DBRS Confirms the Ratings on Credico Finance 12 S.r.l.

DBRS Ratings Limited (“DBRS”) has reviewed Credico Finance 12 S.r.l. (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 June 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.

Credico Finance 12 S.r.l. is a securitisation of a portfolio of residential mortgage loans secured by properties located in Italy. The pool was originated and is serviced by 35 Italian co-operative banks (BCCs). The transaction follows the standard structure under the Italian Securitisation Law and closed in August 2013. There was no cross-collateralisation at closing and each bank’s portfolio individually repays a portion of the issued notes.

The pool benefits from good seasoning (just under 5 years). Over 65% of the current portfolio was originated in recent vintages (between 2009 and 2013), 33.81% of the borrowers are self-employed and 19% of the loans have purpose classified as “remortgage”.

As of the June 2014 payment date, the 90+ delinquency ratio as a percentage of the performing balance of the portfolio was 0.85%. The current cumulative default ratio as a percentage of the original balance of the portfolio was very low at 0.01%.

The Class A notes are supported by subordination of the Class B1-B35 notes and a portion of the Cash Reserve set up at transaction close. Credit enhancement for the Class A notes (as a percentage of the performing portfolio) increased to 14.59% from 13.40% at closing in August 2013. The Cash Reserve provides both liquidity and credit support to the structure and it is currently at the initial and target level of EUR 41.65 million.

BNP Paribas Securities Services, Milan Branch and BNP Paribas Securities Services, London Branch are the Transaction Bank and English Transaction Bank for this transaction, respectively. The Transaction Bank holds the payment account, collection account, cash reserve accounts and reserve account while the English Transaction Bank holds the investment account and principal amortisation reserve account for the Issuer. The DBRS private ratings of each BNP Paribas Securities Services, Milan Branch and BNP Paribas Securities Services, London 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 payment reports provided by Accounting Partners S.r.l. 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 12 August 2013, when DBRS assigned the ratings of ‘A’ (sf) to 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 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 is 3.18% and 7.97%, respectively. At the ‘A’ (sf) rating level, the corresponding PD is 14.88% and the LGD is 19.54%.
• The Risk Sensitivity overview below illustrates the ratings expected if the PD and LGD increases 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 ‘A’ (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’ (sf)
• 25% increase in PD and 50% increase in LGD, expected rating of ‘A’ (sf)
• 50% increase in PD and 25% increase in LGD, expected rating of ‘A’ (sf)
• 50% increase in PD and 50% increase in LGD, expected rating of ‘A’ (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: 12 August 2013
Initial Rating Committee Chair: Claire Mezzanotte

Lead Surveillance Analyst: Elisa Scalco
Rating Committee Chair: Mary Jane Potthoff

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