DBRS Takes Rating Actions on Asset-Backed European Securitisation Transaction Seven S.r.l.

DBRS Ratings Limited (“DBRS”) has reviewed Asset-Backed European Securitisation Transaction Seven S.r.l. (“A-BEST Seven”) and taken the following rating actions:
• Class A Notes confirmed at AAA (sf), and
• Class B Notes upgraded to ‘AA’ (sf) from ‘A’ (sf).

The above mentioned rating actions are based upon the following analytical considerations:
• Portfolio performance, in terms of defaults and delinquencies, as of the April 2014 payment date.
• Updated default, recovery and loss assumptions on the remaining balance of the collateral portfolio.
• 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 and Class B Notes to cover the expected losses at the AAA (sf) and AA (sf) rating level, respectively.

A-BEST Seven is a securitisation of a portfolio of auto loans originated and serviced by FGA Capital S.p.A., a joint venture 50% owned by Fiat Group and 50% owned by Crédit Agricole Consumer Finance. The deal follows the standard structure under the Italian Securitisation Law and closed in May 2012.

The pool comprises of loans extended to Italian individuals (93.51%) and corporates (6.49%) to buy new (84.18%) and used car (15.82%). The portfolio is static and neither revolving nor ramp-up is permitted.

The cumulative default ratio (calculated on the initial collateral balance) exhibited an increasing trend since the initial rating in May 2012, but it is still very low at 0.30%. The 90+ delinquency ratio has marginally decreased on the last reporting dates and reached the value of 0.13% in April 2014.

The Class A Notes are supported by subordination of the Class B and Class M Notes, while the Class B Notes are supported by subordination of the Class M Notes only. Credit enhancement for the Class A Notes (as a percentage of the performing portfolio) increased to 34.69% from 15.54% since the initial rating in May 2012, while credit enhancement for the Class B Notes increased to 16.21% from 7.38%.

U.S. Bank Global Trust Services serves as account bank for the transaction. The DBRS private ratings of U.S. Bank Global Trust Services 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 Transactions. Additionally, Unicredit Bank AG acts as swap counterparty for the transaction. The current DBRS private rating of Unicredit Bank AG complies with the current DBRS Derivative Criteria.

Notes:
All figures are in Euro unless otherwise noted.
The principal methodology applicable is the Master European Structured Finance Surveillance Methodology. 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 payment reports and investor reports provided by U.S. Bank Global Trust Services. 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 17 April 2013, when DBRS confirmed the ratings of the Class A Notes and the Class B Notes at ‘AAA’ (sf) and ‘A’ (sf), respectively and removed the ratings from Under Review with Negative Implications.

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 Base Case Probability of Default (PD) and Loss Given Default (LGD) for the pool based on a review of the transaction performance. 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 receivables are 2.65% and 90.27%, respectively.
• The Risk Sensitivity overview below illustrates the ratings expected for the Class A Notes if the PD and LGD increase by a certain percentage over the Base Case assumption. For example, if the LGD increase by 50% the rating for the Class A Notes would be expected to be AAA (sf), all else being equal. If the PD increases by 50% the rating for the Class A Notes would be expected to remain at AAA (sf), all else being equal. If both the LGD and PD increase by 50%, the rating of the Class A Notes would be expected to remain at AAA (sf), all else being equal.

Class A Notes Risk Sensitivity:

• 25% increase in LGD, expected rating of AAA (sf).
• 50% increase in LGD, expected rating of AAA (sf).
• 25% increase in PD, expected rating of AAA (sf).
• 50% increase in PD, expected rating of AAA (sf).
• 25% increase in LGD and 25% increase in PD, expected rating of AAA (sf).
• 25% increase in LGD and 50% increase in PD, expected rating of AAA (sf).
• 50% increase in LGD and 25% increase in PD, expected rating of AAA (sf).
• 50% increase in LGD and 50% increase in PD, expected rating of AAA (sf).

Class B Notes Risk Sensitivity:

• 25% increase in LGD, expected rating of AA (sf).
• 50% increase in LGD, expected rating of AA (sf).
• 25% increase in PD, expected rating of AA (sf).
• 50% increase in PD, expected rating of AA (sf).
• 25% increase in LGD and 25% increase in PD, expected rating of AA (sf).
• 25% increase in LGD and 50% increase in PD, expected rating of AA (sf).
• 50% increase in LGD and 25% increase in PD, expected rating of AA (sf).
• 50% increase in LGD and 50% increase in PD, expected rating of AA (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: Paolo Conti
Initial Rating Date: 23 May 2012
Initial Rating Committee Chair: Claire Mezzanotte

Lead Surveillance Analyst: Elisa Scalco
Rating Committee Chair: Chuck Weilamann

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.
• Unified Interest Rate Model for European Securitisations.
• Rating European Consumer and Commercial Asset-Backed Securitisations.