DBRS Confirms Rating on CR Volterra 2 SPV S.r.l. Class A Notes

DBRS has today confirmed its A (sf) rating on the Class A Notes issued by CR Volterra 2 SPV S.r.l.

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 30 April 2015.
-- Portfolio default rate, loss given default and expected loss assumptions for the remaining collateral pool.
-- Current available credit enhancement to the Class A Notes to cover the expected losses at the A (sf) rating level.

As of 30 April 2015, 90+ delinquent loans accounted for 3.25% of the non-defaulted collateral pool balance, up from 2.89% a year ago. Cumulative defaulted loans as a percentage of the initial collateral pool balance at transaction closing was 2.52%, an increase from 0.45% in the prior year. The collateral performance is within DBRS’s expectations and DBRS maintains its 2-year default probability assumption at 3.19% for this transaction.

Credit enhancement to the Class A Notes as a percentage of the performing collateral balance is 21.12% through partial subordination of the Class J Notes as of 27 May 2015. In the event of a Trigger Notice, the amount standing in the Cash Reserve Account will also be available as a source credit support to Class A. The Cash Reserve is currently at its target level.

The transaction also benefits from a fully funded Commingling Reserve of EUR 4.4 million. As soon as the Class A Notes factor falls below 0.5%, the reserve will be allowed to amortise to 4.82% of the Class A Notes outstanding balance with a floor of EUR 919,500.

BNP Paribas Securities Services SA/Milan is the Account Bank for the transaction. The DBRS private rating on the Account Bank complies with the threshold for the Account Bank 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”, which can be found on www.dbrs.com at http://www.dbrs.com/about/methodologies. Other methodologies and criteria referenced in this transaction are listed at the end of this press release.

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.

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 reports provided by Securitisation Services 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 previous rating action on this transaction took place on 13 August 2015, when the rating of the
Class A Notes was confirmed at A (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 current assets. Adverse changes to asset 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 mortgages for the Issuer are 11.33% and 25.12%, respectively. At the A (sf) rating level, the corresponding PD is 28.35% and the LGD is 39.99%.
-- 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 Series A Notes would be expected to be at A (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Series A Notes would be expected to be at A (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Series A Notes would be expected to fall to A (low) (sf).

Series A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (sf)
-- 50% increase in LGD, expected rating of A (sf)
-- 25% increase in PD, expected rating of A (sf)
-- 50% increase in PD, expected rating of A (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (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: Alastair Bigley
Initial Rating Date: 31 July 2013
Initial Rating Committee Chair: Quincy Tang

Lead Surveillance Analyst: Kevin Ma
Rating Committee Chair: Quincy Tang

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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)
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda (July 2015)
-- 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