DBRS Confirms Rating on Locat SV S.r.l.

DBRS Ratings Limited (DBRS) has today confirmed its rating of the Series 2011, Class A notes (the Class A notes) issued by Locat SV S.r.l. (the Issuer) at AA (low) (sf).

The confirmation of the rating on the Class A notes is based upon 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 default rate, recovery rate and expected losses are within DBRS’s expectations.
-- Current available credit enhancement for the Class A notes to cover the expected losses at the AA (low) (sf) rating level.

Locat SV S.r.l. is a securitisation of a mixed pool of leases receivables related to real estate, equipment, vehicles and naval vessels. The receivables were originated and are serviced by Unicredit Leasing. The transaction follows the standard structure under the Italian Securitisation Law and closed in February 2011.

As of March 2015, the portfolio consists of 82.13% real estate leases, 10.39% equipment leases, 2.62% vehicle leases and 4.85% nautical leases. Therefore the pool is heavily concentrated in real estate leases (82.13%).

The portfolio is performing within current DBRS’s expectations in term of delinquencies and defaults. The current 90+ delinquency rate is 2.79%, up from 2.57% in March 2014. The gross cumulative default ratio as a percentage of the original portfolio increased over the year and it is high at 14.89%, but still below DBRS’s base case default rate of 28.87%. Cumulative recoveries are low but have been increasing over time and currently stand at 17.29%.

The Class A notes are supported by subordination of the Class B notes and a Cash Reserve Fund. Current credit enhancement to the Class A notes (as a percentage of the performing balance of the portfolio) is 64.38%, up from 50.82% in March 2014. The entire Cash Reserve Fund has been used and its current balance is EUR 0.00 million. The Class A notes are further supported by a Debt Service Reserve equal to 1.50% of the outstanding balance of the Class A notes.

BNP Paribas Securities Services, Milan branch is the account bank for the transaction. The DBRS private rating of BNP Paribas Securities Services, Milan branch is 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”. Credit Suisse International is the swap counterparty for the transaction. The DBRS private rating of Credit Suisse International is above the First Rating Threshold as described in 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”. 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

A review of the transaction legal documents was not conducted as the documents have remained unchanged since the most recent rating action.

The sources of information used for this rating include investor reports provided by Unicredit Leasing 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 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 27 May 2014, when DBRS confirmed the rating on the Class A notes at AA (low) (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 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 28.87% and 76.95%, 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 AA (low) (sf), all else being equal. If the PD increases by 50% the rating for the Class A notes would be expected to remain at AA (low) (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 be lowered to A (sf), all else being equal.

Class A Risk Sensitivity:

• 25% increase in LGD, expected rating of AA (low) (sf).
• 50% increase in LGD, expected rating of AA (low) (sf).
• 25% increase in PD, expected rating of AA (low) (sf).
• 50% increase in PD, expected rating of AA (low) (sf).
• 25% increase in LGD and 25% increase in PD, expected rating of AA (low) (sf).
• 25% increase in LGD and 50% increase in PD, expected rating of A (sf).
• 50% increase in LGD and 25% increase in PD, expected rating of AA (low) (sf).
• 50% increase in LGD and 50% increase in PD, expected rating of A (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: 17 February 2011
Initial Rating Committee Chair: Claire Mezzanotte

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

DBRS Ratings Limited
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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.

A description of how DBRS analyzes structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375