DBRS Assigns Provisional Ratings to Claris RMBS 2014 S.r.l.

DBRS Ratings Limited (“DBRS”) assigns provisional ratings to the following notes to be issued by Claris RMBS 2014 Srl:

-- AAA (sf) to EUR 550,000,000 Class A1 Notes

-- AAA (sf) to EUR 155,000,000 Class A2 Notes

Claris RMBS 2014 Srl is a securitisation of a portfolio of Italian prime residential mortgages. The mortgage loans were originated by bancApulia (“BAP”) and Veneto Banca (“VB”). BAP is part of Veneto Banca Group as a result of the merger of BAP and Banca Meridiana in 2010. The portfolio will be serviced by VB.

The mortgage portfolio was transferred to the Issuer on 10 February 2014. The mortgage portfolio consists of first lien mortgages granted to borrowers resident in Italy. The main geographical concentrations in the portfolio are Veneto (27.07%), Puglia (19.57%), Lombardia (18.77%) and Piemonte (10.81%). As at the cut-off date of the portfolio is the portfolio was 2.86 years seasoned had a weighted average current LTV of 55.24%.

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; Class A1 Notes 36.05% credit enhancement consists of the subordinated Class A2 Notes and Class J Notes. The Class A2 Notes 18.03% credit enhancement consists of a Class J Notes. The rated notes will receive interest pari-passu with no priority among themselves. The reserve fund provides liquidity support to cover for senior fees and interest on the rated notes. After replenishment of the reserve fund, excess spread available is used to pay down the rated notes.

• The mortgage portfolio consists of loans which have variable interest rates, fixed rates and loans that have the option to change rates from floating to fixed and fixed to floating. The transaction is exposed to basis and fixed interest rate risk of the collateral versus floating rate paid under the rated notes. The Issuer will enter into several hedging agreements with JP Morgan Securities Plc and Natixis SA to mitigate basis and fixed interest rate risk. The transaction swap documents reflect DBRS swap methodology in respect to fixed to floating swaps, but is not in full compliance in respect to basis swaps. For the purpose of the cash flow analysis, DBRS has assumed that the basis risk in this transaction is unhedged. DBRS deems the impact of the basis swap to be limited. This is reflected on the rating of the rated notes.
• The credit quality of the mortgages backing the Notes and the ability of the servicer to perform its servicing duties; the mortgage portfolio in Claris RMBS 2014 Srl, whilst seasoned, also has a large proportion of mortgage loans originated after the onset of the global financial crisis in 2008.DBRS was provided with the historical performance as well as loan level data for the mortgage portfolio in the transaction. Details of estimated defaults, loss given default and expected losses for the mortgage portfolio at “AAA (sf)” stress scenarios are highlighted below.
• DBRS used a combination of default timing curves (front- and back-ended), rising and declining interest rates and low, mid and high prepayment scenarios in accordance with the DBRS rating methodology to stress the cash flows. Given the low prepayment level observed in Italy, DBRS also tested a scenario with zero prepayments.
• 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.

Notes:
All figures are in Euro unless otherwise noted.

The principal methodology applicable is:
Master European Residential Mortgage-Backed Securities Rating Methodology and the Italian Jurisdictional Addendum

Other methodologies and criteria referenced in this transaction are listed at the end of this press release.

This can be found on www.dbrs.com at:
http://www.dbrs.com/about/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” on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/

The sources of information used for this rating include VB and their agents. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality. The information upon which DBRS ratings and reports are based, and any other content displayed on the Site, is obtained by DBRS from sources DBRS believes to be accurate and reliable. DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance. The extent of any factual investigation or independent verification depends on facts and circumstances.

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

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.

To assess the impact of a change in the transaction parameters (probability of defaults and/or loss given default) on the rating of Class A1 Notes and Class A2 Notes, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the “Base Case”):
• In respect of Class A1 Notes and a rating category of “AAA (sf)”, the Probability of Default (“PD”) of 27.98%, a 25% and 50% increase on the PD.
• In respect of Class A1 Notes and a rating category of “AAA (sf)”, Loss Given Default (“LGD”) of 31.99%, a 25% and 50% increase on the LGD.
• In respect of Class A2 Notes and a rating category of “AAA (sf)”, the Probability of Default (“PD”) of 27.98%, a 25% and 50% increase on the PD.
• In respect of Class A2 Notes and a rating category of “AAA (sf)”, Loss Given Default (“LGD”) of 31.99%, a 25% and 50% increase on the LGD.

DBRS concludes that for the Class A1 Notes:
• A hypothetical increase of the PD by 25% or a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to maintain the Class A1 Notes to AAA (sf).
• A hypothetical increase of the PD by 50%, ceteris paribus, would lead to a downgrade of the Class A1 Notes to AA (high) (sf).
• A hypothetical increase of the LGD by 50%, ceteris paribus, would lead to maintain the Class A1 Notes to AAA (sf).
• A hypothetical increase of the PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to downgrade the Class A1 Notes to AA (high) (sf).
• A hypothetical increase of the PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to downgrade the Class A1 Notes to AA (sf).
• A hypothetical increase of the PD by 25% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to downgrade the Class A1 Notes to AA (high) (sf).
• A hypothetical increase of the PD by 50% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to downgrade the Class A1 Notes to AA (sf).

DBRS concludes that for the Class A2 Notes:
• A hypothetical increase of the PD by 25%, ceteris paribus, would lead to a downgrade of the Class A2 Notes to AA (high) (sf).
• A hypothetical increase of the LGD by 25%, ceteris paribus, would lead to maintain the Class A2 Notes to AAA (sf).
• A hypothetical increase of the PD by 50%, ceteris paribus, would lead to a downgrade of the Class A2 Notes to AA (sf).
• A hypothetical increase of the LGD by 50%, ceteris paribus, would lead to maintain the Class A2 Notes to AAA (sf).
• A hypothetical increase of the PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A2 Notes to AA (high) (sf).
• A hypothetical increase of the PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A2 Notes to AA (sf).
• A hypothetical increase of the PD by 50% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A2 Notes to AA (low) (sf).

For further information on DBRS 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.

Initial Lead Analyst: David Sanchez Rodriguez
Initial Provisional Rating Date: 21/03/2014
Initial Provisional Rating Committee Chair: Quincy Tang
Last Rating Date: Not applicable; no last rating date.
Lead Surveillance Analyst: Dylan Cissou

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The rating methodologies and criteria used in the analysis of this transaction can be found at:
http://www.dbrs.com/about/methodologies

• Master European Residential Mortgage Backed Securities Rating Methodology and Jurisdictional Addenda
• Legal Criteria for European Structured Finance Transactions
• Operational Risk Assessment for European Structured Finance Servicers
• Unified Interest Rate Model for European Securitisations
• Derivative Criteria for European Structured Finance Transactions