DBRS Confirms Class A-2013 Notes of BPL Mortgages S.r.l., Series VI, and maintains UR-Negative

DBRS Ratings Limited (DBRS) has today confirmed its A (sf) rating on the €1,083,273,042 Class A-2013 Notes (the Notes) issued by BPL Mortgages S.r.l., Series VI (the Issuer). The Notes remain Under Review with Negative Implications.

The Issuer is a limited liability company incorporated under the laws of the Republic of Italy. The transaction is a cash flow securitisation collateralised by a portfolio of bank loans to Italian small and medium-sized Enterprises (SMEs) and self-employed individuals that were originated by Banco Popolare Società Cooperativa (BP) and by Credito Bergamasco S.p.A. (Creberg), both belonging to the BP Banking Group. Following full acquisition of Creberg by BP, effective since 1 June 2014, BP is the successor to Creberg in its capacities.

The rating on the Class A - 2013 Notes addresses the timely payment of interest and ultimate payment of principal payable on or before the Final Maturity Date in November 2056.

The rating action reflects an annual review of the transaction. The Notes are amortising and are at 32.75% of their initial balance at the last payment date (1 June 2015). Given this deleveraging, the current credit enhancement available has increased considerably, while the transaction performance is in line with DBRS’s expectations.

BNP Paribas Securitisation Services, London Branch acts as the transaction account bank and paying agent. The transaction bank for the purpose of holding the cash reserve account is at Banco Popolare Società Cooperativa., London Branch. There is an amendment underway to move that account from the London Branch to the parent company in Italy (BP). Cash Reserve is available to cover senior expenses and interest shortfalls on the Class A – 2013 Notes throughout the life of the transaction. It will only be available as credit support when the Class A – 2013 Notes are redeemed or at Final Maturity.

The Notes remain Under Review with Negative Implications pending DBRS’s review of recent developments in European regulation and legislation that mean that there is less certainty about the likelihood of timely systemic support for these systemically important banks (SIBs) (see “DBRS Places 38 European Banking Groups Under Review Negative due to Systemic Support” and “http://www.dbrs.com/research/280456/dbrs-places-21-classes-from-13-european-sf-transactions-under-review-with-negative-implications.html”).

Cumulative defaults as defined in the transaction documents are at 8.13% after slightly more than two years since closing. DBRS’s updated portfolio annualised probability of default (PD) remains at 6.34%. The Class A - 2013 Notes also benefit from relatively high recovery rates due to the large portion of secured loans of the portfolio with a relatively low loan to value.

There have not been substantial changes in the portfolio composition since our last surveillance review on the transaction. The current portfolio continues to exhibit low borrower concentration, similar as at closing and despite the significant amortisation. High levels of industry concentration in the Real Estate and Construction sectors are in line with the initial portfolio and are addressed in DBRS Diversity Model.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is Rating CLOs Backed by Loans to European Small and Medium-Sized Enterprises (SMEs), which can be found on the DBRS website under Methodologies at http://www.dbrs.com/about/methodologies.

DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology. A review of the transaction legal documents was not conducted as the documents have remained unchanged since the most recent rating action.

Other methodologies and criteria 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.

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 the issuer, BP and data from the European DataWarehouse GmbH.

DBRS does not rely upon third-party due diligence in order to conduct its analysis; DBRS was not supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS considers the information made available to it for the purposes of providing this rating to have been 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 previous rating action on this transaction took place on 29 May 2015, when the rating of the Notes was placed Under Review with Negative Implications.

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):
-- Probability of default (PD) rates used: base case PD of 6.34%, a 10% and 20% increase in the base case PD.
-- Recovery rates used: base case recovery rates, corresponding to a recovery rate of 51.96% at the A (sf) stress level, a 10% and 20% decrease in the base case recovery rates.

DBRS concludes that either a hypothetical increase of the base PD by 20% or a hypothetical decrease of the recovery rate by 20%, ceteris paribus, would produce model results suggesting a confirmation of the Notes at A (sf). A scenario combining both a hypothetical increase in the PD by 10% and a hypothetical decrease in the recovery rate by 10% would also lead to model results suggesting a confirmation of the current rating.

For further information on DBRS’s 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: Mudasar Chaudhry
Initial Rating Date: 12 March 2013
Initial Rating Committee Chair: Jerry Van Koolbergen

Lead Surveillance Analyst: Alfonso Candelas
Rating Committee Chair: Jerry Van Koolbergen

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
-- Master European Structured Finance Surveillance Methodology
-- Rating CLOs Backed by Loans to European Small and Medium-Sized Enterprises (SMEs)
-- Rating CLOs and CDOs of Large Corporate Credit
-- Cash Flow Assumptions for Corporate Credit Securitizations
-- Operational Risk Assessment for European Structured Finance Servicers
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda

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