DBRS Assigns Ratings to the Class A Notes of Etruria Securitisation SPV S.r.l.

DBRS Ratings Limited (“DBRS”) has today assigned a rating of A (high) (sf) to the EUR 427,000,000 Class A Asset Backed Floating Rate Notes (the “Class A Notes”) issued by Etruria Securitisation SPV S.r.l. (the “Issuer”). The Issuer is a limited liability company incorporated under the laws of Italy. The transaction is cash flow securitisation collateralised by a portfolio of bank loans to Italian Small and Medium Sized Enterprises (“SMEs”), which were transferred by BancaEtruria Società Cooperativa (“BancaEtruria”).

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 2055. DBRS does not rate the EUR 216,987,000 Class B Asset Backed Floating Rate Notes (the “Class B Notes”).

The asset transfer documents were signed on 12 July 2012 and were amended on 8 October 2012. As of 6 July 2012, the transaction portfolio consisted of the aggregate of 4,984 loans extended to 4,403 individual borrowers or borrower groups. The par balance of the loan portfolio is EUR 643.21 million. In addition, as of 6 September 2012, approximately EUR 15.67 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 Interest Payment Date, 26 January 2013, to pay the fees, the interest on the Class A Notes and to amortise the Class A Notes in accordance with the Priority of Payments. The par balance of the loan portfolio includes loans that have been in arrears for no more than 90 days as of 6 July 2012. Loans that are at least 60 days in arrears as of the Issue Date are regarded as being in default in the DBRS cash flow analysis.

BancaEtruria acts as the Originator, Servicer and Sub Loan Provider. BNP Paribas Securities Services, Milan Branch, will Principal Paying Agent, Agent Bank, Computation Agent, Custodian and Representative of the Noteholders. BNP Paribas Securities Services, London Branch, will act as the Transaction Bank and Cassa di Risparmio di Asti S.p.A. is the Stand-by 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, the Cash Reserve Account and Commingling 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 has a Cash Reserve Account that will be available to pay senior fees and interest on the Class A Notes. The initial balance in the Cash Reserve Account will be EUR 10,875,000 and thereafter will be maintained at 2.5% of the outstanding balance of the Class A Notes. In addition, there is a Commingling Reserve Account in case the Servicer is unable to fulfil its obligations and causes a liquidity issue. The initial balance in the Commingling Reserve Account will be EUR 13,050,000 and thereafter will be maintained at 3.0% of the outstanding balance of the Class A Notes. The balances in both reserve accounts will be maintained at the minimum level of EUR 3,000,000.

The structure does have a cash-trapping mechanism (the “Prepayments Account”) to mitigate claw-back risk arising from unscheduled prepayments that could be subject to repayment in the case of the bankruptcy of the borrower.

The structure does not have a specific mechanism to mitigate set-off risk. 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, 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 Originator. The Originator provided historical default and delinquency information based on both the notional balance and number of loans it had originated since 2005. However, the definition of default used by the Originator is that specified by the Bank of Italy, sofferenza, which does not match the definition that DBRS bases its analysis on, which is the European Central Bank standard of 90 days in default. An allowance was also made for this difference.

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 October 2012

Note:
All figures are in Euros unless otherwise noted.