DBRS Ratings GmbH (DBRS Morningstar) upgraded its ratings on the Class A-2012 Notes, Class A-2016 Notes, and Class A-2019 Notes (together, the Class A Notes) issued by BPL Mortgages S.r.l., Series V (the Issuer) to A (high) (sf) from A (sf).
The ratings on the Class A Notes address the timely payment of interest and ultimate payment of principal on or before the legal final maturity date in October 2058.
The upgrades 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 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 (high) (sf) rating level.
The Issuer is a securitisation of Italian residential mortgage loans granted originally by Banco Popolare – Società Cooperativa (BP), which together with Banca Popolare di Milano merged into Banco BPM S.p.A. (Banco BPM) in January 2017. The transaction closed originally in December 2012 and was subsequently restructured twice, in October 2016 and March 2019. On both occasions, the seller repurchased the non-performing loans from the Issuer, the Issuer purchased subsequent portfolios from BP (in October 2016) and Banco BPM (in March 2019), and new series of Class A Notes were issued, ranking pari passu with the existing Class A Notes.
As of the January 2020 payment date, loans 30 to 60 and 60 to 90 days in arrears represented 1.3% and 0.4% of the outstanding portfolio balance, respectively, while loans more than 90 days in arrears represented 0.4%. Gross cumulative defaults amounted to 0.5% of the original portfolio balance as of the latest restructuring date in March 2019, with cumulative recoveries of 3.0% 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 17.6% and 30.9%, respectively.
The subordination of the Class B Notes and overcollateralisation provides credit enhancement to the Class A Notes. As of the January 2020 payment date, credit enhancement to the Class A Notes increased to 24.5% from 19.2% at the time of the latest amendment in March 2019.
The transaction benefits from an amortising cash reserve, maintained with Banco BPM, which is available to cover senior expenses and interest payments on the Class A Notes. The reserve has a target balance equal to 3.0% of the outstanding Class A Notes balance, subject to a floor of EUR 40.0 million, and as of the January 2020 payment date was at its target of EUR 79.3 million.
BNP Paribas Securities Services, London branch (BNP London) acts as the account bank for the transaction. Based on the DBRS Morningstar private rating of BNP London, 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 ratings 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 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 investor reports provided by BNP Paribas Securities Services, Milan branch, servicer reports provided by Banco BPM, 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 first transaction restructuring in October 2016, 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 action on this transaction took place on 14 March 2019, when DBRS Morningstar assigned a rating of A (sf) to the Class A-2019 Notes, and downgraded the ratings on the Class A-2012 Notes and Class A-2016 Notes to A (sf) from A (high) (sf).
The lead analyst responsibilities for this transaction have been transferred to Daniel Rakhamimov.
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 ratings, DBRS Morningstar considered the following stress scenarios as compared with the parameters used to determine the ratings (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 17.6% and 30.9%, 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. For example, if the LGD increases by 50%, the ratings on the Class A Notes would be expected to decrease to A (low) (sf), ceteris paribus. If the PD increases by 50%, the ratings on the Class A Notes would be expected to decrease to BB (high) (sf), ceteris paribus. Furthermore, if both the PD and LGD increase by 50%, the ratings on the Class A Notes would be expected to decrease to BB (high) (sf), ceteris paribus.
Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in LGD, expected rating of A (low) (sf)
-- 25% increase in PD, expected rating of BBB (high) (sf)
-- 50% increase in PD, expected rating of BB (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 (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 (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: Daniel Rakhamimov, Senior Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 24 December 2012
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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.
-- Master European Structured Finance Surveillance Methodology
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Rating CLOs Backed by Loans to European SMEs
-- Legal Criteria for European Structured Finance Transactions
-- Interest Rate Stresses for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
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.