DBRS Assigns Ratings to Claris Lease 2015 S.r.l.

DBRS Ratings Limited (DBRS) has today assigned ratings to the Series 2015-1-A and Series 2015-1-B Notes (Rated Notes) issued by Claris Lease 2015 S.r.l. (the Issuer) as follows:

-- Series 2015-1-A Notes at A (sf)
-- Series 2015-1-B Notes at BBB (sf)

The transaction is a cash flow securitisation collateralised by a portfolio of vehicle, equipment and real estate lease receivables arising from lease contracts granted to Italian corporates, small and medium-sized enterprises, entrepreneurs, artisans and producer families. The lease contracts were originated by Claris Leasing S.p.A. (Claris Leasing or the Originator) and represent approximately 60% of the Originator’s managed portfolio. The Originator is the leasing company of the Veneto Banca banking group and 98% of the securitised lessees are also customers of one of the Veneto Banca retail banks.

The ratings on the Rated Notes address the timely payment of interest and the ultimate payment of principal payable on or before the Final Maturity Date in October 2043. DBRS does not rate the Series 2015-1-C Notes.

The economic effect of the transfer of the portfolio from the Originator to the Issuer took place on 7 April 2015 (the Valuation Date) with an aggregate par balance of EUR 472.42 million consisting of 3,094 lease contracts to 1,953 leases. As of this date, the portfolio did not contain any receivable in arrears, while 1.92% of the portfolio was benefitting from principal payment holidays.

The ratings on the Rated Notes are based on DBRS’s review of the following items:
-- Relevant credit enhancement in the form of subordination.
-- The portfolio characteristics:
-- The portfolio is mainly unsecured as the ownership of the leased asset (67.75% real estate properties, 26.31% equipment and 5.94% vehicles) has not been transferred to the Issuer and no specific security has been created for the Issuer’s benefit (as it is the normality in Italian leasing transactions). The Originator has undertaken to transfer to the Issuer proceeds of the re-lease or sale of the leased asset in case of default of a lessee, but in case of bankruptcy of the Originator, the Issuer will have only a senior unsecured claim against the Originator. For such reasons, DBRS gave very limited credit to recoveries coming from the re-lease or sale of the leased asset.
-- The portfolio exhibits moderate obligor concentration with the exposure to the largest one, ten and 20 borrowers representing 1.81%, 13.05% and 19.66% of the portfolio, respectively. Overall, the portfolio regional concentrations reflect the distributions of Veneto Banca branches across Italy.
-- The transaction is not exposed to set-off risk as Claris Leasing is not a deposit-taking entity and does not provide other forms of financial services that could give rise to set-off risk.
-- The portfolio yield is expected to increase as the portfolio amortises. The residual value has not been sold to the Issuer, but each interest instalment is calculated on a principal balance that includes also the principal component of the residual value. The Issuer will therefore benefit from a portfolio yield that will naturally increase as a consequence of the natural amortisation of the securitised balance and the bullet nature of the residual value.
-- The presence of adequate cash-trapping mechanisms aimed at limiting the leakage of excess spread and accelerating the payment of the Rated Notes in case of higher-than-expected portfolio performance.
-- The Series 2015-1-A Notes benefit from a trigger designed to defer the interest payments due on the Series 2015-1-B Notes, should the cumulative gross default be higher than 23.60%. At the same time, such trigger constrains the upside potential of the Series 2015-1-B credit quality which DBRS considered in the rating of the Series 2015-1-B Notes.
-- The reserve fund (Debt Service Reserve) available to cover interest and senior fees shortfalls on the Rated Notes, which will be funded on the first payment date with principal collections. It will be maintained at 4% of the outstanding balance of the Rated Notes, with a cap of EUR 7,740,000 and a floor of EUR 1,548,000.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay Noteholders according to the approved terms.
-- The transaction parties’ financial strength and capabilities to perform their respective duties and the quality of origination, underwriting and servicing practices.
-- The soundness of the legal structure and the presence of legal opinions which address the true sale of the assets as well as consistency with the DBRS “Legal Criteria for European Structured Finance Transactions” methodology.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is “Rating European Consumer and Commercial Asset-Backed Securitisations,” which can be found on www.dbrs.com 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 Securitisation in the Euro Area” at:
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 the Arrangers, BNP Paribas S.A. and Finanziaria Internazionale Securitisation Group.

DBRS received historical performance default and recovery data relating to Claris Leasing originations by quarterly vintage on a cumulative basis going back to 2001 and up to and including Q32014. Data was also provided relating to quarterly dynamic arrear levels and dynamic prepayment data from to 2001 up to Q32014. In addition, DBRS received loan-by-loan data related to the securitised portfolio that further supported DBRS’s analysis. DBRS considers that 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.

These ratings concerns a newly issued financial instrument. These are the first DBRS ratings on these financial instruments.

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

To assess the impact a change of the transaction parameters would have on the ratings, DBRS considered the following stress scenarios as compared with the parameters used to determine the ratings (the base case):
-- Probability of default (PD) rate used: base-case PD of 13.26% (excluding sovereign stress), a 25% and 50% increase on the base-case PD.
-- Recovery rates used: base-case recovery rate of 14.15% (excluding sovereign stress)
-- Loss given default (LGD): base-case LGD of 85.85%, a 25% and 50% increase on the base-case LGD.

DBRS concludes that for the Series 2015-1-A Notes:
-- A hypothetical increase of the base-case PD by 25% or a hypothetical increase of the base-case LGD by 25%, ceteris paribus, would lead to a downgrade of the Series 2015-1-A Notes to BBB (high) (sf).
-- A hypothetical increase of the base-case PD by 50%, ceteris paribus, would lead to downgrade of the Series 2015-1-A Notes to BBB (low) (sf).
-- A hypothetical increase of the base-case LGD by 50%, ceteris paribus, would lead to downgrade of the Series 2015-1-A Notes to BBB (high) (sf).
-- A hypothetical increase of the base-case PD by 25% and a hypothetical increase of the base-case LGD by 25%, ceteris paribus, would lead to downgrade of the Series 2015-1-A Notes to BBB (sf).
-- A hypothetical increase of the base-case PD by 50% and a hypothetical increase of the base-case LGD by 25%, ceteris paribus, would lead to a downgrade of the Series 2015-1-A Notes to BB (sf).
-- A hypothetical increase of the base-case PD by 25% and a hypothetical increase of the base-case LGD by 50%, ceteris paribus, would lead to a downgrade of the Series 2015-1-A Notes to BBB (sf).
-- A hypothetical increase of the base-case PD by 50% and a hypothetical increase of the base-case LGD by 50%, ceteris paribus, would lead to a downgrade of the Series 2015-1-A Notes to BB (sf).

DBRS concludes that for the Series 2015-1-B Notes:
-- A hypothetical increase of the base-case PD by 25%, ceteris paribus, would lead to a downgrade of the Series 2015-1-B Notes to BB (sf).
-- A hypothetical increase of the base-case PD by 50%, ceteris paribus, would lead to downgrade of the Series 2015-1-B Notes to B (sf).
-- A hypothetical increase of the base-case LGD by 25% or by 50%, ceteris paribus, would lead to a downgrade of the Series 2015-1-B Notes to BB (high) (sf).
-- A hypothetical increase of the base-case PD by 25% and a hypothetical increase of the base-case LGD by 25%, ceteris paribus, would lead to downgrade of the Series 2015-1-B Notes to B (high) (sf).
-- A hypothetical increase of the base-case PD by 50% and a hypothetical increase of the base-case LGD by 25%, ceteris paribus, would lead to a downgrade of the Series 2015-1-B Notes to B (low) (sf).
-- A hypothetical increase of the base-case PD by 25% and a hypothetical increase of the base-case LGD by 50%, ceteris paribus, would lead to a downgrade of the Series 2015-1-B Notes to B (high) (sf).
-- A hypothetical increase of the base-case PD by 50% and a hypothetical increase of the base-case LGD by 50%, ceteris paribus, would lead to a downgrade of the Series 2015-1-B Notes to B (low) (sf).

For further information on DBRS’s historic default rates published by the European Securities and Markets Administration in a central repository see:
http://cerep.esma.europa.eu/cerepweb/statistics/defaults.xhtml.

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

Initial Lead Analyst: Marcello Bonassoli
Initial Rating Date: 24 April 2015
Initial Rating Committee Chair: Chuck Weilamann

Lead Surveillance Analyst: Vito Natale
Rating Committee Chair: Chuck Weilamann

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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.

-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Legal Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
-- Unified Interest Rate Model for European Securitisations