DBRS Confirms Rating on MondoMutui Cariparma S.r.l. – Series 2012

DBRS Ratings Limited (DBRS) has today confirmed its rating of the Class A Notes of MondoMutui Cariparma S.r.l. – Series 2012 (the Issuer) at AAA (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 October 2014 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 AAA (sf) rating level.

MondoMutui Cariparma S.r.l. – Series 2012 is a securitisation of a portfolio of residential mortgage loans secured by properties located in Italy. The pool was originated and is serviced by Cassa di Risparmio di Parma e Piacenza (Cariparma), a subsidiary of Crédit Agricole. The transaction follows the standard structure under the Italian Securitisation Law and closed in February 2012.

The portfolio is over four years seasoned, geographically concentrated in the northern regions of Italy (mainly Lombardy and Piedmont) and 97% of the pool was originated in recent vintages (2009, 2010 and 2011). In addition, the portfolio contains loans that can switch from floating to a fixed rate (approximately 41% of the original portfolio) and loans where the borrower can ask for a partial payment holiday.

The portfolio is performing in line with DBRS’s expectations. As of the October 2014 payment date, the 90+ delinquency ratio (excluding defaulted loans) as a percentage of the performing balance of the portfolio was 0.63%. The gross cumulative default ratio as a percentage of the original portfolio increased to 1.05% over the year, but it is still well below DBRS’s base case portfolio default rate of 17.23%.

The Class A Notes are supported by subordination of the Class J Notes. The credit enhancement for the Class A Notes (as a percentage of the performing portfolio) increased to 20.17% in October 2014, up from 18.79% in October 2013. This has been the result of the amortisation of the Class A Notes.

In May 2012, a cash reserve of EUR 20 million, funded through a subordinated loan by Cariparma, was incorporated in the transaction. The cash reserve will be used at termination to cover any potential loss on the Class A Notes. The transaction benefits also from a liquidity facility of EUR 75.41 million set up at transaction close. The liquidity facility amortises to 3.20% of the Class A Notes balance in April each year and covers shortfalls in payment of Class A Notes interest and items senior thereto. The liquidity facility currently amounts to EUR 68.48 million.

Cariparma is the Account Bank for this transaction. The DBRS private rating of Cariparma 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. In addition, Cariparma also acts as swap counterparty for this transaction. The DBRS private rating of Cariparma 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.

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 Cariparma 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 AAA (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 17.23% and 12.05%, respectively. At the AAA (sf) rating level, the corresponding PD is 49.75% and the LGD is 37.21%.
-- 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 fall to AA (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A Notes would be expected to fall to AA (high) (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating for the Class A Notes would be expected to fall to A (high) (sf).

Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AA (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (high) (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 AA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (high) (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: Konstantine Pastras
Initial Rating Date: 24 May 2012
Initial Rating Committee Chair: Claire Mezzanotte

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

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
Derivative 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