DBRS Assigns Ratings to the Class B Notes Issued by Madeleine SPV S.r.l.

DBRS Ratings Limited (“DBRS”) has today assigned final ratings of BBB (low) (sf) to the Class B Notes issued by Madeleine SPV S.r.l. on 29th September 2014 (the “Issuer”) and has confirmed the ratings of A (low) (sf) previously assigned to the Class A Notes. The rating actions follow a restructuring of the transaction. The Notes are backed by a pool of salary assignment loans and pension assignment loans originated in Italy by Pitagora S.p.A. The transaction closed in May 2013.

The ratings are based upon review by DBRS of the following analytical considerations, as described more fully below:
• Credit enhancement levels are sufficient to support DBRS projected expected cumulative net loss (CNL) assumption under various stress scenarios at the A (low) (sf) standard for the Class A Notes and BBB (low) (sf) for the Class B Notes.
• 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.
• The legal structure and presence of legal opinions addressing the assignment of the assets to the issuer and the consistency with the DBRS Legal Criteria for European Structured Finance Transactions.
• Portfolio performance of the existing collateral, in terms of level of delinquencies and defaults, as of the July 2014 payment date.

On 25th September 2014, in the context of the restructuring of the transaction, the Issuer has redeemed in full the existing Class B Notes for EUR 28.18 million and issued new classes of notes (namely the new Class B Notes and Class C Notes) which rank junior to the existing Class A Notes. The full repayment of the existing Class B Notes has been financed through the proceeds of subscription of the newly issued notes.

As per the September 2014 Servicer Report, the 90+ delinquency ratio was low at 0.57%. The cumulative net default ratio was 0.19% of the original collateral balance.

The Class A Notes are supported by subordination of the Class B and Class C Notes. The Class B Notes are supported by the Class C Notes only. Credit enhancement for the Class A and Class B Notes (as a percentage of the collateral portfolio) is 13.06% and 3.53%, respectively.

The transaction benefits from a Cash Reserve of EUR 4.63 million which provides liquidity protection during the life of the transaction, but may also be used at maturity to cover principal payments on the Class A and the Class B Notes. The cash reserve amortises, subject to the absolute floor of 1.50% of the paid-up amount of the Class A Notes.

The transaction benefits also from a Prepayment Reserve of 5.36mn. In case of a loan payment, the originator is required to pay back to the borrower, on a pro-rata basis, a portion of the expenses paid up-front. The 3.22% prepayment reserve covers these payments in case of default of the originator. DBRS gives partial credit to the prepayment reserve in its cash flow analysis.

The Bank of New York Mellon (Luxembourg) S.A., Italian Branch and The Bank of New York Mellon, London Branch are, respectively, the Italian and English Account Bank for the transaction. The DBRS private rating of The Bank of New York Mellon (Luxembourg) S.A., Italian branch and the DBRS public rating of the Bank of New York Mellon - London Branch comply 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 performance data relating to the receivables provided by Pitagora S.p.A. and Investor Reports provided by Securitisation Services S.p.A. (the “Calculation Agent”). 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 18th July 2014, when DBRS assigned the rating of A (low) (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 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 13.86% and 56.13%, respectively. In assessing the rating on the Class B Notes, DBRS estimated and applied a Base Case LGD of 40.00%.
• 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 BBB (low) (sf), all else being equal. If the PD increases by 50% the rating for the Class A Notes would be expected to remain at BBB (low) (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 B (high) (sf), all else being equal.

Class A Notes Risk Sensitivity:

• 25% increase in LGD, expected rating of BBB (high) (sf).
• 50% increase in LGD, expected rating of BBB (low) (sf).
• 25% increase in PD, expected rating of BBB (high) (sf).
• 50% increase in PD, expected rating of BBB (low) (sf).
• 25% increase in LGD and 25% increase in PD, expected rating of BBB (low) (sf).
• 25% increase in LGD and 50% increase in PD, expected rating of BB (sf).
• 50% increase in LGD and 25% increase in PD, expected rating of BB (sf).
• 50% increase in LGD and 50% increase in PD, expected rating of B (high) (sf).

Class B Notes Risk Sensitivity:

• 25% increase in LGD, expected rating of BB (low) (sf).
• 50% increase in LGD, expected rating of B (low) (sf).
• 25% increase in PD, expected rating of BB (low) (sf).
• 50% increase in PD, expected rating of B (low) (sf).
• 25% increase in LGD and 25% increase in PD, expected rating of B (low) (sf).
• 25% increase in LGD and 50% increase in PD, expected rating of CCC (sf).
• 50% increase in LGD and 25% increase in PD, expected rating of CCC (sf).
• 50% increase in LGD and 50% increase in PD, expected rating of CC (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: 18 July 2014
Initial Rating Committee Chair: Chuck Weilamann

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

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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.
• Rating European Consumer and Commercial Asset-Backed Securitisations.