not audit or independently verify the data or information it receives in connection with
the rating process.
These ratings concern newly issued financial instruments.
These are the first DBRS Morningstar ratings on these financial instruments.
Information regarding DBRS Morningstar ratings, including definitions, policies and methodologies are 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 with the parameters used to determine the rating (the Base Case):
-- Recovery Rates Used: Cumulative base case recovery amount of approximately EUR 194 million at the BBB (sf) stress level, a 5% and 10% decrease of the cumulative base case recovery rate.
-- DBRS Morningstar concludes that a hypothetical decrease of the recovery rate by 5%, ceteris paribus, would lead to a downgrade of the Class A Notes to BB (sf).
-- DBRS Morningstar concludes that a hypothetical decrease of the recovery rate by 10%, ceteris paribus, would lead to a downgrade of the Class A Notes to B (low) (sf).
-- Recovery Rates Used: Cumulative base case recovery amount of approximately EUR 262 million at the CCC (sf) stress level, a 5% and 10% decrease of the cumulative base case recovery rate.
-- DBRS Morningstar concludes that a hypothetical decrease of the recovery rate by 5%, ceteris paribus, would lead to a confirmation of the Class B Notes at CCC (sf).
-- DBRS Morningstar concludes that a hypothetical decrease of the recovery rate by 10%, ceteris paribus, would lead to a downgrade of the Class B Notes below CCC (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 Limited are subject to EU and US regulations only.
Lead Analyst: Manon Naegels, Financial Analyst
Rating Committee Chair: David Lautier, Senior Vice President
Initial Rating Date: 23 December 2019
DBRS Ratings Limited
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Registered in England and Wales: No. 7139960
The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies.
-- Rating European Non-Performing Loans Securitisations
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- European CMBS Rating and Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Servicers
-- Legal Criteria for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions
-- 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.
DBRS Morningstar amended this PR on 15 January 2020 to change the DBRS Morningstar BBB (sf) rating stress to 25.7% from 25.9%.