DBRS Assigns Rating to Mars 2600 S.R.L. – Series 4 2012 (Mars Series 4) Notes

DBRS Ratings Limited (DBRS) has today assigned ratings to some of the notes issued under Mars 2600 S.R.L. – Series 4 2012 (Mars Series 4, issuer) as shown below:

•AA (sf) rating to the Class A1 notes aggregating EUR122,900,000, paying a margin of 1% over 3 months Euribor; and
•AA (sf) rating to the Class A2 notes aggregating EUR235,400,000, paying a fixed coupon of 2.4% p.a.

The Class D notes, which are junior to the above classes of notes, are not rated.

Mars 2600 S.R.L is a SPV set up in 2004. The current issuance is the fourth series of RMBS notes issued by the SPV and are backed by first ranking mortgages, to prime borrowers in Italy, originated by Banca Sella SpA (Banca Sella). Mars Series 4 follows the standard structure under Italian securitisation law and closed on 14 March 2012.

Mars Series 4 transaction is exposed to basis risk which is unhedged. The structure under the transaction reduces the extent of basis risk where part of the fixed rate liability on the notes matches the fixed rate paying mortgage assets. DBRS has applied interest rate stresses, per its Unified Interest Rate Methodology, to the cash flows on the assets and the liabilities to simulate the basis risk exposure on the notes to test the timely payment of interest on the rated notes.

The rating is based upon review by DBRS of the following analytical considerations:

•The transaction’s capital structure and the form and sufficiency of available credit enhancement. Relevant credit enhancement is in the form of subordination and excess spread. The Class A1 and A2 notes are supported by Class D subordinated notes (10% in size). The liquidity for the rated Class A1 and A2 notes is supported by a reserve fund, 2% in size of the aggregate notes issued at close. The reserve fund is available to meet any shortfalls in payment of senior fees and interest on Class A1 or Class A2.

•The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms of the transaction documents.

•Banca Sella’s capabilities with respect to originations, underwriting and , servicing.

•The credit quality of the mortgages backing the notes and the ability of the servicer to perform collection activities on the collateral. The Mars Series 4 mortgage portfolio is comprised of performing loans with only 5.72% of the loans having ever been classified in arrears (less than 60 days) since origination. Moreover, the weighted average loan-to-value (WALTV) of the mortgage portfolio is low at 49.53%. DBRS thus expects lower expected losses on Mars Series 4 mortgage portfolio as compared to Italian mortgage portfolios with higher WALTVs.

•The legal structure and presence of legal opinions addressing the assignment of the assets to the issuer and the consistency with the DBRS Legal Criteria for European Structured Finance Transactions.

DBRS applied its Italian RMBS Criteria to assess the mortgage loss on the underlying mortgage portfolio for Mars Series 4.

Note:
All figures are in EUR unless otherwise noted.

The principal methodologies applicable are:
•Master European Residential Mortgage-Backed Securities Rating Methodology
•Legal Criteria for European Structured Finance Transactions
•Operational Risk Assessment for European RMBS Servicers
•Unified Interest Rate Model Methodology for European Securitisations

These can be found on dbrs.com under Methodologies. For a more detailed discussion of sovereign risk impact on Structured Finance ratings, please refer to DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area”.

The data and sources of information used for this rating include data relating to historical performance and recoveries from Banca Sella, performance history of previous issuances by the SPV and performance history of publicly rated Italian RMBS deals from Intex. House prices’ statistics maintained by Nomisma, Italy. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

This is a newly created financial instrument.

This is the first DBRS rating on this financial instrument.

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

For additional information on these ratings, please refer to the linking document.

Lead Analyst: Kali Sirugudi
Rating Committee Chair: Claire Mezzanotte
Initial Rating Date: March 23, 2012