DBRS Confirms A (high) (sf) Rating on the Class A Notes issued by Credico Finance 14 S.r.l.

DBRS Ratings Limited (“DBRS”) has today confirmed the A (high) (sf) rating on the EUR 173,235,690.64 Class A Notes issued by Credico Finance 14 S.r.l. (the “Issuer”).

The Issuer is a limited liability company incorporated under the laws of the Republic of Italy. The transaction is a cash flow securitisation collateralised by a portfolio of bank loans to Italian small and medium-sized enterprises (“SMEs”), artisans, and producer families. The portfolio is comprised of loans granted by ten unrated Italian Cooperative Banks (“BCCs”), as listed below:

• B.C.C. dell’Adriatico Teramano (“BCC Teramano”)
• Banca di Credito Cooperativo dell’alta Brianza – Alzate Brianza – Soc. Coop. (“BCC Alzate Brianza”)
• Banca di Credito Cooperativo di Piove di Sacco s.c. (“BCC Piove di Sacco”)
• Banca di Forlì Credito Cooperativo Società Cooperativa (“BCC Forlì”)
• Banca di Credito Cooperativo di Pompiano e della Franciacorta Soc. Coop. (“BCC Pompiano”)
• Cassa Rurale ed Artigiana di Brendola Credito Cooperativo – Società Cooperativa (“BCC Brendola”)
• Banca Annia Credito Cooperativo di Cartura e del Polesine S.C. (“BCC di Cartura e del Polesine”)
• Banca di Teramo di Credito Cooperativo – Società Cooperativa (“BCC di Teramo”)
• Banca di Credito Cooperativo di Castiglione Messer Raimondo e Pianella s.c.r.l. (“BCC Castiglione”)
• Banca Romagna Cooperativa Credito Cooperativo Romagna Centro e Macerone S.c. (“BCC Romagna”)

The rating on the Class A Notes addresses the timely payment of interest and the ultimate payment of principal payable on or before the Final Maturity Date in July 2052. DBRS does not rate the Class B Asset Backed Floating Rate Notes, divided into ten Notes (B1, B2, B3, B4, B5, B6, B7, B8, B9, B10, collectively the “Junior Notes”), which have an aggregate total par balance of EUR 85,376,000.

The rating action reflects an annual review of the transaction. Performance is in line with our expectations at closing. As of the last payment date (18 July 2014), there are no gross cumulative defaults reported, as per the default definition in the transactions documents, while the percentage of loans in arrears for more than 90 days over the original balance at the closing date is at 0.71%.
The Class A Notes have begun amortising and have a current factor of 0.79. Given this deleveraging, the current credit enhancement has moderately increased since closing.
The portfolio annualized probability of default (“PD”) used has not changed (2.97%).

Notes:
All figures are in Euros unless otherwise noted.

The principal methodology applicable is “Rating CLOs Backed by Loans to European Small and Medium Sized Enterprises (SMEs)”, which can be found on the DBRS website under Methodologies at http://www.dbrs.com/about/methodologies. Other methodologies and criteria referenced in this transaction are listed at the end of this press release.
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 the parties involved in the rating, including but not limited to the Originator, the Issuer and their agents.

DBRS considers the information made available to it for the purposes of providing this rating to have been 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.

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”):
• Probability of Default Rates Used: Base Case PD of 2.97%, a 10% and 20% increase on the Base Case PD.
• Recovery Rates Used: Base Case Recovery Rates, corresponding to a recovery rate of 40.68% at the A (high) (sf) stress level, a 10% and 20% decrease in the Base Case Recovery Rates.

DBRS concludes that either a hypothetical increase of the base PD by 20% or a hypothetical decrease of the Recovery Rate by 20%, ceteris paribus, would produce model results suggesting a confirmation of the Class A Notes at A (high) (sf). A scenario combining both a hypothetical increase in the PD by 10% and a hypothetical decrease in the Recovery Rate by 10% would also lead to model results suggesting a confirmation of the Class A Notes at A (high) (sf).

It should be noted that the interest rates and other parameters that would normally vary with rating level, including the recovery rates, were allowed to change as per the DBRS methodologies and criteria.

This is the first rating action since the Initial Rating Date.

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com

For further information on DBRS’s 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: Marcello Bonassoli
Initial Rating Date: 21 October 2013
Initial Rating Committee Chair: Simon Ross

Last Rating Date: Not applicable as no last rating date
Lead Surveillance Analyst: Alfonso Candelas
Rating Committee Chair: Carlos Silva

DBRS Ratings Limited
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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”
“Rating CLOs Backed by Loans to European Small and Medium-Sized Enterprises (SMEs)”
“Rating Methodology for CLOs and CDOs of Large Corporate Credit”
“Cash Flow Assumptions for Corporate Credit Securitizations”
“Operational Risk Assessment for European Structured Finance Servicers”
“Unified Interest Rate Model for U.S. and European Structured Credit”
“Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda”