DBRS Confirms Rating on Credico Finance 9 S.r.l.

DBRS Ratings Limited (DBRS) has today confirmed its rating of the Class A Notes of Credico Finance 9 S.r.l. (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 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 enhancements for the Class A Notes to cover the expected losses at the AAA (sf) rating level.

Credico Finance 9 S.r.l. is a securitisation of a portfolio of residential mortgage loans secured by properties located in Italy. The pool was originated and is serviced by eighteen Italian co-operative banks (BCCs). The transaction follows the standard structure under the Italian Securitisation Law and closed in July 2011. There was no cross-collateralisation at closing and each bank’s portfolio individually repays a portion of the issued notes.

The mortgage pool is well-seasoned (over six years) and approximately 56% of the current pool was originated after 2008.

The portfolio is performing in line with DBRS’s expectations. As per the January 2015 payment date, the 90+ delinquency ratio (excluding defaulted loans) as a percentage of the performing balance of the portfolio was at 1.22%. The gross cumulative default ratio (as a percentage of the original balance of the portfolio) slightly increased over the year reaching 0.23% in January 2015, but it is still below DBRS’s base case portfolio default rate of 2.71%.

The Class A Notes are supported by subordination of the Class B1-B18 Notes and a portion of the liquidity reserve set up at closing of the transaction. Credit enhancement to the Class A Notes (as a percentage of the performing portfolio) increased to 19.81% in January 2015, up from 19.73% in April 2014. The liquidity reserve provides both liquidity and credit support to the structure and it is currently at EUR 27.55 million.

Deutsche Bank S.p.A. and Deutsche Bank AG, London branch are the transaction bank and English transaction bank for this transaction, respectively. The transaction bank holds the payment account, collection account, liquidity reserve accounts and reserve account while the English transaction bank holds the investment account and principal amortisation reserve account for the Issuer. The DBRS private ratings of each Deutsche Bank S.p.A. and Deutsche Bank AG, London branch are at least equal to the Minimum Institution Rating given the rating assigned to the Class A Notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology. In addition, J.P. Morgan Securitites plc and JPMorgan Chase Bank N.A are the swap counterparty and swap guarantor for the transaction, respectively. The DBRS private rating of J.P. Morgan Securitites plc and DBRS’s public rating of JPMorgan Chase Bank N.A comply with the DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology.

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 Deutsche Bank 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.

The last rating action on this transaction took place on 8 May 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 2.71% and 3.97%, respectively. At the AAA (sf) rating level, the corresponding PD is 26.14% and the LGD is 23.71%.
-- 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 AAA (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 AAA (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 remain at AAA (sf).

Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AAA (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: 11 July 2011
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