DBRS Confirms Rating on 2013 Popolare Bari RMBS S.r.l.
RMBSDBRS Ratings Limited (DBRS) has today confirmed its rating of AA (high) (sf) on the Class A1 and Class A2 Notes (together, the Class A Notes) issued by 2013 Popolare Bari RMBS S.r.l. (the Issuer).
The confirmation of the ratings of the Class A Notes is based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies and defaults, as of the December 2014 payment date.
-- Updated portfolio default rate, loss given default (LGD) and expected loss assumptions for the remaining collateral pool.
-- Incorporation of a sovereign-related stress component to address the impact of macroeconomic variables on collateral performance, given the Long-Term Foreign and Local Currency Issuer Ratings of A (low) for the Republic of Italy.
-- Current available credit enhancement for the Class A Notes to cover the expected losses at the AA (high) (sf) rating level.
The Issuer is a limited liability company incorporated under the laws of Italy. The Class A Notes are backed by first lien, fully amortising mortgage loans originated for the majority in the regions of Puglia, Campania, Umbria, Lazio and Basilicata. The originators and servicers of this transaction are Banca Popolare di Bari S.c.p.a. and Cassa di Risparmio di Orvieto S.p.a., both part of the Banca Popolare di Bari Group.
The transaction is performing within DBRS’s expectation. The characteristic of the portfolio did not change significantly since the closing of the transaction in April 2014. Defaulted loans, defined in the legal documentation as loans with at least 15 monthly instalments due and not paid, are currently zero. The 90+ delinquency ratio as a percentage of the performing balance of the portfolio increased to 1.30% in December 2014, up from 0.60% in September 2014.
The credit enhancement to the Class A Notes increased to 25.27% in December 2014, up from 23.19% at closing of the transaction in April 2014. This has been the result of the amortisation of the Class A Notes. Credit enhancement to the Class A Notes is provided by subordination of the Class B Notes and a non-amortising reserve fund of EUR 15.59 million. The reserve fund is available to cover any interest shortfalls on senior fees and interest on the Class A Notes and is currently at the initial and target level of EUR 15.59 million.
The Bank of New York Mellon (Luxembourg) S.A., Italian branch is the Transaction Bank for this transaction. The DBRS public rating of The Bank of New York Mellon (Luxembourg) S.A., Italian branch is 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 Transactions. In addition, J.P. Morgan Securitites plc is the hedging counterparty for this transaction. The DBRS private rating of J.P. Morgan Securitites plc complies with the current DBRS Derivative Criteria for European Structured Finance Transactions.
Notes:
All figures are in euros 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.
For a more detailed discussion of sovereign risk impact on Structured Finance ratings, please refer to DBRS’s “The Effect of Sovereign Risk on Securitisations in the Euro Area” commentary at http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.
The sources of information used for this rating include investor reports provided by Securitisation Services S.p.A. 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.
This is the first rating action since Initial Rating Date.
Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.
To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios as compared with the parameters used to determine the rating (the base case):
-- DBRS expected a lifetime base case probability of default (PD) and LGD for the pool based on a review of the current receivables. 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 are 9.93% and 11.93%, respectively. At the AA (high) (sf) rating level, the corresponding PD is 32.85% and the LGD is 33.80%.
-- DBRS assumed that the time of recovery lag was 60 months and also tested an additional scenario with 84 months of recovery lag based on the low level of recovery reported by the originators on the repossession data and information provided.
-- The Risk Sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base case assumption. For example, if the LGD increases by 50%, the rating on the Class A Notes would be expected to remain at AA (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Class A Notes would be expected to fall to A (sf), assuming no change in the LGD. Furthermore, if both PD and LGD increase by 50%, the rating on the Class A Notes would be expected to fall to A (low) (sf).
Class A notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD, expected rating of AA (sf)
-- 50% increase in PD, expected rating of A (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (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 (low) (sf)
For further information on DBRS historic default rates published by the European Securities and Markets Administration 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: Davide Nesa
Initial Rating Date: 10 April 2014
Initial Rating Committee Chair: Claire Mezzanotte
Lead Surveillance Analyst: Elisa Scalco
Rating Committee Chair: Quincy Tang
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
-- Derivative Criteria for European Structured Finance Transactions
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