DBRS Assigns Ratings to the Series 2012-2-A of Civitas SPV S.r.l.

DBRS Ratings Limited (“DBRS”) has today assigned a rating of A (low) (sf) to the EUR 273,000,000 Series 2012-2-A Asset Backed Floating Rate Notes (the “Series A Notes”) issued by Civitas SPV S.r.l. (the “Issuer”). The Series 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 Banca di Cividale S.p.A (“Banca di Cividale”). The rating on the Series A Notes addresses the timely payment of interest and ultimate payment of principal payable on or before the Final Maturity Date in October 2055. DBRS does not rate the EUR 144,700,000 Series 2012-2-B Asset Backed Notes (the “Junior Notes”).

The asset transfer documents were signed on 17 July 2012. As of 14 July 2012, the transaction portfolio consisted of the aggregate of 2,919 loans extended to 2,264 individual borrowers or borrower groups. The par balance of the loan portfolio is EUR 409.85 million, which entirely consists of loans that are either not in arrears or have been in arrears for no more than 30 days.

Banca di Cividale acts as the Originator, Servicer and Cash Manager. BNP Paribas Securities Services, Milan Branch is the Account Bank and Paying Agent. In addition, Securitisation Services acts as Computation Agent, Corporate Servicer, Back-up Servicer Facilitator and Representative of Noteholders.

The rating of the Series 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.
• A cash-trapping mechanism which will not allow any junior payments until the Series A Notes are redeemed in full.
• 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 Series 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 structure envisages a cash trapping mechanism to mitigate claw-back risk coming from unscheduled prepayments: if a loan has not been granted to individuals which are not subject to Italian Bankruptcy Law and it does not qualify as “mutuo fondiario”, the related prepayments are set aside for two years.

The transaction does not have mitigants dedicated to set-off and commingling risk. This was factored into DBRS’s analysis of the transaction.

The Originator has funded the Cash Reserve through the proceeds of the issuance of Junior Notes. The Cash Reserve will have an aggregate initial balance of EUR 6,900,000 (equal to 2.5% of the initial balance of the Series A Notes). These funds will be deposited with the reserve account opened with the Account Bank. Prior to the delivery of a Trigger Notice, the Cash Reserve is available to cover senior expenses and interest shortfalls on the Series A Notes throughout the life of the transaction, and will only be available as credit support when the Series A Notes will be redeemed or at final legal maturity.

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 Banca di Cividale. Banca di Cividale provided historical default and delinquency information based on the notional amount and number of loans it had originated since 2006, 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 Banca di Cividale 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: 1 August 2012

Note:
All figures are in Euros unless otherwise noted.