DBRS Confirms and Upgrades Ratings on Notes Issued by 2014 Popolare Bari SME S.R.L.

DBRS Ratings Limited (DBRS) has today confirmed and upgraded the ratings on the following notes issued by 2014 Popolare Bari SME S.R.L. (the Issuer):

-- €89,797,716.00 Class A2a Notes: Confirmed at AAA (sf)
-- €11,299,545.93 Class A2b Notes: Confirmed at AAA (sf)
-- €35,000,000.00 Class B Notes: Upgraded to AA (high) (sf) from AA (low) (sf)

The transaction is a cash flow securitisation collateralised by a portfolio of bank loans to Italian small and medium-sized enterprises (SMEs), entrepreneurs, artisans and self-employed individuals which were granted by Banca Popolare di Bari S.C.p.A. (BPB) and Cassa di Risparmio di Orvieto S.p.A. (CRO and collectively with BPB, the Originators).

The ratings on the Class A2a, and Class A2b Notes address the timely payment of interest and the ultimate payment of principal payable on or before the Maturity Date in November 2054. The rating on the Class B Notes addresses the ultimate payment of interest and the ultimate payment of principal payable on or before the Maturity Date in November 2054. DBRS does not rate the Class J1 Notes or the Class J2 Notes.

The rating actions reflect an annual review of the transaction. The Class A1 Notes paid down in full as of 31 March 2015. The Class A2a and Class A2b Notes are currently amortising pro rata, and are at 74.8% of their initial balance. The Class B Notes will start to amortise once the Class A2a and A2b Notes have fully paid down. Given this deleveraging, the current credit enhancement available has increased considerably, while the transaction performance is in line with DBRS’s expectations.

As of the June 2015 payment date, the percentage of loans in arrears for more than 90 days over the original balance at the closing date is at 2.94%, while cumulative defaulted loans are at 0.17% as per the default definition of the transaction.

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)”. 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’s legal documents was not conducted, as the documents have remained unchanged since the most recent rating action (closing).

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 information provided by Securitisation Services S.p.A. and BPB, 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 April 2015, when DBRS discontinued the rating on the Class A1 Notes after the payment in full. Before that, DBRS assigned a rating of AAA (sf) to the Class A1, A2a, and A2b Notes and a rating of AA (low) (sf) to Class B Notes.

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):
-- Probability of default (PD) rates used: base case PD of 3.55%, and a 10% and 20% increase in the base case PD.
-- Recovery rates used: base case recovery rates, corresponding to a recovery rate of 29.28% at the AAA (sf) stress level and 31.46% at the AA (high) (sf) stress level for the Class A2a and A2b and Class B Notes respectively, 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 Class A2a, Class A2b and Class B Notes at their current ratings respectively. 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 ratings.

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: Carlos Silva
Initial Rating Date: 5 August 2014
Initial Rating Committee Chair: Chuck Weilamann

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

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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
-- Operational Risk Assessment for European Structured Finance Servicers
-- Unified Interest Rate Model for European Securitisations
-- 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

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.