DBRS Assigns Ratings to the 2012 POPOLARE BARI SME S.r.l.

DBRS Ratings Limited (“DBRS”) has today assigned final ratings to the Notes issued by 2012 POPOLARE BARI SME S.r.l. (“the Issuer”), as follows:

EUR 497,000,000 Class A1 Asset-Backed Floating Rate Notes: A (high) (sf)
EUR 120,000,000 Class A2 Asset-Backed Floating Rate Notes: A (high) (sf)

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 two banks that are part of the Banca Popolare di Bari Group: Banca Popolare di Bari S.C.p.A. (“BPB”) and Cassa di Risparmio di Orvieto S.p.A (“CRO”, with BPB are collectively referred to as the “Originators”).

The Class A1 and Class A2 Notes are collectively referred as “Senior Notes”. The rating on the Senior Notes addresses the timely payment of interest and the ultimate payment of principal payable on or before the Final Maturity Date in October 2054. DBRS does not rate the: Class B1 Asset-Backed Floating Rate Notes, or the Class B2 Asset-Backed Floating Rate Notes (collectively, the “Junior Notes”), with an aggregate total par balance of EUR 245,877,000.

The asset transfer documents were signed on 26 October 2012 based on a final portfolio chosen on the 15 October 2012. As of 15 October 2012, the transaction portfolio consisted of 5,657 loans extended to 4,665 borrowers and borrower groups totaling EUR 862.88 million. The transaction portfolio consists of a portfolio of loans originated by BPB representing EUR695.09m or 80.55% and a portfolio of loans originated by CRO representing EUE167.79m or 19.45% of the total portfolio balance. As of 15 October 2012 the portfolio did not contain loans in arrears for more than 30 days.

The transaction is fairly diversified by borrower exposure with the largest one, ten and twenty borrower groups representing 1.51%, 8.86%, and 13.20% of the outstanding portfolio balance, respectively. The portfolio exhibits industry concentration and relevant regional concentration in Southern Italy, which was addressed by applying a higher correlation in the analysis. The largest four industries (by NACE industry group) are Wholesale and Retail Trade, Construction, Manufacturing, and Real Estate, representing 22.78%, 22.62%, 17.52%, and 10.64% of the outstanding portfolio balance, respectively. The top three regions represent 66.64% of the portfolio balance, split between the regions of Puglia (34.90%), Campania (17.49%) and Basilicata (14.24%).

Each of BPB and CRO will act as the Servicers for their respective portfolios. BPB will also act as Master Servicer and Banca Etruria will be the Back-up Servicer.

The rating of the Senior 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: there is a separate waterfall for each Originator with the Class A1 and Class B1 Notes backed by the BPB portfolio, while the Class A2 and Class B2 Notes are backed by the CRO portfolio); however, the two waterfalls are fully cross-collateralized since inception of the deal.
• A cash-trapping mechanism which will not allow any junior payments until the Senior Notes are redeemed in full and will accelerate the repayment of the Senior Notes.
• 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 Senior 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 does not have mitigants dedicated to set-off and commingling risk. This was factored into DBRS’s analysis of the transaction.

The swap criteria used by J.P. Morgan Securities PLC, acting as Swap Counterparty, is not fully compliant with the DBRS methodology (Swap Criteria for European Structured Finance Transactions, February 2012). There is, therefore, a risk that the transaction is exposed to swap counterparty credit risk. DBRS has applied additional stresses in its analysis to account for this risk.

The Originators have funded two non-amortizing Liquidity Reserves through the proceeds of the issuance of subordinated loans granted by the Originators to the Issuer. The Liquidity Reserves will have an aggregate balance of EUR 25,886,290 and is available to cover senior expenses and interest shortfalls on the Class A1 and Class A2 Notes throughout the life of the transaction. The Liquidity Reserves will only be available as credit support when the Class A1 and A2 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 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: 14 December 2012

Note:
All figures are in Euros unless otherwise noted.