DBRS Confirms Rating on Monviso 2014 S.r.l.
Consumer Loans & Credit CardsDBRS Ratings Limited (DBRS) has today confirmed the rating of AA (high) (sf) of the Class A notes issued by Monviso 2014 S.r.l. (the Issuer):
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 delinquencies and defaults, as of the June 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 (high) (sf) rating level.
Monviso 2014 S.r.l. is a securitisation of Italian unsecured consumer loans receivables granted to retail clients for financing the purchase of new vehicles (44.41%), used vehicles (10.22%) personal loans (30.30%), other finalised loans (15.07%), originated and serviced by Consel S.p.A. The transaction’s 12th monthly revolving period ended on the 23 June 2015 payment date, and there were concentration limits in place to mitigate any potential portfolio deterioration.
As of June 2015 payment date, two- to three-month arrears are at 0.3%, the 90+ delinquency ratio is at 0.03% and any defaults have not occurred yet.
Credit enhancement for the Class A notes consists of subordination of the junior notes. It remained stable over the year at 35% given the transaction was still in its revolving period and notes will start to amortise on the September 2015 payment date.
The transaction benefits from a Cash Reserve funded through the proceeds of the Class J notes for an amount corresponding to 1% of the principal amount of Class A notes, corresponding to EUR 2.4 million. It is available to cover senior expenses and Class A interest. The Target Cash Reserve Account amortises with the repayment of the Notes and has to be maintained at 1% of the principal amount of the Class A notes with a floor at EUR 100,000.
The Bank of New York Mellon (Luxembourg) SA, Italian branch acts as Account Bank for the transaction. The DBRS public rating of The Bank of New York Mellon (Luxembourg) SA, Italian branch 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.” 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.
Due to the inclusion of a revolving period in the transaction, the collateral was initially modelled based on the worst-case replenishment criteria set forth in the transaction’s legal documents. These assumptions have not changed and consequently cash flow analysis was not conducted.
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 The Bank of New York Mellon, servicer reports provided by Consel S.p.A. and data from the European DataWarehouse.
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 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 last rating action on this transaction took place on 4 July 2014, when DBRS finalised the provisional ratings of AA (high) (sf).
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 transaction performance. Adverse changes to 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 for the Issuer are 8.9% (including sovereign stress) and 89.5% (including sovereign stress), respectively.
-- 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 fall to AA (low) (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A notes would be expected to fall to AA (low) (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A1/A2 notes would be expected to fall to A (low) (sf).
Class A notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in LGD, expected rating of AA (low) (sf)
-- 25% increase in PD, expected rating of AA (sf)
-- 50% increase in PD, expected rating of AA (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (low) (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: Paolo Conti
Initial Rating Date: 18 June 2014
Initial Rating Committee Chair: Claire Mezzanotte
Lead Surveillance Analyst: Vito Natale
Rating Committee Chair: Chuck Weilamann
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 (December 2014)
-- Master European Structured Finance Surveillance Methodology (April 2015)
-- Operational Risk Assessment for European Structured Finance Servicers (January 2015)
-- Rating European Consumer and Commercial Asset-Backed Securitisations (December 2014)
-- 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.
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