DBRS Assigns Ratings to Quarzo 2015

DBRS Ratings Limited (DBRS) has today assigned ratings to the notes to be issued by Quarzo S.r.l. (Quarzo 2015, the Issuer or the SPV) as follows:

-- Series A Notes: A (high) (sf)

The ratings are based upon review by DBRS of the following analytical considerations:
-- Transaction capital structure, and form and sufficiency of available credit enhancement.
-- Relevant credit enhancement in the form of subordination and a cash reserve.
-- Credit enhancement levels are sufficient to support the expected cumulative net loss assumption projected under various stress scenarios at A (high) of the Series A Notes issued by Quarzo S.r.l.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms in which they have been invested.
-- Compass S.p.A’s capabilities with respect to originations, underwriting, servicing and financial strength.
-- The credit quality of the collateral and ability of the servicer to perform collection activities on the collateral. DBRS conducted an operational risk review of Compass S.p.A and deems Compass S.p.A to be an acceptable servicer.
-- 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.

The transaction was modelled in Intex Dealmaker and the default rates at which the rated notes did not return all specified cash flows in a timely manner were determined.

Notes:
All figures are in euros unless otherwise noted. The principal methodology applicable is: “Rating European Consumer and Commercial Asset-Backed Securitisations.”

-- 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

For a more detailed discussion of the 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 performance and portfolio data relating to the receivables sourced by Compass S.p.A. DBRS received historical gross loss data from Q1 2002 to Q4 2014, and historical recovery data from Q4 2002 to Q1 2015. In addition, DBRS received portfolio stratification tables related to the portfolio as at 12 July 2015.

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

-- DBRS was supplied with third party assessments.

Data checks were performed and DBRS did not apply additional cash flow stresses in its scenarios. 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.

This rating concerns a newly issued financial instrument. This is the first DBRS rating on this financial instrument.

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):

-- Probability of Default Rate Used: Base Case PD of 10.06%, a 25% and 50% increase on the base case PD.
-- Recovery Rate Used: Base Case Recovery Rate of 10.67%.
-- Loss Given Default (LGD): Base Case LGD of 89.33%, a 25% and 50% increase on the base case LGD.

DBRS concludes that for the Series A Notes:
-- A hypothetical increase of the base case PD by 25% or a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to maintain the rating of the Series A Notes at A (high) (sf).
-- A hypothetical increase of the base case PD by 50% or a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Series A Notes to A (low) (sf).
-- A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Series A Notes to A (low) (sf).
-- A hypothetical increase of the base case PD by 50% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Series A Notes to BB (high) (sf).
-- A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Series A Notes to BBB (sf).
-- A hypothetical increase of the base case PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Series A Notes to BBB (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: 22 July /2015
Initial Rating Committee Chair: Chuck Weilamann

Lead Surveillance Analyst: Vito Natale
Rating Committee Chair: Chuck Weilamann

DBRS Ratings Limited
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The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies

Rating European Consumer and Commercial Asset-Backed Securitisations
Operational Risk Assessment for European Structured Finance Servicers
Rating European Covered Bonds
Legal Criteria for European Structured Finance Transactions.

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