DBRS Rates Grecale ABS S.r.l. – Series 6

DBRS Ratings Limited (DBRS) has on 19th of April 2011 assigned a final rating of “AAA” (sf) to the Class A notes issued by Grecale ABS S.r.l. – Series 6 (Grecale 6). The DBRS rating is a second rating on an existing transaction issued in July 2009. Grecale 6 issued two classes of mortgage-backed floating rate notes (Class A and Class B). DBRS rates Class A notes only. The Class A notes are backed by floating rate, first lien, fully amortizing mortgage loans mainly originated in the regions of Emilia Romagna, Lombardia, Lazio, Toscana, Sicilia and Campania. The originator and servicer of this transaction is UGF Banca S.p.a., which is part of Unipol Group.

The ratings are based upon DBRS review of the following analytical considerations:
•Transaction capital structure and form and sufficiency of available credit enhancement.
•Relevant credit enhancement is in the form of excess spread (if any), a funded reserve fund and subordination.
•The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to terms in which they have invested.
•The transaction parties’ capabilities with respect to originations, underwriting, servicing, and financial strength.
•The credit quality of the collateral and ability of the servicer to perform collection activities on the collateral.

DBRS credit analysis is performed on a loan-level basis and includes a probability of default and loss given default assessment, an originator- and servicer-specific historical performance review, an analysis of loan default data, a Italian housing market and property price trend evaluation, and finally a cash flow simulation based on various stresses to prepayments, timing of defaults and recoveries and interest rates.

DBRS made appropriate adjustments to our model parameters based on the analysis of market value declines in Italy and the historical performance data provided by the originator and servicer.

DBRS made appropriate adjustments to determine the two year probability of default, since UGF Banca utilises the definition of defaults (sofferenze) used by the Bank of Italy, which might give room to a discretionary judgment of when to classify a position to be defaulted.

DBRS applied penalties to borrowers who have been in arrear in the past, borrowers whose primary income was missing, borrowers whose employment status was missing, mortgages with a balloon repayment and mortgages granted to foreign borrowers.

Note:
All figures are in Euro unless otherwise noted.

The applicable methodologies are Master European Residential Mortgage-Backed Securities Rating Methodology and Legal Criteria for European Structured Finance Transactions, which can be found on our website under Methodologies, with adjustments made for the Italian mortgages. This is not a newly created financial instrument.

The sources of information used for this rating include working papers and data on the Italian economy and housing market provided by: International Monetary Fund, World Bank, OECD, ECB, Eurostat, Bank of Italy and Nomisma. DBRS conducted an operational review on the origination and servicing practices of UGF Banca. UGF Banca provided loan-level data and historical performance of mortgage portfolio dating back to 2000. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

This is the first DBRS rating on this financial instrument.

For additional information on this rating, please refer to the linking document located below.

Lead Analyst: Alessio Pignataro
Rating Committee Chair: Claire Mezzanotte
Initial Rating Date: 19th April 2011