DBRS Ratings GmbH (DBRS Morningstar) confirmed and placed Under Review with Positive Implications (UR-Pos.) the AA (high) (sf) and A (sf) ratings on the Class B and C Notes, respectively, issued by Alba 8 SPV S.r.l. (the Issuer).
The ratings address the timely payment of interest and ultimate payment of principal on or before the legal final maturity date.
The rating confirmations and placement UR-Pos. 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 notes to cover the expected losses at their respective rating levels;
Alba 8 SPV S.r.l. is a securitisation of lease receivables granted by Alba Leasing S.p.A. to corporates, small businesses, and individual enterprises with their registered offices in Italy. The pool comprises real estate, equipment, vehicle, and naval-air-rail lease receivables. The transaction closed in June 2016, when the SPV issued two senior classes of floating-rate notes (the Class A1 and Class A2 Notes), two mezzanine classes of floating-rate notes (the Class B and Class C Notes), and one class of junior notes (the Class J Notes).
The portfolio is performing within DBRS Morningstar’s initial expectations. As of the December 2019 cut-off, there were no reported loans that were two to three months in arrears, stable from December 2018. The 90+ delinquency ratio was also at 0.0%, the same as one year ago. The gross cumulative default ratio stood at 2.9% of the initial portfolio balance, up from 2.5% as at the December 2018 cut-off.
PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
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 11.6% and 85.8%, respectively.
The current rating on the Class C Notes is lower than the higher rating that could be assigned with the primary methodology. DBRS Morningstar placed the ratings UR-Pos while it continues to assess if the current performance trend could be sustainable amid the current Coronavirus Disease (COVID-19) environment.
For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.
For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release:
Overcollateralisation of the outstanding collateral portfolio provides credit enhancement and does not include the debt service reserve. As of the January 2020 payment date, credit enhancement to the Class B and Class C Notes was 87.5% and 71.6%, respectively, up from 57.1% and 46.9%, respectively, as at the January 2019 payment date.
The transaction structure benefits from an amortising cash reserve (the Debt Service Reserve), which provides liquidity support and is available to cover shortfalls on senior fees, expenses, and interest on the rated notes. The reserve is currently at its floor level of EUR 4.1 million, which accounts for 0.5% of the rated notes initial balance.
Citibank NA, Milan Branch acts as the account bank for the transaction. Based on the private rating of Citibank NA, Milan Branch, 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 notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.
DBRS Morningstar analysed the transaction structure in Intex DealMaker.
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the ratings is the “Master European Structured Finance Surveillance Methodology” (13 December 2019).
DBRS Morningstar has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.
DBRS Morningstar is undertaking a review and will remove the rating from this status as soon as it is appropriate.
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 at: http://www.dbrsmorningstar.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:
The sources of data and information used for these ratings include payment, investor and servicer reports provided by Alba Leasing S.p.A., payment and investor reports provided by Securitisation Services S.p.A. 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.
On 30 August 2019, DBRS Morningstar discontinued its rating on the Class A-2 Notes, following their payment in full. Prior to that, the last rating actions on this transaction took place on 10 April 2019, when DBRS Morningstar confirmed its AAA (sf) and A (sf) ratings on the Class A-2 and Class C Notes, respectively, and upgraded the rating on the Class B Notes to AA (high) (sf) from A (high) (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.dbrsmorningstar.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 11.6% and 85.8%, 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 B Notes as example, if the LGD increases by 50%, the rating of the Class B Notes would be expected to remain at AA (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class B Notes would be expected remain at AA (high) (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class B Notes would be expected to remain at AA (high) (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 A (sf)
-- 50% increase in LGD, expected rating of A (sf)
-- 25% increase in PD, expected rating of A (sf)
-- 50% increase in PD, expected rating of A (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (sf)
These ratings are UR-Pos. Generally, the conditions that lead to the assignment of reviews are resolved within a 90-day period.
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 U.S. regulations only.
Lead Analyst: Daniele Canestrari, Senior Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 20 June 2016
DBRS Ratings GmbH
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The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrsmorningstar.com/about/methodologies.
-- Interest Rate Stresses for Structured Finance Transactions (10 October 2019)
-- Legal Criteria for European Structured Finance Transactions (11 September 2019)
-- Master European Structured Finance Surveillance Methodology (13 December 2019)
-- Operational Risk Assessment for European Structured Finance Servicers (28 February 2020)
-- Rating European Consumer and Commercial Asset-Backed Securitisations (13 January 2020)
-- Rating CLOs and CDOs of Large Corporate Credit (28 February 2020)
-- Rating European Structured Finance Transactions Methodology (28 February 2020)
A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrsmorningstar.com/research/278375.
For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at email@example.com.
This press release was amended on 14 April 2020 to correct a misclassification that the rating action represented a material deviation from the principal methodology, “Master European Structured Finance Surveillance Methodology”.