DBRS Confirms the Ratings on MondoMutui Cariparma S.r.l. – Series 2012

DBRS Ratings Limited (“DBRS”) has reviewed MondoMutui Cariparma S.r.l. – Series 2012 (the “Issuer”) and confirmed the ratings on the Class A Notes at AAA (sf).

Confirmation of the ratings for the Class A Notes is based upon the following analytical considerations, as described more fully below:

• Portfolio performance, in terms of delinquencies and defaults, as of the October 2013 payment date.
• Updated Portfolio Default Rate, Loss Given Default and Expected Loss for the remaining collateral pool.
• Incorporation of a sovereign related stress component in the rating analysis to address the impact of macroeconomic variables on collateral performance given the long-term foreign and local currency rating of ‘A’ (low) for the Republic of Italy.
• Current available credit enhancement to the Class A Notes to cover the expected losses at the AAA (sf) rating level.

MondoMutui Cariparma S.r.l. – Series 2012 is a securitisation of a portfolio of residential mortgage loans secured by properties located in Italy. The pool was originated and is serviced by Cassa di Risparmio di Parma e Piacenza (“Cariparma”), a subsidiary of Credit Agricole. The transaction follows the standard structure under the Italian Securitisation Law and closed in February 2012.

The portfolio is three years seasoned and concentrated in the Northern regions of Italy (mainly Lombardy and Piemonte). 96% of the pool was originated in recent vintages (2009, 2010 and 2011). Additionally, the portfolio contains loans that can switch from floating to a fixed rate (approximately 41% of the original portfolio) and loans where the borrower can ask for a partial payment holiday.
As of the October 2013 payment date, the current 90+ delinquency ratio as a percentage of the performing balance of the portfolio was very low at 0.32%. The current cumulative default ratio as a percentage of the original balance was low as well at 0.34%.

The Class A Notes are supported by subordination of the Class J Notes. The credit enhancement for the Class A (as a percentage of the performing collateral balance) has increased from 16.00% to 18.87% since transaction close. In May 2012, a cash reserve of EUR 20 million, funded through a subordinated loan by Cariparma, was incorporated in the transaction. The cash reserve will be used at termination to cover any potential loss on the Class A Notes. The transaction benefits also of a liquidity facility of EUR 75.41 million set up at transaction close. The liquidity facility amortises to 3.2% of the Class A Notes balance in April each year and covers shortfalls in payment of Class A Notes interest and items senior thereto.

The reference index for the notes is Euribor 6-month. Approximately 13.35% of the loans in the current portfolio pay a fixed rate of interest while the remaining part pays a floating rate of interest linked to different indexes: Euribor 1-month (43.90%), Euribor 3-month (23.06%), Euribor 6-month (18.45%), others (1.25%). To mitigate the fixed-floating mismatch the Issuer entered into an interest rate swap with Cariparma. The DBRS private rating of Cariparma complies with the DBRS Derivative Criteria for European Structured Finance Transactions given the rating assigned to the Class A Notes.

Cariparma is also the account bank for this transaction. The DBRS private rating of Cariparma is at least equal to the Minimum Institution Rating given the rating assigned to the Class A Notes, as described in the DBRS Legal Criteria for European Structured Finance.

Notes:
All figures are in Euro unless otherwise noted.
The principal methodology applicable is the Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda. 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 investor reports and servicer reports provided by Cariparma, Crédit Agricole Corporate and Investment Bank, Milan Branch and data from the European DataWarehouse. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

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 last rating action on this transaction took place on 2 August 2013, when DBRS confirmed the ratings on the Class A Notes at AAA (sf) following the execution of certain amendments to the transaction documents.

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.

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

To assess the impact of the changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the “Base Case”):
• DBRS expected a lifetime base case Probability of Default (PD) and Loss Given Default (LGD) for the pool based on a review of the current assets. Adverse changes to asset performance may cause stresses to base case assumptions and therefore have a negative effect on credit ratings.
• The base case PD and LGD of the current pool of mortgages for the Issuer are 17.23% and 12.05%, respectively. At the AAA (sf) rating level, the corresponding PD is 49.75% and the LGD is 37.21%.
• The Risk Sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base case assumption. For example, if the LGD increases by 50%, the rating of the Class A Notes would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A Notes would be expected to remain at AAA (sf), assuming no change in the LGD. Furthermore, if both PD and LGD increase by 50%, the rating of the Class A Notes would be expected to remain at AA (high) (sf).

Class A Notes Risk Sensitivity:
• 25% increase in LGD, expected rating of AAA (sf)
• 50% increase in LGD, expected rating of AA (sf)
• 25% increase in PD, expected rating of AAA (sf)
• 50% increase in PD, expected rating of AA (high) (sf)
• 25% increase in PD and 25% increase in LGD, expected rating of AA (sf)
• 25% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)
• 50% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
• 50% increase in PD and 50% increase in LGD, expected rating of A (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: Konstantine Pastras
Initial Rating Date: 24 May 2012
Initial Rating Committee Chair: Claire Mezzanotte

Lead Surveillance Analyst: Elisa Scalco
Rating Committee Chair: Diana Turner

DBRS Ratings Limited
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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

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