DBRS Confirms Ratings on Mars 2600 S.r.l. Series 5

DBRS Ratings Limited (DBRS) has today confirmed the Class A1 and Class A2 Notes (the Class A Notes) issued by Mars 2600 S.r.l. Series 5 (the Issuer) at AA (sf).

The confirmation of the ratings on the Class A Notes are based on the following analytical considerations, as described more fully below:

-- Portfolio performance, in terms of delinquencies and defaults, as of the April 2015 payment date.
-- Updated portfolio default rate, loss given default and expected loss assumptions for the remaining collateral pool.
-- Current available credit enhancement to the Class A Notes to cover the expected losses at the AA (sf) rating level.

Mars 2600 S.r.l. Series 5 is a securitisation of first-ranking Italian residential mortgages originated and serviced by Banca Sella S.p.A. The transaction closed in June 2014.

As of April 2015, 2 to 3 month arrears are at 0.15%, up slightly from 0.06% in July 2014. The 90+ delinquency ratio was at 0.27%. The current cumulative default ratio is 0.17%.

As of the April 2015 payment date, credit enhancement to the Class A Notes was 15.71%, up from 12.67% in July 2014. Credit enhancement to the Class A Notes consists of subordination of the Class D Notes.

The transaction benefits from a Cash Reserve Fund that is available to cover senior fees and interest shortfall on the Class A Notes. The Cash Reserve Fund is currently at the target level of EUR 9.78 million. The Cash Reserve Fund may start to amortise once the Class A Note factor is below 0.5, subject to further performance conditions.

BNP Paribas Securities Services SCA/Milan holds the Transaction Account for the transaction. The DBRS private rating of BNP Paribas Securities Services SCA/Milan complies with 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.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is the “Master European Structured Finance Surveillance Methodology”, 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’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 Securitisation Services S.p.A. (the “calculation agent”) 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.

This is the first rating action on the transaction since the Initial Rating Date.

Information regarding DBRS ratings, including definitions, policies and methodologies is available at 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 lifetime base case probability of default (PD) and loss given default (LGD) for the pool based on a review of the current assets. 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 8.42% and 6.32%, respectively. At the AA (sf) rating level, the corresponding PD is 26.46% and the LGD is 23.21%.
-- 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 remain at AA (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 AA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected to remain at AA (sf).

Class A1 and A2 Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD, expected rating of AA (sf)
-- 50% increase in PD, expected rating of AA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (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 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: Davide Nesa
Initial Rating Date: 12 June 2014
Initial Rating Committee Chair: Quincy Tang

Lead Surveillance Analyst: Elisa Scalco
Rating Committee Chair: Mary Jane Potthoff

DBRS Ratings Limited
1 Minster Court, 10th Floor
Mincing Lane
London
EC3R 7AA
United Kingdom
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 (December 2014)
-- Master European Structured Finance Surveillance Methodology (April 2015)
-- Operational Risk Assessment for European Structured Finance Servicers (January 2015)
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda (January 2015)
-- Unified Interest Rate Model for European Securitisations (January 2013)

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