DBRS Assigns Rating to Mondomutui Cariparma S.r.l. – Series 2009

DBRS Ratings Limited (DBRS) has today assigned a rating of AAA (sf) to the Class A notes issued by Mondomutui Cariparma S.r.l. (Issuer). The DBRS rating is on notes issued from an existing transaction that originally closed in November 2009. Mondomutui Cariparma at the Issue Date (11 November 2009) had issued EUR 3,945,400,000 of the Class A notes and at the DBRS rating date the outstanding balance of the Class A notes is 1,915,887,818 with a notes factor of 48.6%.

The ratings assigned to the notes address timely payment of interest and ultimate payment of principal.

At the time of the issue this was the first RMBS issuance where loans originated by Cassa di Risparmio di Parma e Piacenza S.p.A. (Cariparma) have been securitised. This is the second Cariparma residential mortgage-backed securities transaction rated by DBRS (after Series 2012).

The Originator, Servicer, Cash Manager, Account Bank, Swap Counterparty and Liquidity Provider of the transaction is Cariparma, which is fully owned by the Crédit Agricole Group. Cariparma is suitably rated in accordance with the DBRS methodologies at the time of this rating to allow for the Class A notes to be rated AAA (sf).

This first series issued by Mondomutui Cariparma is an Italian securitisation of first lien, fully amortising mortgage loans originated and serviced by Cariparma S.p.A. As of the end of the last collection period (31 December 2014), the Portfolio consisted of 31,417 (out of which 43 fully repaid) loans for a total notional balance of EUR 2,374 million. Loans in the Portfolio were granted to borrowers categorised under Bank of Italy SAE code 600-individuals (93.55%), SAE code 614-artisan (1.79%) and SAE code 615-small commercial borrowers (4.65%). The Portfolio is concentrated in the North and Centre of Italy, in particular the two largest regional concentrations are Lombardy (36.42%) and Emilia Romagna (35.62%). The Portfolio is granular in size with the average loan balance at approximately EUR 75,677. The weighted-average original loan-to-value (WAOLTV) is 65.53% and the weighted-average current loan-to-value (WACLTV) is 48.30%. DBRS noted a higher price reduction in the update property valuation, provided by the Origination, compared to the modest house price decline registered in Italy. The WACLTV remains relatively low utilising this update valuation at 58.07% but the distribution of the mortgages within the loan-to-value buckets is consistently different. DBRS considers in its analysis the updated valuation property but did not apply indexation to the value.

The mortgage portfolio has more than five-and-a-half years of seasoning. The portfolio is composed of 91.46% of performing mortgages and a small proportion of mortgages in payment holiday (paying interest only for a short term). In particular, 1.94% of the current balance is in arrears for more than six months; of this 1.21% more than twelve months. For further details on the collateral please refer to the Rating Report.

The Class A notes will pay semi-annually interest at six-months Euribor plus a margin of 35 basis points. The floating-rate loans in the Initial Portfolio are primarily indexed to six-month Euribor (35.81%), one-month Euribor (36.56%) and a residual portion to three-month Euribor and ECB rate (3.18%). The loan portfolio also consists of fixed-rate loans (34.46%) and includes a portion of the floating-rate loans that can switch from floating to fixed. The Issuer entered in a total return swap with Cariparma in which it pays on each payment date all the revenue from the Portfolio (excluding recoveries) and it receives from the swap counterparty the six-months Euribor payable on the current outstanding amount of the Class A notes plus a margin of 140 basis points. This feature covers the timely payment of the Class A notes and moreover the excess spread can be utilised to cure the default amount of the period.

The credit enhancement on the Class A notes has built up since the Issue Date from 9% to 16.9% at the last payment date in January 2015. The main reasons for this are (1) the average annual dynamic prepayment rate at approximately 5%, (2) the portfolio composition of only capital plus interest repayment mortgages and (3) the low level of defaulted loans since Issue Date of 2.97% at 31 December 2014, on a cumulative basis.

There is no Reserve Fund in place but the Issuer can utilise a Liquidity line provided by Cariparma. The Liquidity line represents 3.20% of the amount of the Class A notes each payment date and it will be available to provide liquidity support to the rated notes and to pay senior fees.

The Originator can repurchase certain loans in the portfolio during the life of the transaction. The Servicer Agreement allows for the portfolio to be renegotiated within certain limits (e.g. maximum spread reduction, maximum extension) but without a specific limit on the borrowers that can take these advantages. It is a standard market practice to have limits on those renegotiations but for this transaction having the total return swap in place the Class A note will not suffer from this potential liquidity contraction.

The ratings are based upon DBRS’s review of the following analytical considerations:

-- Transaction capital structure and form and sufficiency of available credit enhancement.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to terms in which they have invested.
-- The transaction parties’ capabilities with respect to originations, underwriting, servicing and financial strength.
-- The legal structure and presence of legal opinions addressing the assignment of the assets to the Issuer and the consistency with DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.
-- Incorporation of a sovereign-related stress component in our stress scenarios due to the rating assigned by DBRS to the Republic of Italy’s of A (low) - Stable Trend.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is the “Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda”.

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 working papers and data on the Italian economy and housing market provided by: the European Central Bank, Eurostat, Bank of Italy, Nomisma, Istituto Nazionale di Statistica (ISTAT). DBRS conducted an operational review on the origination and servicing practices of Cariparma in April 2015. The Originator provided loan-level data and historical performance of mortgage portfolio dating back to 2004. 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 extent of any factual investigation or independent verification depends on facts and circumstances.

DBRS does not rely upon third-party due diligence in order to conduct its analysis.

DBRS was supplied with third party assessments dated 2009. However, this did not impact the rating analysis.

This rating concerns issued financial instrument in 2009. This is the first rating action.

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

To assess the impact of a change in the transaction parameters (probability of defaults and/or loss given default) on the rating of Class A Notes, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the Base Case).
-- In respect of the Class A Notes and a rating category of AAA (sf), the Probability of Default (PD) of 29.65%, a 25% and 50% increase on the PD.
-- In respect of the Class A Notes and a rating category of AAA (sf), Loss Given Default (LGD) of 44.83%, a 25% and 50% increase on the LGD.

DBRS concludes that for the Class A Notes:
-- A hypothetical increase of the PD by 25%, ceteris paribus, would lead to maintain the Class A Notes at AAA (sf).
-- A hypothetical increase of the LGD by 25%, ceteris paribus, would lead to maintain the Class A Notes at AAA (sf).
-- A hypothetical increase of the PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to maintain the Class A Notes at AAA (sf).

-- A hypothetical increase of the PD by 50%, ceteris paribus, would lead to maintain the Class A Notes at AAA (sf).

-- A hypothetical increase of the LGD by 50%, ceteris paribus, would lead to maintain the Class A Notes at AAA (sf).
-- A hypothetical increase of the PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A Notes to AA (sf).
-- A hypothetical increase of the PD by 25% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A Notes to AA (sf).
-- A hypothetical increase of the PD by 50% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A Notes to AA (low) (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: Davide Nesa
Initial Rating Date: 15 June 2015
Initial Rating Committee Chair: Mary Jane Potthoff

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

Legal Criteria for European Structured Finance Transactions
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
Derivative Criteria for European Structured Finance Transactions