DBRS Assigns Ratings to the Class A Notes issued by SME Grecale S.r.l.

DBRS Ratings Limited (“DBRS”) has today assigned a rating of AAA (sf) to the EUR 430,000,000 Class A Asset Backed Floating Rate Notes (the “Class A Notes”) issued by SME Grecale S.r.l. (the “Issuer”). The Class A Notes have also been placed Under Review with Negative Implications due to the placement of the ratings of the Republic of Italy’s long-term foreign and local currency debt Under Review with Negative Implications. The Republic of Italy’s foreign and local currency debt are rated A (high). 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”), which were originated by Unipol Banca S.p.A. (“Unipol Banca”). The rating on the Class A Notes addresses the timely payment of interest and ultimate payment of principal payable on or before the Final Maturity Date in January 2062. DBRS does not rate the EUR 409,217,000 Class B SME Loan Backed Floating Rate and Variable Return Notes (the “Class B Notes”).

The asset transfer documents were signed on 20 March 2012. As of 2 July 2012, the transaction portfolio consisted of the aggregate of 6,247 loans extended to 4,991 individual borrowers or borrower groups. The par balance of the loan portfolio is EUR 786.37 million, which consists of (i) EUR 758.06 million of loans that are either not in arrears or have been in arrears for no more than 30 days, and (ii) EUR 28.3 million of loans that have been in arrears for more than 30 days. In addition, approximately EUR 52.85 million of the original loan portfolio has amortised since the Valuation Date. This amount will be included in the Available Funds and used on the First Payment Date, 22 September 2012, to pay the fees, the interest of the Class A Notes, and to amortise the Class A Notes in accordance with the Pre-Enforcement Priority of Payments.

Unipol Banca acts as the Originator, Servicer, Corporate Servicer, and Subordinated Loan Provider. J.P. Morgan Securities PLC acts as the Hedging Counterparty, and J.P. Morgan Chase Bank is the Hedge Guarantor. The Bank of New York Mellon (Luxembourg) S.A., Italian Branch is the Italian Account Bank, The Bank of New York Mellon SA/NV London Branch is the English Account Bank. In addition, Italfondiario S.p.A. is the Back-Up Servicer.

The rating of the Class A Notes is based upon DBRS’s review of the following items:
• The transaction structure, the form and sufficiency of available credit enhancement, the portfolio characteristics, and the cash trapping mechanism of the non-amortising Class A Cash Reserve Account.
• The transaction parties’ financial strength and capabilities to perform their respective duties and the quality of origination, underwriting, and servicing practices.
• An assessment of the 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 Class A Notes will be made quarterly.
• The soundness of the legal structure and the 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 consistency with the DBRS Legal Criteria for European Structured Finance Transactions.

The transaction does not have dedicated mitigants for set-off, commingling or prepayments. This was factored into DBRS’s analysis of the transaction.

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, the Issuer 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 Unipol Banca. Unipol Banca provided historical default and delinquency information based on the notional amount and number of loans it had originated since 2004, 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 Unipol Banca data reflected the Bank of Italy standard.

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 SME CLO(s), please see European Disclosure Requirements, located at http://www.dbrs.com/research/235269.

Lead Analyst: Simon Ross
Rating Committee Chair: Jerry van Koolbergen
Initial Rating Date: 13 July 2012

Note:
All figures are in Euros unless otherwise noted.