DBRS Confirms Rating on BPL Mortgages S.r.l. – Series V

DBRS Ratings Limited (DBRS) has today confirmed its rating of the Class A Floating Rate Notes (the Class A notes) of BPL Mortgages S.r.l. – Series V (the Issuer) at A (sf).

The confirmation of the rating of the Class A notes is based upon the following analytical considerations:
-- Portfolio performance, in terms of delinquencies and defaults, as of the January 2015 payment date.
-- Updated portfolio default rate, loss given default 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 rating of A (low) for the Republic of Italy.
-- Current available credit enhancement for the Class A notes to cover the expected losses at the A (sf) rating level.

BPL Mortgages S.r.l. – Series V is a securitisation of a portfolio of Italian first and second ranking mortgage loans originated and serviced by Banco Popolare Società Cooperativa and Credito Bergamasco S.p.A. The transaction follows the standard structure under the Italian Securitisation Law and closed in December 2012. At closing, only a part of the total Class A issuance of EUR 2.44 billion was paid up. On the first payment date falling in April 2013, the Issuer purchased a further portfolio with the proceeds of the second issuance.

The portfolio is five years seasoned and slightly concentrated in the northern regions of Italy. Approximately 16% of the current mortgage portfolio is exposed to loans originated in the 2006 and 2007 vintages. The Issuer is exposed to risk of non-standard mortgages loans in the portfolio. For instance, approximately one-third of the pool is made of optional loans which allow the borrower to switch interest rate type from floating to fixed and vice versa. Additionally, there are offset mortgages where the borrower does not pay interest up to the amount credited in a linked current account. DBRS has increased the expected losses at each rating category in order to account for the risk arising from the non-standard composition of the portfolio.

The portfolio is performing in line with DBRS’s expectations. The 90+ delinquency ratio (excluding defaulted loans) as a percentage of the performing balance of the portfolio has slightly decreased to 1.31% in January 2015, from 1.84% in October 2014. The gross cumulative default ratio increased to 3.11% over the year, but it is still below DBRS’s base case portfolio default rate of 10.82%.

The Class A notes are supported by subordination of the Class B notes. The credit enhancement to the Class A notes (as a percentage of the performing portfolio) increased to 42.15% in January 2015, up from 36.27% in January 2014. This has been the result of the amortisation of the Class A notes.

A non-amortising cash reserve of EUR 64.00 million (equal to 2.20% of the current aggregate balance of the notes) provides liquidity support to the Class A notes. The reserve is filled up immediately after the interest payment on the Class A notes and is currently at the initial and target level of EUR 64.00 million.

BNP Paribas Securities Services, Milan branch and Banco Popolare S.c., London branch are the agent bank and transaction bank for this transaction, respectively. The agent bank holds the payment account, while the transaction bank holds the cash reserve account and expenses account for the Issuer. The DBRS private ratings of each BNP Paribas Securities Services, Milan branch and Banco Popolare S.c., London branch are 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.

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.

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’s “The Effect of Sovereign Risk on Securitisations in the Euro Area” commentary on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.

The sources of information used for this rating include investor reports provided by BNP Paribas Securities Services, Milan 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 16 April 2014, when DBRS confirmed the ratings of the Class A notes at A (sf).

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 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 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 10.82% and 14.73%, respectively. At the A (sf) rating level, the corresponding PD is 27.39% and the LGD is 27.86%.
-- 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 of the Class A notes would be expected to remain at A (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A notes would be expected to remain at A (sf), assuming no change in the LGD. Furthermore, if both PD and LGD increase by 50%, the rating for the Class A notes would be expected to fall to BBB (low) (sf).

Class A notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (sf)
-- 50% increase in LGD, expected rating of A (sf)
-- 25% increase in PD, expected rating of A (sf)
-- 50% increase in PD, expected rating of A (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (low) (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: 24 December 2012
Initial Rating Committee Chair: Claire Mezzanotte

Lead Surveillance Analyst: Elisa Scalco
Rating Committee Chair: Diana Turner

DBRS Ratings Limited
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London
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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
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