DBRS Ratings GmbH (DBRS Morningstar) confirmed the following ratings on the notes issued by CR VOLTERRA 2 SPV S.r.l. (the Issuer):
-- Class A (2013) Notes at AA (low) (sf)
-- Class A (2016) Notes at AA (low) (sf)
-- Class M (2016) Notes at A (sf)
The ratings on the Class A (2013) and Class A (2016) Notes (together, the Class A Notes) address the timely payment of interest and the ultimate payment of principal on or before the legal final maturity date. The rating on the Class M (2016) Notes (the Class M Notes) addresses the ultimate payment of interest and principal on or before the legal final maturity date.
The confirmations 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 February 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.
CR VOLTERRA 2 SPV S.r.l. is a securitisation of Italian residential mortgage loans originated and serviced by Cassa di Risparmio di Volterra S.p.A. (CR Volterra). The transaction closed in July 2013, when the SPV issued the Class A (2013) Notes and Class J Notes. In July 2016, the Issuer restructured the transaction to include a further portfolio of first-lien and second-lien mortgages secured over properties located in Italy and issued two additional classes of notes, the Class A (2016) and Class M (2016) Notes.
In the context of the restructuring, CR Volterra repurchased defaulted receivables and 60+ day arrears. On 12 April 2019, CR Volterra executed an amendment to have more flexibility to manage the portfolio. Following the amendment, spread reductions on the portfolio are limited to 12% of the original portfolio balance, up from 6%.
The portfolio is performing within DBRS Morningstar’s initial expectations. As of the January 2020 cut-off date, loans that were two to three months in arrears represented 0.7% of the outstanding portfolio balance, slightly up from 0.6% as at the January 2019 cut-off date. The 90+ delinquency ratio was 1.8%, up from 1.2% as at the January 2019 cut-off date. The gross cumulative default ratio stood at 2.6% of the initial portfolio balance, up from 2.1% in January 2019.
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 10.4% and 23.8%, respectively.
Overcollateralisation of the outstanding collateral portfolio provides credit enhancement and does not include the cash reserve. As of the February 2020 payment date, credit enhancement to the Class A and Class M Notes was 35.2% and 26.4%, respectively, up from 28.0% and 20.6%, respectively, as at the February 2019 payment date.
The transaction benefits from an amortising cash reserve, which provides liquidity support and is available to cover senior fees, interest shortfalls on the Class A Notes and interest shortfall on the Class M Notes, if no subordination event has occurred. The cash reserve is currently at its target amount of EUR 3.6 million, which accounts for 2.17% of the outstanding balance of the rated notes.
The transaction also benefits from a commingling reserve fund of EUR 4.4 million, equal to 2.72% of the outstanding balance of the Class A and Class M Notes. The reserve fund is available to cover senior fees and interest shortfalls on the Class A Notes and Class M Notes in case of servicer disruption.
BNP Paribas Securities Services SCA/Milan acts as the account bank for the transaction. Based on the private rating of BNP Paribas Securities Services SCA/Milan, the downgrade provisions outlined in the transaction documents, and structural mitigants 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 notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.
DBRS Morningstar analysed the transaction structure in Intex DealMaker.
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: https://www.dbrsmorningstar.com/research/358308.
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.
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: https://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: https://www.dbrsmorningstar.com/research/350410/global-methodology-for-rating-sovereign-governments.
The sources of data and information used for these ratings include investor reports provided by Securitisation Services S.p.A., servicer reports provided by CR Volterra, 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 initial ratings, 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 12 April 2019, when DBRS Morningstar upgraded the ratings on the Class A Notes to AA (low) (sf) from A (high) (sf) and confirmed the rating on the Class M Notes at A (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 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 10.4% and 23.8%, 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 A Notes as example, if the LGD increases by 50%, the rating on the Class A Notes would be expected to remain at AA (low) (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Class A Notes would be expected to fall to BBB (high) (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating on the Class A Notes would be expected to fall to BBB (high) (sf).
Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in LGD, expected rating of AA (low) (sf)
-- 25% increase in PD, expected rating of A (high) (sf)
-- 50% increase in PD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf)
Class M 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 BBB (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 (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (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 U.S. regulations only.
Lead Analyst: Daniele Canestrari, Senior Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Dates:
Class A (2013) Notes: 31 July 2013
Class A (2016) and Class M (2016) Notes: 8 August 2016
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The rating methodologies used in the analysis of this transaction are listed below and can be found at: http://www.dbrsmorningstar.com/about/methodologies.
-- 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)
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda (10 December 2019) and European RMBS Credit Model 1.0
-- Interest Rate Stresses for Structured Finance Transactions (10 October 2019)
A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at https://www.dbrsmorningstar.com/research/278375.
For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at firstname.lastname@example.org.