DBRS Confirms Ratings on BPL Mortgages S.r.l. – Series V

DBRS Ratings Limited (“DBRS”) has reviewed BPL Mortgages S.r.l. – Series V (the “Issuer”) and confirmed the ratings on the Class A Notes at ‘A’ (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 January 2014 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 ‘A’ (sf) rating level.

BPL Mortgages S.r.l. – Series V is a securitisation of a portfolio of Italian first and second ranking mortgage loans originated and serviced by Banco Popolare Società Cooperativa and Credito Bergamasco S.p.A. The transaction follows the standard structure under the Italian Securitisation Law and closed in December 2012. At closing, only a part of the total Class A issuance of EUR 2.44 billion was paid-up. On the first payment date fallen in April 2013, the Issuer purchased a further portfolio with the proceeds of the second issuance.

The portfolio is just under four years seasoned and slightly concentrated in the Northern regions of Italy. Approximately 17% of the original mortgage portfolio was exposed to loans originated in the 2006 and 2007 vintages. The Issuer is exposed to risk of non-standard mortgages loans in the portfolio. For instance, approximately one third of the portfolio is made of optional loans which allow the borrower to switch interest rate type from floating to fixed and vice versa. Additionally, there are offset mortgages where the borrower does not pay interest up to the amount credited in a linked current account. DBRS has increased the expected losses at each rating category in order to account for the risk arising from the non-standard composition of the portfolio.

As of the January 2014 payment date, the current 90+ delinquency ratio as a percentage of the performing balance of the portfolio was low at 1.37%, down from the peak of 2.22% reached in October 2013. The current cumulative default ratio as a percentage of the original balance was 1.06%.

The Class A Notes are supported by subordination of the Class B Notes. The credit enhancement for the Class A (as a percentage of the performing collateral balance) has increased from 32.00% to 37.00% since rating in December 2012. A non-amortising cash reserve of EUR 64.00 million (equal to 1.98% of the current aggregate balance of the notes) was set up at the transaction closing and provides liquidity support to the Class A Notes. The cash reserve is held at Banco Popolare S.c., London branch and it is currently at the initial and target level.

BNP Paribas Securities Services, Milan branch and Banco Popolare S.c., London branch are the agent bank and transaction bank for this transaction, respectively. The agent bank holds the payment account, while the transaction bank holds the cash reserve account and expenses account for the Issuer. The DBRS private ratings of each BNP Paribas Securities Services, Milan branch and Banco Popolare S.c., London branch are 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 provided by BNP Paribas Securities Services, 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 4 April 2013, when DBRS confirmed the ratings on the Class A Notes at ‘A’ (sf).

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 10.82% and 14.73%, respectively. At the ‘A’ (sf) rating level, the corresponding PD is 27.39% and the LGD is 27.86%.
• 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 ‘A’ (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 ‘A’ (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 BBB (low) (sf).

Class A Notes Risk Sensitivity:
• 25% increase in LGD, expected rating of ‘A’ (sf)
• 50% increase in LGD, expected rating of ‘A’ (sf)
• 25% increase in PD, expected rating of ‘A’ (sf)
• 50% increase in PD, expected rating of ‘A’ (sf)
• 25% increase in PD and 25% increase in LGD, expected rating of A (low) (sf)
• 25% increase in PD and 50% increase in LGD, expected rating of BBB (low) (sf)
• 50% increase in PD and 25% increase in LGD, expected rating of A (low) (sf)
• 50% increase in PD and 50% increase in LGD, expected rating of BBB (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: Alessio Pignataro
Initial Rating Date: 24 December 2012
Initial Rating Committee Chair: Claire Mezzanotte

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

DBRS Ratings Limited
1 Minster Court, 10th Floor
Mincing Lane
London
EC3R 7AA
United Kingdom

Registered in England and Wales: No. 7139960

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
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