DBRS Confirms Rating to Padovana RMBS S.r.l. (Padovana RMBS) Notes

DBRS Ratings Limited (DBRS) has today confirmed the rating of ‘A’ (sf) to the Class A notes issued under Padovana RMBS S.r.l. (Padovana RMBS, issuer). DBRS assigned ratings only apply to the paid up amount of the notes. The paid-up amount of the Class A notes, as of 4 October 2012, stands at EUR284.60 million (EUR156.3 million as at the initial issuance date).

DBRS removed the Class A notes from ‘Under Review with Negative Implications’. The influence of the Italian sovereign credit risk (Downgraded to Long term rating of ‘A’, as of August 8, 2012) on the Padovana RMBS rated notes has been considered.

The Class B notes, which are junior to the above classes of notes, are not rated. The paid-up amount of the Class B notes, as of 4 October 2012 stands at EUR71.177 million (EUR39.10 million as at the initial issuance date).

The proceeds of the additional paid-up amount on the notes have been used by the issuer to purchase additional mortgage portfolio. The additional mortgage portfolio satisfies the conditions applicable to purchase of new loans under the transaction.

The aggregate of the paid-up, collateralised notes under Padovana RMBS now stands at EUR355.78 million. The issuer does not envisage any further increase to the paid-up amount of the notes under the transaction and hence no new loans will be purchased going forward.

As a result of the above change the credit enhancement to the Class A notes is reduced to 20.51% from 23.22% as at the initial issuance date. The reduction in credit enhancement is due to a smaller reserve fund, 0.5% of the collateralised notes as compared to 3.21% at the initial issuance date. The support from the subordinated Class B notes (20.01% of the collateralised notes) remains the same.

The reduction in credit enhancement does not affect the ratings on the Class A notes. As at the initial issuance date, the increase in the paid-up amount on the collateralised notes and its effect on the credit enhancement was expected and DBRS had stressed its cash flows analysis to account for the potential reduction in credit enhancement to the Class A notes.

The liquidity reserve of 3.5% of the collateralised notes, will amortise in line with the Class A notes. The amounts so released from the liquidity reserve will increase the reserve fund supporting the Class A notes.

Padovana RMBS is the issuance of RMBS notes backed by first and second ranking mortgages, to prime borrowers in Italy, originated by Banca Padovana Credito Cooperativo S.c. (Banca Padovana). Padovana RMBS follows the standard structure under Italian securitisation law and closed on 25 July 2012.

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.
• The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms of the transaction documents.
• The transaction parties’ capabilities with respect to originations, underwriting, servicing, and financial strength.
• The credit quality of the mortgages backing the notes and the ability of the servicer to perform collection activities on the collateral.
• The back-up servicing arrangement to mitigate servicing disruption.
• 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.

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 Padovana, and performance history of publicly rated Italian RMBS deals. 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 an existing financial instrument.

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

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

Lead Analyst: Kali Sirugudi
Rating Committee Chair: Claire Mezzanotte
Initial Rating Date: July 25, 2012