DBRS Assigns Ratings to the Class A1 Notes and Class A2 Notes Issued by BPM Securitisation 2 S.r.l.

DBRS Ratings Limited (“DBRS”) has today assigned a rating of AAA (sf) to the EUR 341,000,000 Class A1 Asset Backed Floating Rate Notes (the “Class A1 Notes”) and a rating of AAA (sf) to the EUR 147,000,000 Class A2 Asset Backed Floating Rate Notes (the “Class A2 Notes”), together the “Rated Notes”, issued by BPM Securitisation 2 S.r.l. (the “Issuer”). The Issuer is a limited liability company incorporated under the laws of Italy. The transaction is a cash flow securitisation collateralised by a portfolio of bank loans to Italian Small and Medium Sized Enterprises (“SMEs”) and corporates which were originated by Banca Popolare di Milano S.c. a r.l. (the “Originator” or “BPM”). The ratings on the Rated Notes address the timely payment of principal and interest payable on or before the Final Maturity Date, on the Payment Date in July 2053. DBRS does not rate the EUR 485,951,000 Class Z Asset Backed Floating Rate Notes (the “Class Z Notes”). The Rated Notes and Class Z Notes together are referred to as the “Bonds”.

The transaction portfolio consists of the aggregate of 8,854 loans extended to 7,889 separate borrowers. On the Issue Date, the par balance of the portfolio is EUR 973,950,985, which is funded by the aggregate issuance of the Bonds. There is also a Cash Reserve of EUR 19,000,000 that is financed by a Subordinated Loan provided by the Originator. This reserve cannot amortise, other than due to being used as specified in the transaction. It will be replenished through the Priority of Payments. It can be used to pay down the Rated Notes on the Payment Date on which the Rated Notes are repaid in full.

A Commingling Amount of EUR 22,652,741, equivalent to 2.3% of the portfolio, will also be deposited into the Italian Account Bank. In addition, the Potential Set-off Amount of EUR 38,000,000 has been calculated as of the Transfer Date and this amount, net of any amounts paid out, will be deposited by the Originator in the Italian Account Bank if the DBRS equivalent rating of the Originator drops below BBB (low). The Potential Set-Off Amount cannot amortise, other than due to being used as specified in the transaction. Neither reserve will be replenished through the Priority of Payments.

BPM acts as the Originator and Servicer of the portfolio, and the Collection Account Bank. Deutsche Bank S.p.A. is the Italian Account Bank and Cash Manager, and Deutsche Bank AG, London Branch is the English Account Bank.

The rating of the Rated Notes is based upon DBRS’s review of the following considerations:
• Transaction structure, the form and sufficiency of available credit enhancement, the portfolio characteristics and the cash trapping mechanisms.
-- The credit enhancement for a particular Note is (i) the performing asset balance, minus (ii) the outstanding balance of all Notes senior to the Notes in question, minus (iii) the balance of the Notes in question.
---- The credit enhancement of the Class A1 Notes is EUR 632,950,985 and that of the Class A2 Notes is EUR 485,950,985.
-- In addition, the Cash Reserve provides protection to the Rated Notes by covering unpaid items in the Pre-Trigger Priority of Payments that are fees and interest to the Rated Notes. The Cash Reserve is replenished in the Priority of Payments.
-- The Originator is obliged to post the Potential Set-Off Amount to cover set-off and the Additional Commingling Amount of EUR 8,000,000, to increase the coverage of commingling risk, if its DBRS Equivalent rating drops below BBB (low).
-- The credit enhancement and other protections for the Rated Notes enable them to return the scheduled principal and interest payments under projected default and recovery scenarios.

• The Issuer has not entered into any hedging contracts.
-- The Issuer is at risk due to the potential mismatch between the reference index of the Bonds and the reference indices of the assets.
-- The potential risk due to a payment frequency mismatch between the liabilities and the loan collateral is, however, greatly mitigated by the high proportion of loans that pay at least quarterly, 91.85%. The proportion of loans that pay monthly is 62.96%, reducing this risk even more.
-- The remaining risks due to not having any hedges have been addressed by the sizing of the Cash Reserve and amount of subordination in the structure.

• Over the life of the transaction, BPM, as the Servicer, has the authority to modify the loans in the portfolio, depending on the situation of the borrower. The Servicer would do this if, in its judgment, it would most likely get a more favorable outcome than if no relief were offered. These modifications, or renegotiations, include reductions in interest rates, payment holidays, extension of the loan term and switching from fixed to floating interest rates at a lower level. However, these renegotiations will, in general, be disadvantageous to the Issuer in the short term, leading to a loss, even if they produce a better overall outcome in the long term. This transaction has no mechanism to compensate the Issuer for these losses; therefore, DBRS stressed the transaction parameters additionally to account for this.

• Review of the legal structure and operational capabilities of key transaction participants.

• The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the approved terms. Interest and principal payments on the Notes will be made quarterly, generally on the 20th day of January, April, July and October. The first Payment Date will be 20 April 2012.

• The transaction parties’ financial strength and capabilities to perform their respective duties and the quality of origination, underwriting and servicing practices.

• Soundness of the legal structure and presence of legal opinions which address the true sale of the assets to the trust and the non-consolidation of the special purpose vehicle, as well as the consistency with the DBRS Legal Criteria for European Structured Finance Transactions.

The principal methodology is Master European Granular Corporate Securitisations (SME CLOs), which can be found on our website under Methodologies.

The sources of information used for these ratings include the parties involved in the rating, including but not limited to the Originator, Banca Popolare di Milano S.c. a r.l., the Issuer, BPM Securitisation 2 S.r.l., and its agents.

DBRS considers the information available to it for the purposes of providing this rating was of average quality. DBRS adjusted its analysis to account for the quality of information provided. The source of our concern is the historical information provided for DBRS to determine the average annual default rate of corporate borrowers. The average annual default rate for corporate borrowers is a key input parameter in DBRS analysis, and is derived by DBRS from information provided to it by BPM. BPM provided historical default and delinquency information based on the notional amount and number of loans it had originated since 2003, but this did not match the definition and form that DBRS bases its analysis on. The definition of default in the Italian market is defined by the Bank of Italy and is different to the European Central Bank standard of 90 days. The BPM data reflected the Bank of Italy standard.

However, BPM did supply additional arrears information incorporating the notional number of loans in arrears. DBRS was therefore able to use this data to analyse the historical performance of BPM. As a result, the data provided by BPM is considered to be of average quality. Aside from the data quality issue with regards to the calculation of the average annual default rate, DBRS considers the other information available to it for the purposes of providing this rating was of satisfactory quality.

Further information on DBRS’s analysis of this transaction will be available in a rating report on http://www.dbrs.com, or by contacting us at info@dbrs.com.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

This is the first DBRS rating on this financial instrument.

For additional information on DBRS European CLO and Tranched Credit Derivatives, please see European Disclosure Requirements, located at http://www.dbrs.com/research/237794.

Lead Analyst: Simon Ross
Rating Committee Chair: Jerry van Koolbergen
Initial Rating Date: 19 December 2011

Note:
All figures are in Euros unless otherwise noted.