DBRS Confirms the Ratings of Adriano Lease Sec. S.r.l.

DBRS Ratings Limited (“DBRS”) has reviewed Adriano Lease Sec. S.r.l. (“the Issuer”) and has confirmed the ratings of AAA (sf) to the Class A Notes.

The confirmation of the ratings on the Class A Notes is based upon the following analytical considerations, as described more fully below:
• Portfolio performance, in terms of defaults and delinquencies, as of the April 2014 payment report.
• 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.
• Credit enhancement currently available to the Class A Notes to cover the expected losses assumed in the stress scenario associated with the AAA (sf) rating level.

Adriano Lease Sec. S.r.l. is a cash securitisation of lease receivables extended to SME clients resident in Italy. Leasint S.p.A. is the Originator and Servicer for the transaction. The deal follows the standard structure under the Italian Securitisation Law and closed in December 2011.

The portfolio is static and the residual value has not been securitised. The commercial lease receivables in the pool are a mix of motor vehicles (1.65%), equipment (12.02%) and real estate assets (86.33%). Motor vehicle and equipment leases have usually shorter amortisation profile than real estate assets. As a result, the real estate component of the portfolio has increased over the life of the transaction.

The cumulative gross default ratio (calculated on the initial collateral balance) exhibited an increasing trend since the transaction close and reached a peak of 7.32% in April 2014. Conversely, the 90+ delinquency ratio decreased to 0.86%, down from 1.85% in January 2014.

The Class A Notes are supported by subordination of the Class B Notes. Credit enhancement for the Class A Notes (as a percentage of the performing portfolio) increased to 85.11% from 52.20% since the initial rating in December 2011.

The transaction benefits from an amortising Cash Reserve which provides liquidity support to the Class A Notes. The Cash Reserve will be also available to cover any principal payments at maturity of the Class A Notes. The Cash Reserve amortises to 1.5% of the outstanding balance of the Class A Notes, subject to the absolute floor of EUR 20.90 million. Its balance is at the current target level of EUR 20.90 million.

Credit Agricole Corporate and Investment Bank, Milan Branch is the Account Bank for the transaction. The DBRS private ratings of Credit Agricole Corporate and Investment Bank, Milan Branch 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, Banca IMI S.p.A. acts as Swap Counterparty for the deal. According to DBRS Derivative Criteria for European Structured Finance Transactions, and given its DBRS private rating, the Swap Counterparty posting collateral in favor of the noteholders sufficiently addresses the risk associated with the counterparty default. The credit support amount as calculated under the documentation is currently nil.

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 Securitisation Services S.p.A. 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 9 August 2013, when DBRS confirmed the rating of the Class A Notes at AAA (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 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 25.98% and 78.12%, 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 be 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).

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: Bruno Franco
Initial Rating Date: 29 December 2011
Initial Rating Committee Chair: Claire Mezzanotte

Lead Surveillance Analyst: Vito Natale
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.
• Master European Structured Finance Surveillance Methodology.
• Operational Risk Assessment for European Structured Finance Servicers.
• Unified Interest Rate Model for European Securitisations.
• Derivative Criteria for European Structured Finance Transactions.
• Rating European Consumer and Commercial Asset-Backed Securitisations.