DBRS Ratings GmbH (DBRS Morningstar) assigned a BBB (sf) rating with a Negative trend to the EUR 235,000,000 Class A notes issued by Diana SPV S.r.l. (the Issuer).
As of the 31 March 2019 cutoff date, the notes were backed by a EUR 999.7 million portfolio by gross book value (GBV) of Italian secured and unsecured nonperforming loans originated by Banca Popolare di Sondrio S.C.p.A. (BPS or the Seller). The majority of loans in the portfolio (approximately 89.2% by GBV) defaulted after 2011, in particular between 2015 and 2017 (47.1% of GBV). Prelios Credit Servicing S.p.A. (Prelios or the Servicer) services the receivables. A backup servicer, Securitisation Services S.p.A., was also appointed and will act as a servicer in case of termination of Prelios.
The securitised portfolio is mostly composed of secured loans, representing approximately 67.8% of the GBV, of which approximately 95.5% by GBV benefits from a first-ranking lien mortgage, and unsecured borrowers representing the remaining 32.2% of the GBV. At cutoff date, the portfolio was mainly represented by corporate borrowers (78.5% by GBV), and the properties securing the loans in the portfolio mainly comprised residential properties (44.4% by updated real estate value). The secured collateral was highly concentrated in Northern regions of Italy (84.4% by updated real estate value) with Lombardy representing 74.5% by real estate value.
The transaction benefits from approximately EUR 54.6 million of collections recovered between 31 March 2019 and 31 May 2020 closing date, which will be distributed in accordance with the priority of payments on the first interest payment date.
The transaction includes a cash reserve, sized at 4.5% of the principal outstanding of the Class A notes, and a recovery expenses cash reserve, both fully funded with the proceeds of a limited recourse loan granted to the Issuer by BPS for an amount equal to EUR 10.825 million. The limited recourse loan also funds the EUR 100,000 retention amount. At each interest payment date, the cash reserve amount and the recovery expenses cash reserve will be part of the available funds for the waterfall and will be replenished in the waterfall up to the respective target amount.
Interest on the Class B notes, which represent mezzanine debt, will be paid ahead of the principal of the Class A notes unless certain performance-related triggers are breached.
The rating addresses the timely payment of interest and ultimate repayment of principal on the Class A notes.
DBRS Morningstar based its rating on an analysis of the projected recoveries of the underlying collateral, the historical performance and expertise of the servicer, the availability of liquidity to fund interest shortfalls and special-purpose vehicle expenses, and the transaction’s legal and structural features. DBRS Morningstar’s BBB (sf) rating stress assumes a haircut of approximately 22.1% to the servicer’s initial business plan for the portfolio.
DBRS Morningstar analysed the transaction structure using Intex DealMaker.
The Coronavirus Disease (COVID-19) and the resulting isolation measures have caused an economic contraction, leading to sharp increases in unemployment rates, income reductions for many borrowers and reduced investment activities. DBRS Morningstar anticipates that negative effects in the short and medium term may arise in the coming months for many nonperforming loan (NPL) transactions, some meaningfully. In particular, the deterioration of macroeconomic conditions could negatively affect recoveries from NPLs and the related real estate collaterals. The ratings are based on additional analysis and adjustments to expected performance as a result of the global efforts to contain the spread of the coronavirus.
On 16 April 2020, the DBRS Morningstar Sovereign group published its outlook on the impact to key economic indicators for the 2020-22 time frame. These scenarios were updated on 1 June 2020. For details see the following commentaries: https://www.dbrsmorningstar.com/research/359679/global-macroeconomic-scenarios-implications-for-credit-ratings and https://www.dbrsmorningstar.com/research/359903/global-macroeconomic-scenarios-application-to-credit-ratings. DBRS Morningstar analysis considered impacts consistent with the moderate scenario in the referenced reports.
For more information on DBRS Morningstar considerations for European NPL transactions and Coronavirus Disease (COVID-19), please see the following commentaries: https://www.dbrsmorningstar.com/research/362326 and https://www.dbrsmorningstar.com/research/360393.
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 rating is: “Rating European Non-Performing Loans Securitisations” (13 May 2020).
DBRS Morningstar has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.
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: https://www.dbrsmorningstar.com/research/350410/global-methodology-for-rating-sovereign-governments.
The sources of data and information used for this rating include historical performance provided by the servicer as at 23 March 2020 (static pool repossession data for secured loans from 1980 up to 2019, annualised historical performance curves for unsecured loans from 2002 up to 2019, and timing of the main courts), business plan and loan tape as at 27 May 2020, provided by the servicer and the seller, respectively.
DBRS Morningstar did not rely upon third-party due diligence in order to conduct its analysis.
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.
This rating concerns a newly issued financial instrument. This is the first DBRS Morningstar rating on this financial instrument.
Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available on www.dbrsmorningstar.com.
To assess the impact of changing the transaction parameters on the rating, DBRS Morningstar considered the following stress scenarios, as compared to the parameters used to determine the rating (the Base Case):
-- Recovery Rates Used: Cumulative base case recovery amount of approximately EUR 308.9 million at the BBB (sf) stress level, a 5% and 10% decrease in the base case recovery rate.
-- DBRS Morningstar concludes that a hypothetical decrease of the Recovery Rate by 5%, ceteris paribus, would lead to a downgrade in the transaction to BB (sf).
-- DBRS Morningstar concludes that a hypothetical decrease of the Recovery Rate by 10%, ceteris paribus, would lead to a downgrade in the transaction to B (sf).
Generally, the conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar’s outlooks and ratings are monitored.
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 U.S. regulations only.
Lead Analyst: Sebastiano Romano, Senior Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 17 June 2020
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.
-- Rating European Non-Performing Loans Securitisations (13 May 2020),
-- Rating European Consumer and Commercial Asset-Backed Securitisations (13 January 2020),
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda (10 December 2019),
-- European CMBS Rating and Surveillance Methodology (13 December 2019),
-- Operational Risk Assessment for European Structured Finance Servicers (28 February 2020), https://www.dbrsmorningstar.com/research/357429/operational-risk-assessment-for-european-structured-finance-servicers.
-- Legal Criteria for European Structured Finance Transactions (11 September 2019),
-- Derivative Criteria for European Structured Finance Transactions (26 September 2019),
-- Interest Rate Stresses for European 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: http://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.