DBRS Morningstar Comments on Locat SV S.r.l. - Series 2016 Following Amendment

DBRS Ratings GmbH (DBRS Morningstar) reviewed the impact of an amendment (the Amendment) to the transaction Locat SV S.r.l. - Series 2016 (the Issuer) and concluded that the Amendment will not in and of itself result in a downgrade or withdrawal of the rating of the Class A Notes (the Notes). The effective date of the amendment is 15 May 2020.

The Amendment has been executed in the context of the Coronavirus Disease (COVID-19) pandemic. It intends to grant more flexibility to the servicer with regards to payment suspension applications, which might be applied for by the securitised borrowers.

In particular, the Amendment provides for a waiver from the 10% contractual limit for payment suspensions granted pursuant to:

-- Italian Law Decree No. 18 of 17 March 2020 (also called “Decreto Cura Italia”)
-- Addendum to the 2019 ABI (“Associazione Bancaria Italiana”) Agreement dated 7 March 2020

Only borrowers falling in the SME category as defined by the EU recommendation 2003/361 are eligible to apply for the above-mentioned measures.

Furthermore, the waiver is also meant to apply to any other principal payment suspension measure (the Private Initiative) that UniCredit Leasing S.p.A., in its role of servicer, may grant to any securitised borrower. The Private Initiative terminated on 30 April 2020, with 4.10% of the portfolio outstanding balance as of the same date having benefitted from a suspension.

In DBRS Morningstar’s view, the Amendment might provide relief to the securitised borrowers by supporting them in coping with liquidity stresses that may arise as a result of the coronavirus pandemic. On the other side, the transaction’s ability to generate sufficient cash flows might be affected, however this risk is expected to be mitigated by the presence of a cash reserve (the Debt Service Reserve), which would be able to cover temporary liquidity shortfalls.

Locat SV S.r.l. - Series 2016 is a securitisation of lease receivables backed by financial lease contracts granted and serviced by UniCredit Leasing S.p.A. to corporates, small and medium-size businesses, and individual enterprises with registered offices in Italy. The transaction closed in November 2016, when the SPV issued one class of floating-rate notes and one class of variable-return notes, namely the Class A Notes and the Class B Notes.

As of the March 2020 payment date, the gross cumulative default ratio was 3.3% of the initial portfolio balance, while the 90+ delinquency ratio stood at 0.22% of the outstanding portfolio balance.

Overcollateralisation of the outstanding collateral portfolio provides credit enhancement. As of the March 2020 payment date, credit enhancement to the Class A Notes was 54.9%.

More information on the transaction can be found at: https://www.dbrsmorningstar.com/issuers/22224.

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.

ESG CONSIDERATIONS
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.

Notes:
All figures are in euros unless otherwise noted.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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