DBRS Confirms Ratings of CR VOLTERRA 2 SPV S.r.l.

DBRS Ratings Limited (“DBRS”) has reviewed the Class A Notes issued by CR Volterra 2 SPV S.r.l. (the “Issuer”) and confirms the rating of ‘A’ (sf).

CR Volterra 2 is a securitisation of Italian first and second lien prime residential mortgages originated and serviced by Cassa di Risparmio di Volterra S.p.A (“CRV”). Over 98% of the outstanding portfolio is concentrated in the Tuscany region. The transaction initially closed in July 2013.

Confirmation of the rating for the Class A Notes is based upon the following analytical considerations:

• Portfolio performance, in terms of the level of delinquencies and defaults, as of the 27 May 2014 payment date.
• Updated portfolio defaults, loss given defaults and expected losses estimates for the remaining pool.
• Current available credit enhancement to the Class A Notes to cover the expected losses at the ‘A’ (sf) rating level.

As of the 27 May 2014 payment date, the current delinquency ratio for loans more than 90 days overdue, as a percentage of the current balance of the portfolio (EUR 207.2 million), was 3.39%, while the delinquency ratio for loans more than 180 days overdue was at 0.79%. The cumulative default is currently 0.45% of the initial collateral balance.

Credit enhancement for the Class A Notes, as a percentage of the performing collateral balance, consists of subordination of the Class J Notes (partially as a part of it has been used to fund the Cash Reserve Fund) and a Cash Reserve Fund. The Class A Notes have a current credit enhancement level of 20.72%.

The Cash Reserve Fund is allowed to amortise to 2.17% of the Class A Notes outstanding balance at the beginning of the period. It has always been at its target level and as of the May 2014 payment date stood at EUR 3.7 million. The transaction also benefits from a fully funded Commingling Reserve of EUR 4.4 million. As soon as the Class A Notes factor falls below 0.5%, the reserve will be allowed to amortise to 4.82% of the Class A Notes outstanding balance with a floor of EUR 919,500.

BNP Paribas Securities Services SA/Milan (the “Account Bank”) holds the Treasury Account for the transaction. The DBRS private rating of the Account Bank complies with the threshold for the Account Bank given the rating assigned to the Class A Notes, as described in the DBRS Legal Criteria for European Structured Finance Transactions.

Notes:
All figures are in EUR 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 investor reports provided by Securitisation Services S.p.A. (the “Calculation Agent”) 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 31 July 2013, when DBRS assigned the rating of ‘A’ (sf) on the Class A Notes.

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 receivables. 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 11.33% and 25.12%, respectively. The corresponding levels at the ‘A’ (sf) rating level are 28.35% and 39.99%.
• 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 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 of the Class A Notes would be expected to decrease at BB (high) (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 at decrease at BB (high) (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 BBB (low) (sf)
• 50% increase in PD, expected rating of BB (high) (sf)
• 25% increase in PD and 25% increase in LGD, expected rating of BBB (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 BB (high) (sf)
• 50% increase in PD and 50% increase in LGD, expected rating of BB (high) (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: Alastair Bigley
Initial Rating Date: 31 July 2013
Initial Rating Committee Chair: Quincy Tang

Lead Surveillance Analyst: Dylan Cissou
Rating Committee Chair: Mary Jane Potthoff

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
• Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
• Unified Interest Rate Model for European Securitisations