DBRS Assigns Rating to the Class A Notes of Claris SME 2012 S.r.l.

DBRS Ratings Limited (“DBRS”) has today assigned a rating of A (high) (sf) to the EUR 1,041,400,000 Class A Asset Backed Floating Rate Notes (the “Class A Notes”) issued by Claris SME 2012 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 self-employed individuals. The loans were originated by three banks that are part of the Veneto Banca Group: Veneto Banca S.c.p.A. (“VB”), bancApulia S.p.A. (“bancApulia”) and Cassa di Risparmio di Fabriano e Cupramontana S.p.A (“CARIFAC”, with VB and bancApulia are collectively referred to as the “Originators”).

The rating on the Class A Notes addresses the timely payment of interest and the ultimate payment of principal payable on or before the Final Maturity Date in July 2047. DBRS does not rate the: Class B1 Asset Backed Floating Rate Notes; the Class B2 Asset Backed Floating Rate Notes, or Class B3 Asset Backed Floating Rate Notes (collectively, the “Junior Notes”) with an aggregate total par balance of EUR 404,950,000.

The asset transfer documents were signed on 23 July 2012. As of 15 June 2012, the transaction portfolio consisted of the aggregate of 10,107 loans extended to 8,125 individual borrowers or borrower groups. The par balance of the loan portfolio is EUR 1,446.34 million and does not contain loans in arrears for more than 30 days. The transaction is well diversified by borrower exposure with the largest one, ten and twenty borrower groups representing 1.2%, 7.8%, and 12.2% of the outstanding portfolio balance, respectively. The portfolio does exhibit some industry and regional concentration, which was addressed by applying a higher correlation in the analysis. The largest three industries (by NACE industry group) are Real Estate Activities, Construction, and Manufacturing, representing 21.2%, 19.2%, and 14.5% of the outstanding portfolio balance, respectively. The top three regions represent 69.2% of the portfolio balance split between the regions of Veneto (33.3%), Puglia (22.1%) and Lombardia (13.9%).

Each of VB, CARIFAC and bancApulia will act as the Servicers for their respective portfolios.

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.
• A cash-trapping mechanism which will not allow any junior payments until the Class 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 Class A Notes will be made semiannually.
• 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 a maximum period of 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 Originators have funded the Cash Reserve through the proceeds of the issuance of subordinated loan granted by the Originators to the Issuer. The Cash Reserve will have an aggregate initial balance of EUR 35,000,000. The Cash Reserve is available to cover senior expenses and interest shortfalls on the Class A Notes throughout the life of the transaction, and will only be available as credit support when the Class 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 Originators, the Issuer and its agents.

The vintage performance data provided did not match the definition that DBRS bases its analysis on. The historical performance data was based on the “sofferenza” definition of default which is when a loan is at least 270 days in arrears, as opposed to the standard of 90 days used by DBRS. However, DBRS used additional dynamic arrears data provided by the originators to determine conservative average annual default rate. 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 SME CLO(s), please see European Disclosure Requirements, located at http://www.dbrs.com/research/235269.

Lead Analyst: Carlos Silva
Rating Committee Chair: Jerry van Koolbergen
Initial Rating Date: 13 August 2012

Note:
All figures are in Euros unless otherwise noted.