DBRS Confirms Rating on the Class A Notes Issued by Quadrivio SME 2012 S.r.l.

DBRS Ratings Limited (DBRS) has today confirmed its AAA (sf) rating on the €608,949,737.63 Class A notes issued by Quadrivio SME 2012 S.r.l. (the Issuer).

The transaction is a cash flow securitisation collateralised by a portfolio of bank loans to Italian small and medium-sized enterprises (SMEs) originated by Credito Valtellinese S.C (Creval), Credito Siciliano S.p.A., Credito Artigiano S.p.A (currently integrated in Creval), and Cassa di Risparmio di Fano S.p.A (Carifano). All together, the originators can be referred to as Gruppo Credito Valtellinese. 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 October 2060.

Creval acts as the Originator, Servicer, Sub-servicer (for its own portfolio) and Subordinated Loan Provider. Credito Siciliano S.p.A acts as Originator, Sub-servicer (for its own portfolio) and Subordinated Loan Provider. Cassa di Risparmio di Fano S.p.A acts as Originator, Sub-servicer (for its own portfolio) and Subordinated Loan Provider. BNP Paribas Securities Services, Milan Branch is the Italian Account Bank and the Principal Paying Agent. BNP Paribas Securities Services, London Branch is the English Account Bank. In addition, Securitisation Services S.p.A. is the Back-Up Servicer Facilitator.

The rating actions reflect an annual review of the transaction. Since closing, the Class A notes have been amortising and are now at 35% of their initial balance. Given this deleveraging, the current credit enhancement available has increased considerably. At the end of the last collection period, 31 December 2014, the cumulative gross defaults as per the transaction definition and in terms of the initial balance of the portfolio were at 10.14%.

The portfolio annualised probability of default (PD) used has been updated in line with the observed defaults and is now 4.90%.

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’s 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 these ratings include the parties involved in the ratings, 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 these ratings 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 changing the transaction parameters on the ratings, DBRS considered the following stress scenarios, as compared to the parameters used to determine the ratings (the Base Case):
-- Probability of Default Rates Used: Base Case PD of 4.90%, a 10% and 20% increase on the Base Case PD.
-- Recovery Rates Used: Base Case Recovery Rates, corresponding to a recovery rate of 51.24% at the AAA (sf) stress level, a 10% and 20% decrease in the Base Case Recovery Rates.

DBRS concludes that a hypothetical increase of the base PD by 20%, ceteris paribus, would produce model results suggesting a confirmation of the Class A notes at AAA (sf). A hypothetical decrease of the Recovery Rate by 20% would also produce model results suggesting a confirmation of the Class A notes at AAA (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 current ratings of the Class A notes.

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

The previous rating action on this transaction took place on 27 February 2014, when the rating of the Class A notes was confirmed and removed from Under Review with Developing Implications.

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

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.

Notes:
All figures are in euros unless otherwise noted.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Initial Lead Analyst: Simon Ross
Initial Rating Date: 6 August 2014
Initial Rating Committee Chair: Jerry van Koolbergen
Last Rating Date: 27 February 2014

Lead Surveillance Analyst: Alfonso Candelas
Rating Committee Chair: Carlos Silva

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

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