DBRS Confirms the Ratings on 24-7 Finance S.r.l.

DBRS Ratings Limited (“DBRS”) has reviewed 24-7 Finance S.r.l. (the “Issuer”) and confirmed the ratings on the Class A notes at ‘A’ (high) (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 August 2014 payment date.
• Updated Portfolio Default Rate (“PDR”), Loss Given Default (“LGD”) and Expected Loss (“EL”) 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’ (high) (sf) rating level.

As of the August 2014 payment date, the 90+ delinquency ratio as a percentage of the performing balance of the portfolio was 3.92%. Over the last year, cumulative defaults have increased from 6.48% to 7.51% and the cumulative recoveries were 5.54% of the defaulted loans.

The updated base case PDR and LGD are 16.18% and 14.48%, respectively. The updated ‘A’ (high) PDR and LGD are 37.78% and 31.45%, respectively. The analysis incorporates a sovereign related stress component to address the impact of macroeconomic variables on collateral performance.

The Class A Notes are supported by the subordination of the Class B Notes and a Cash Reserve. The credit enhancement for the Class A Notes (as a percentage of the performing portfolio) increased to 15.76% from 14.86% over the last year. The Cash Reserve provides credit support to the structure and it is currently (EUR 13.14 million) above the target amount (EUR 5.69 million).

Given the updated PDR and LGD, the Class A Notes have sufficient credit enhancement to withstand cash flow stresses at the ‘A’ (high) (sf) level.

The Account Bank for the transaction is Unione di Banche Italiane SCPA (UBI). Given the ‘A’ (high) (sf) rating on the Class A Notes, UBI Banca is an eligible Account Bank per the Legal Criteria for European Structured Finance Transactions. JP Morgan Securities plc is an eligible swap counterparty per the Derivative Criteria for European Structured Finance Transactions.

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 Bank of New York Mellon (Luxembourg) S.A. Italian 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 19 September 2013, when DBRS confirmed the ratings of ‘A’ (high) (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 16.18% and 14.48%, respectively. At the ‘A’ (high) (sf) rating level, the corresponding PD is 37.78% and the LGD is 31.45%.
• 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 of ‘BBB’ (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A notes would be expected of ‘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 ‘BB’ (sf).

Class A notes Risk Sensitivity:
• 25% increase in LGD, expected rating of ‘A’ (low) (sf)
• 50% increase in LGD, expected rating of ‘BBB’ (high) (sf)
• 25% increase in PD, expected rating of ‘BBB’ (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 ‘BB’ (high) (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’ (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: 27 July 2011
Initial Rating Committee Chair: Claire Mezzanotte

Lead Surveillance Analyst: Vito Natale
Rating Committee Chair: Diana Turner

DBRS Ratings Limited
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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