DBRS Ratings GmbH (DBRS Morningstar) confirmed the rating of the Class A Notes issued by UBI SPV Group 2016 S.r.l. (the Issuer) at A (low) (sf).
The rating addresses the timely payment of interest and ultimate payment of principal by the legal final maturity date in October 2070.
The confirmation follows an annual review of the transaction and is based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies and defaults, as of the January 2020 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 (low) (sf) rating level;
-- No revolving termination events have occurred.
UBI SPV Group 2016 S.r.l. is a securitisation of first-lien residential mortgage loans originated in Italy by Unione di Banche Italiane S.p.A. (UBI Banca or the Originator) and several other Italian local banks incorporated into UBI Banca in November 2016 and February 2017. UBI Banca undertook the role of Master Servicer at the transaction closing and has replaced the acquired originators in their sub-servicing activities.
The transaction closed in August 2016, when the special-purpose vehicle issued a senior class of floating-rate notes and a junior class of additional return notes, namely the Class A Notes and Class B Notes. The transaction includes a revolving period lasting until the August 2022 payment date (inclusive), during which UBI Banca may sell subsequent portfolios to the Issuer, subject to certain conditions and limitations.
On 25 January 2019, the following amendments were made to the transaction:
-- Extension of the revolving period until August 2022 (inclusive);
-- Change of certain concentration limits;
-- Change of some renegotiation limits to provide more flexibility to the servicer to manage the portfolio;
-- Increase of the cash reserve balance to 6.25% of the Class A Notes (up from 4.00%).
The portfolio is performing within DBRS Morningstar’s initial expectations. As of November 2019, loans that were two to three months in arrears represented 0.2% of the outstanding portfolio balance, unchanged from November 2018. The 90+ delinquency ratio was 1.7%, slightly down from 2.0% in November 2018. The gross cumulative default ratio stood at 2.0% of the aggregate of the initial and subsequent portfolio balances, up from 1.5% in November 2018.
DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of receivables and, given that the transaction is still within its revolving period, its base case PD and LGD assumptions at 20.7% and 37.3%, respectively, continue to be based on a worst-case portfolio composition as per the replenishment criteria set forth in the transaction legal documents.
Overcollateralisation of the outstanding collateral portfolio and the cash collateral set aside and not used to purchase subsequent portfolios provide credit enhancement. As of the January 2020 payment date, credit enhancement to the Class A Notes was 24.8%, unchanged from January 2019 because of the revolving period.
The cash reserve is available to pay senior fees, expenses, and missed interest payments on the Class A Notes. The reserve is currently at its target level of EUR 130.4 million, which accounts for 6.25% of the Class A Notes’ initial balance, and will start to amortise after the end of the revolving period, with a target amount equal to 6.25% of the Class A Notes outstanding balance (subject to a floor of EUR 65.2 million).
UBI Banca acts as the account bank for the transaction. Based on the account bank reference rating of UBI Banca at BBB (high), one notch below its DBRS Morningstar Long-Term Critical Obligations Rating of A (low), the downgrade provisions outlined in the transaction documents, and structural mitigants, 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 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.
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 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 payment, investor, and servicer reports provided by UBI 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 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 28 January 2019, when DBRS Morningstar confirmed the rating on the Class A Notes at A (low) (sf).
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 20.7% and 37.3%, 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 (low) (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A Notes would be expected to fall to BB (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 BB (low) (sf).
Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in LGD, expected rating of BBB (low) (sf)
-- 25% increase in PD, expected rating of BBB (sf)
-- 50% increase in PD, expected rating of BB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BB (high) (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 (low) (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 GmbH are subject to EU and US regulations only.
Lead Analyst: Daniele Canestrari, Senior Financial Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 11 August 2016
DBRS Ratings GmbH
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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
-- Operational Risk Assessment for European Structured Finance Originators
-- Interest Rate Stresses for European Structured Finance Transactions
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
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.