DBRS Takes Rating Actions on IBL CQS S.r.l. – Private Transaction – Series 2012-1

DBRS Ratings Limited (DBRS) has today taken the following rating actions on the notes issued by IBL CQS S.r.l. (the Issuer):

-- Class A notes confirmed at AA (sf) and
-- Class B notes upgraded to BBB (high) (sf) from BBB (sf).

The above-mentioned rating actions are based on the following analytical considerations, as described more fully below:

-- Portfolio performance, in terms of delinquencies and defaults, as of the July 2015 payment date.
-- Actual default rate, recovery rate and expected losses are within DBRS’s expectations.
-- Current available credit enhancement for the Class A and B notes to cover the expected losses at the AA (sf) and BBB (high) (sf) rating level.

This is a securitisation of salary assignment loans and delegation of payments loans extended to individuals resident in Italy, originated and serviced by IBL – Istituto Bancario del Lavoro S.p.A. (IBL).

The pool comprises salary assignment loans (83.51%) and delegation of payment loans (16.49%). Employers are represented by private (68.40%), semi-public (11.55%) and public entities (20.06%).

As of the July 2015 payment date, two- to three-month arrears are at 0.97%, the 90+ delinquency ratio is at 1.33% of performing balance and the cumulative gross default ratio (calculated on the initial collateral balance) has exhibited an increasing trend since the closing and reached 3.67%.

The Class A notes are supported by subordination of the Class B and Class C notes, while the Class B notes are supported by subordination of the Class C notes only. Credit enhancement for the Class A notes (as a percentage of the performing portfolio) increased to 52.41% from 24.95% since the initial rating, while credit enhancement for the Class B Notes increased to 22.61% from 9.43%.

The Bank of New York Mellon (Luxembourg) S.A., Italian branch and The Bank of New York Mellon, London branch are the Italian and English Account Bank for the transaction, respectively. The DBRS public ratings of The Bank of New York Mellon (Luxembourg) S.A., Italian branch and The Bank of New York Mellon, London branch are at least equal to the Minimum Institution Rating given the rating assigned to the Class A Notes, as described in the DBRS “Legal Criteria for European Structured Finance Transactions.” Given the combination of the current rating of the both account banks and the replacement provision envisaged in the legal documentation, additional cash flow analysis for the Class A and B notes included scenarios where the transaction did not benefit from the cash reserve.

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.

A review of the transaction legal documents was not conducted, as the documents have remained unchanged since the most recent rating action.

This may be found on www.dbrs.com at http://www.dbrs.com/about/methodologies.

Other methodologies 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 and payment reports provided by Securitisation Services S.p.A., servicer report provided by IBL Banca – Istituto Bancario del Lavoro S.p.A. and loan level 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 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 1 August 2014, when DBRS confirmed ratings on IBL CQS S.r.l. – Private Transaction - Series 2012-1 Class A at AA (sf) and Class B at BBB (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 13.56% (including sovereign stress) and 48.49% (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 A (high) (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 A (high) (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 fall to BBB (sf).

Class A notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD, expected rating of AA (sf)
-- 50% increase in PD, expected rating of A (high) (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 (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (sf)

Class B notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in LGD, expected rating of BBB (sf)
-- 25% increase in PD, expected rating of BBB (high) (sf)
-- 50% increase in PD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of B (high) (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: Alessio Pignataro
Initial Rating Date: 6 July 2012
Initial Rating Committee Chair: Chuck Weilamann

Lead Surveillance Analyst: Antonio Di Marco
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.