DBRS Confirms Rating on 24-7 Finance S.r.l. Class A Notes

DBRS has today confirmed its A (high) (sf) rating on the Class A Notes issued by 24-7 Finance 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 June 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 (high) (sf) rating level.

As of 30 June 2015, 90+ delinquent loans accounted for 4.37% of the non-defaulted collateral pool balance, up from 3.92% a year ago. Cumulative defaulted loans as a percentage of the initial collateral pool balance at transaction closing was 8.23%, an increase from 7.51% in the prior year. The collateral performance is within DBRS expectations.

Credit enhancement to the Class A Notes as a percentage of the performing collateral balance is 17.69%, up from 15.76% a year ago. The Liquidity Reserve, which provides liquidity support, is at its target of EUR 35.1 million whereas the Cash Reserve has been used and its current balance is zero.

The Bank New York Mellon (Luxembourg) S.A., Italian branch 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 the DBRS Legal Criteria for European Structured Finance Transactions. Additionally, J.P. Morgan Securities plc acts as swap counterparty for the transaction. The DBRS private rating of J.P. Morgan Securities plc complies with the DBRS Derivative Criteria for European Structured Finance Transactions, given the rating assigned to the senior notes.

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.

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 payment reports provided by The Bank of New York Mellon, servicer reports provided by UBI and 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 previous rating action on this transaction took place on 17 September 2014, when the rating of the Class A Notes was confirmed at A (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 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 16.18% and 14.18%, respectively. At the A (high) (sf) rating level, the corresponding PD is 37.78% and the LGD is 31.45%.
-- 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 BBB (high) (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 BBB (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 BBB (sf).

Series A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (sf)
-- 50% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD, expected rating of A (low) (sf)
-- 50% increase in PD, expected rating of BBB (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (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: 27 July 2011
Initial Rating Committee Chair: Claire Mezzanotte

Lead Surveillance Analyst: Antonio Di Marco
Rating Committee Chair: Diana Turner

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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)
-- Derivative 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