DBRS Assigns Ratings to the Class A Notes of BCC SME Finance 1 S.r.l.

DBRS Ratings Limited (“DBRS”) has today assigned a rating of A (high) (sf) to the EUR 1,533,000,000 Class A Asset Backed Floating Rate Notes (the “Class A Notes”) issued by BCC SME Finance 1 S.r.l. (the “Issuer”). The Issuer is a limited liability company incorporated under the laws of Italy. The transaction is a multi-originator cash flow securitisation collateralised by a portfolio of bank loans to Italian Small and Medium Sized Enterprises (“SMEs”), which were originated by 27 Italian cooperative banks and 1 corporate bank, as listed below:

• Cassa Rurale Bassa Vallagarina Banca di Credito Cooperativo soc. coop.
• Cassa Rurale di Aldeno e Cadine Banca di Credito Cooperativo soc. coop.
• Cassa Rurale Alto Garda Banca di Credito Cooperativo soc. coop.
• Cassa Rurale Adamello – Brenta Banca di Credito Cooperativo soc. coop.
• Cassa Rurale Giudicarie Valsabbia Paganella Banca di Credito Cooperativo soc. coop.
• Cassa Rurale di Bolzano – Raiffeisenkasse Bozen soc. coop.
• Cassa Rurale Lavis Valle di Cembra Banca di Credito Cooperativo soc. coop.
• Cassa Rurale della Valle dei Laghi Banca di Credito Cooperativo soc. coop.
• Cassa Rurale Val di Fassa e Agordino Banca di Credito Cooperativo soc. coop.
• Cassa Rurale Alta Valdisole e Pejo Banca di Credito Cooperativo soc. coop.
• Cassa Rurale di Pergine Banca di Credito Cooperativo soc. coop.
• Cassa Rurale di Rovereto Banca di Credito Cooperativo soc. coop.
• Cassa Rurale di Tuenno Val di Non Banca di Credito Cooperativo soc. coop.
• Cassa Rurale di Trento Banca di Credito Cooperativo soc. coop.
• Banca di Romano e Santa Caterina Credito Cooperativo (VI) soc. coop.
• Banca di Caraglio del Cuneese e della Riviera dei Fiori Credito Cooperativo soc. Coop
• Banca di Credito Cooperativo di Cherasco soc. coop.
• Banca di Credito Cooperativo di Alba Langhe e Roero soc. coop.
• Banca di Credito Cooperativo di Gatteo soc. coop.
• Banca di Cavola e Sassuolo Credito Cooperativo soc. coop.
• Banca Alto Vicentino Credito Cooperativo Schio soc. coop.
• Centromarca Banca Credito Cooperativo soc. coop.
• Banca di Credito Cooperativo di Pianfei e Rocca de’ Baldi soc. coop.
• Banca di Credito Cooperativo di Sala di Cesenatico soc. coop.
• Banca San Giorgio e Valle Agno Credito Cooperativo di Fara Vicentino soc. coop.
• Banca San Biagio del Veneto Orientale di Cesarolo, Fossalta di Portogruaro e Pertegada Banca di Credito Cooperativo soc. coop.
• Banca Santo Stefano Credito Cooperativo Martellago Venezia soc. coop.
• MEDIOCREDITO TRENTINO-ALTO ADIGE S.p.A. – INVESTITIONBANK TRENTINO-SÜDITROL A.G.

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 May 2060. In connection with the issue of the Class A Notes, the Issuer will issue 28 series of junior notes for an aggregate amount of EUR 656,680,000 (collectively referred to as the “Class B Notes”), which DBRS will not rate.

The asset transfer documents were signed on 7 July 2012. As of 20 July 2012, the transaction portfolio consisted of the aggregate of 12,831 loans extended to 10,364 individual borrowers or borrower groups. The par balance of the loan portfolio is EUR 2,189.67 million, which consists of loans and the proceeds deriving from the amortisation of the loans (EUR 59.28 million). The par balance of the loan portfolio includes loans that have been in arrears for at least 60 days.

Each of the Originators will service its own portfolio. Cassa Centrale – Credito Cooperativo Nord Est S.p.A. will act as Back-up Servicer with respect to all portfolios and as Operating Bank as well. Deutsche Bank AG, London Branch will act as the Agent Bank, the Cash Manager, the English Transaction Bank, and the Principal Paying Agent. Deutsche Bank S.p.A. will act as Transaction Bank, Italian Paying Agent and Computation Agent. J.P. Morgan Securities PLC will act as the Swap Counterparty, while J.P. Morgan Chase Bank NA will act as the Swap Guarantor. In addition, FIS Full Integrated Solutions S.p.A. will act as Corporate Services Provider and as Back-up Servicer Facilitator. Finally, Deutsche Trustee Company Limited will act as the Representative of the Noteholders.

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.
• The structure envisages 28 waterfalls, one for each portfolio, which are linked mainly thorugh the Cash Reserve; full cross-collateralisation will take place only when some conditions are met.
• 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 semi-annual.
• 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 does not have a cash-trapping mechanism to mitigate claw-back risk coming from unscheduled prepayments. This was factored into DBRS’s analysis of the transaction. The transaction does not have mitigants dedicated to set-off and commingling risk. This was factored into DBRS’s analysis of the transaction as well.

Each of the Originators will fund a representative portion of the Cash Reserve through the proceeds of a subordinated loan. The Cash Reserve is non-amortising and will have an aggregate balance of EUR 65.9 million (equal to 4.3% of the initial balance of the Class A Notes). These funds will be deposited into 28 sub-Cash Reserve Accounts opened with the Transaction Bank (Deutsche Bank S.p.A.). Prior to the delivery of a Trigger Notice, each of the sub-Cash Reserves is available to cover senior expenses and interest shortfalls on the Class A Notes throughout the life of the transaction. To the extent that a sub-Cash Reserve is not able to reduce the shortfalls on its portfolio, the other sub-Cash Reserves can be used to make up for them. Finally the Cash Reserves will only be fully available as credit support when its balance can fully repay the Class A Notes 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, overall, of average quality. DBRS adjusted its analysis to account for the type of information provided. The source of concern revolves around 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 the Originators. The Originators provided historical default and delinquency information based on the notional amount of loans they had originated since 2002, which does 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 relative to the European Central Bank standard of 90 days. The data provided by the Originators reflect the Bank of Italy standard. An allowance was also made for the data being based on the notionals of the loans that had defaulted rather than on the number of loans that defaulted, as required by DBRS.

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: 10 August 2012

Note:
All figures are in Euros unless otherwise noted.