DBRS Confirms Rating on ICCREA SME CART S.r.l.

DBRS Ratings Limited (DBRS) has today confirmed its rating on the Class A 2011 Asset-Backed Floating Rate Notes (the Class A Notes) of ICCREA SME CART S.r.l. (the Issuer) at AAA (sf).

The confirmation of the rating on the Class A Notes is based on the following analytical considerations, as described more fully below:
-- Portfolio performance, in terms of defaults and level of delinquencies, as of the March 2015 payment date.
-- Actual gross default rate, recovery rate and expected losses are within DBRS’s expectations.
-- Current available credit enhancement to the Class A Notes to cover the expected losses at the AAA (sf) rating level.

ICCREA SME Cart S.r.l. is a securitisation of a portfolio of financial lease receivables granted to small and medium entities in Italy. The portfolio was originated and is serviced by Iccrea BancaImpresa S.p.A. The structure included a two-year revolving period during which the originator could sell further portfolios until the December 2013 payment date (included). There were replenishment criteria and a purchase termination event to mitigate the potential portfolio performance deterioration. Additionally, the residual value option was not securitised.

The current pool is granular (4,458 contracts) and borrowers are mostly concentrated in the region of Lombardy (27.72%), Veneto (24.85%) and Emilia Romagna (11.12%) in Italy. Assets in the pool belong to four different sub-pools: industrial vehicles (3.04%), equipment (23%), real estate (72%) and auto (1.92%). The pool is well seasoned (just under five years) and is characterized by a relatively long tenor (the current weighted-average remaining term is nine years), mainly attributed to the real estate exposure 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 decreased to 0.62% in March 2015 from 0.71% a year ago. The gross cumulative default ratio as a percentage of the original portfolio increased over the year to 4.55%, but it is still below DBRS’s base-case gross loss rate of 13.19%.

Credit enhancement to the Class A Notes is mainly provided by subordination of the Class Z Notes. The credit enhancement for the Class A Notes (as a percentage of the outstanding performing balance of the portfolio) increased steadily over the year, reaching 70.37% in March 2015 up from 55.47% in March 2014. This has been the result of the amortisation of the Class A Notes.

A non-amortising debt service reserve of EUR 15.00 million provides liquidity support to the structure and may be used to repay the notes at the end of the transaction. The debt service reserve is currently at the target level of EUR 15.00 million. Additionally, the Issuer benefits from a liquidity facility of EUR 100.50 million that covers any interest and principal shortfall on the Class A Notes and an indemnity amount of EUR 5.13 million, which mitigates potential commingling risk.

BNP Paribas Securities Services, Milan branch, and BNP Paribas Securities Services, London branch, are the agent bank and transaction bank for the transaction, respectively. The DBRS private ratings of each BNP Paribas Securities Services, Milan branch, and BNP Paribas Securities Services, 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.” In addition, the DBRS private rating of UBS Limited acting as swap counterparty and the DBRS public rating of UBS AG acting as swap guarantor comply 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. DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology. Other methodologies referenced in this transaction are listed at the end of this press release.

This may be found on www.dbrs.com at http://www.dbrs.com/about/methodologies.

The sources of information used for this rating include investor reports provided by Securitisation Services S.p.A. and servicer reports provided by Iccrea BancaImpresa S.p.A. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

DBRS does not rely upon third-party due diligence in order to conduct its analysis; however, Agreed-Upon Procedures (AUP) are included in the requested documentation. DBRS was not supplied with AUP documents. Data checks were performed and DBRS did not apply additional cash flow stresses in its scenarios.

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 14 May 2014, when DBRS confirmed the rating on 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 with the parameters used to determine the rating (the base case):
-- DBRS expected a base-case probability of default (PD) and loss given default (LGD) for the pool based on a review of the transaction performance. 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 receivables are 13.19% and 82.10%, respectively.
-- The Risk Sensitivity overview below illustrates the ratings expected for the Class A Notes 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 for the Class A Notes would be expected to remain at AAA (sf), all else being equal. If the PD increases by 50%, the rating for the Class A Notes would be expected to drop to AA (high) (sf), all else being equal. If both the LGD and PD increase by 50%, the rating of the Class A Notes would be expected to drop to AA (sf), all else being equal.

Class A 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 AA (high) (sf).
-- 25% increase in LGD and 25% increase in PD, expected rating of AA (high) (sf).
-- 25% increase in LGD and 50% increase in PD, expected rating of AA (sf).
-- 50% increase in LGD and 25% increase in PD, expected rating of AA (high) (sf).
-- 50% increase in LGD and 50% increase in PD, expected rating of AA (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: Lena Katsnelson
Initial Rating Date: 16 November 2011
Initial Rating Committee Chair: Claire Mezzanotte

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

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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 and are as follows:

-- 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.
-- Unified Interest Rate Model for European Securitisations.
-- Rating European Consumer and Commercial Asset-Backed Securitisations.