DBRS Assigns Provisional Ratings to BERICA PMI S.r.l.

DBRS Ratings Limited (“DBRS”) has today assigned provisional ratings to the Notes issued by BERICA PMI S.r.l. (“the Issuer”), as follows:

Class A1X Asset Backed Floating Rate Notes due May 2057: AA (high) (sf)
Class A1Y Asset Backed Floating Rate Notes due May 2057: AA (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”), entrepreneurs and artisans. The loans were originated by two banks that are part of the Banca Popolare di Vicenza Group: Banca Popolare di Vicenza S.C.p.A. (“BPVi”) and Banca Nuova S.p.A. (“BN”), with BPVi are collectively referred to as the “Originators”.

The Class A1X and Class A1Y Notes (collectively, the “Senior Notes”) are pro rata and pari passu in both interest and principal payments. The expected Senior notes’ aggregate issue amount is EUR 1,000 million. 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 May 2057. DBRS does not rate the Class B Notes (the “Junior Notes”).

The Portfolio was transferred from the Originators to the Issuer on 1 March 2013 (the “Effective Date”) with an aggregate par balance of EUR 1,569.0 million and consisting of 10,208 loans to 8,537 borrowers and borrower groups. Between 1 March 2013 and 1 June 2013, the Issuer has collected (net of issuance expenses) EUR 85.01 million of interest and principal proceeds which are expected to be used by the Issuer to repay Senior Notes on the first payment date.

As of 1 June 2013, the transaction portfolio consisted of 9,801 loans extended to 8,220 individual borrowers or borrower groups, with a par balance of EUR 1,499.2 million. As of this date, the portfolio contained 41 loans in arrears for 31 days or less with an aggregated balance of EUR 3.25 million or 0.2% of the outstanding portfolio balance.

The above ratings are provisional. Final ratings will be issued upon receipt of executed versions of the governing transaction documents. To the extent that the documents and information provided by BERICA PMI S.r.l., J.P. Morgan Securities plc and Banca Popolare di Vicenza S.C.p.A. to DBRS as of this date differ from the executed versions of the governing transaction documents, DBRS may assign lower final ratings to the Notes, or may avoid assigning final ratings to the Notes altogether.

The ratings of the Senior Notes are based upon DBRS’s review of the following items:
• The transaction structure, the form and sufficiency of available credit enhancement, the portfolio characteristics:
-- The transaction is well diversified by borrower. The exposure to the largest one, ten and twenty borrower groups represent 0.7%, 4.6%, and 8.0%, respectively based on the portfolio balance outstanding as of 1 June 2013. The portfolio exhibits industry concentration to the Construction and Real Estate sectors, which was addressed by applying a higher correlation in the analysis. Loans to entrepreneurs and artisans with no specific NACE industry information represent 23.6% of the portfolio balance. The largest three industries (by NACE industry group excluding entrepreneurs and artisans) are Real Estate, Manufacturing and Wholesale, and Retail Trade, representing 17.8%, 16.9%, and 14.7% of the outstanding portfolio balance, respectively. The top three regions are represented by Veneto (37.5%), Tuscany (18.6%) and Sicily (12.1%).
-- The expected credit enhancement for the Senior Notes is 41.9% which DBRS considers to be sufficient to support the AA (high) (sf) ratings.
-- 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.
• The transaction benefits from a non-amortizing Cash Reserve, totaling EUR 44 million, which is available to cover senior expenses and interest shortfalls on the Class A1X and Class A1Y Notes throughout the life of the transaction. The Cash Reserve will only be available as credit support when the Class A1X and A1Y Notes will be redeemed or at final legal maturity.
• An assessment of the operational capabilities of key transaction participants.
• The ability of the transaction to withstand stressed cash flow assumptions and repay Noteholders 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.
• Both BPVi and BN will act as the Servicers for their respective portfolios. Additionally, BPVi will act as Master Servicer and Zenith Service S.p.A. will act as Back-up Servicer.
• The swap criteria used by J.P. Morgan Securities plc, acting as Swap Counterparty, is not fully compliant with the DBRS methodology (Derivative Criteria for European Structured Finance Transactions, May 2013). 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 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 this rating include BERICA PMI S.r.l., Banca Popolare di Vicenza S.C.p.A. and Banca Nuova S.p.A., as supplied via the arrangers (J.P. Morgan Securities plc and Banca Popolare di Vicenza S.C.p.A.).

The vintage performance data provided did not match the definition that DBRS bases its analysis on. The historical performance data was based on loans marked as either in over 270 days past due or “sofferenza”, as opposed to the standard of 90 days as per Basel II framework. 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 is available in a presale report on http://www.dbrs.com, or by contacting us at info@dbrs.com.

This rating concerns a newly issued financial instrument. This is the first DBRS rating on this financial instrument.

For additional information on DBRS European SME CLOs, please see European Disclosure Requirements, located at http://www.dbrs.com/research/235269.

For further information on DBRS’s historic default rates published by the European Securities and Markets Administration (“ESMA”) in a central repository see http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

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

Lead Analyst: Carlos Silva
Rating Committee Chair: Simon Ross
Initial Rating Date: 2 July 2013

Note:
All figures are in Euros unless otherwise noted.