DBRS Upgrades Ratings on Notes Issued by Madeleine SPV S.r.l.

DBRS Ratings Limited (DBRS) has today upgraded its ratings on the following notes issued by Madeleine SPV S.r.l. (the Issuer):
-- €127,042,902.03 Class A Notes: upgraded to A (sf) from A (low) (sf)
-- €15,665,025.93 Class B Notes: upgraded to BBB (sf) from BBB (low) (sf)

The upgrade of the ratings on the Class A and Class B Notes is based upon the following analytical considerations:
-- Portfolio Performance, in terms of delinquencies and defaults, as of September 2015 payment date.
-- Ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms in which they have invested.
-- Current available credit enhancement to the notes to cover expected losses assumed in line with the A (sf) rating level for the Class A Notes and the BBB (sf) rating level for the Class B Notes.

The Issuer is a securitisation of salary assignment loans and pension assignment loans granted by Pitagora S.p.A. to individuals resident in Italy. Most loans are disbursed to private individuals working for governmental or quasi-governmental organisations and pensioners; as a result, the performance of the notes is assumed to be highly correlated with the sovereign rating.

The deal closed in May 2013 and in September 2014, in the context of the restructuring of the transaction, the Issuer had redeemed in full the existing Class B Notes for €28.18 million and issued the new Class B Notes and Class C Notes, which rank junior to Class A Notes.

The deal had a ramp-up period until December 2014, during which the paid-up amounts on the Notes were used for the purchase of additional receivables.

As of the September 2015 payment date, 1-month delinquencies, 2-month delinquencies and 3-month delinquencies were 4.93%, 1.42% and 0.38% of the collateral principal balance, respectively, while delinquencies greater than three months were 0.58%. The cumulative gross default ratio was 2.53% of the aggregated original balance, with cumulative recoveries of 58.31%.

Credit enhancement for the Class A Notes (21.58%) is provided by the subordination of the Class B and Class C Notes, and the Reserve Accounts. Credit enhancement for the Class B Notes (11.11%) is provided by the Reserve Accounts.

A Cash Reserve is available to cover senior expenses and missed interest payments on the Class A and Class B notes, and, after the occurrence of a Trigger Event, it will be available to repay principal on the Notes. The Cash Reserve Target Amount is equal to 3.20% of the total paid-up amount of the Class A Notes, subject to the absolute floor of 1.50% of the paid-up amount of the Class A Notes.

The transaction also benefits from a Prepayment Reserve, available to cover any amount which is object of a set-off made by a debtor in the event of prepayment of the relevant Loan, in connection with expenses, fees and/or other amounts: in case of a loan prepayment, the Originator is required to pay back to the borrower, on a pro rata basis, a portion of the expenses paid up front. The Prepayment Reserve Target Amount is equal to 3.22% of the Outstanding Balance of the Aggregate Portfolio.

The Bank of New York Mellon (Luxembourg) S.A. is the Italian Account Bank for this transaction, and The Bank of New York Mellon S.A./N.V., London Branch is the English Account Bank. The DBRS private rating of both the Italian and English Account Bank comply with the Minimum Institution Rating given the rating assigned to the 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 “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.

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 information provided by Pitagora S.p.A (the Servicer), Securitisation Services S.p.A. (the Calculation Agent), 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 these ratings 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 took place on 29 September 2014, when DBRS confirmed the rating on Class A Notes at A (low) (sf) and assigned final rating of BBB (low) (sf) to the Class B Notes.

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.

To assess the impact of the changing transaction parameters on the rating, DBRS considered the following stress scenarios compared with the parameters used to determine the rating (the base case):

-- DBRS expected a base case probability of default (PD) and loss given default (LGD) for the portfolio 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 receivables are 14.56% and 43.87%, respectively.

-- The Risk Sensitivity overview below illustrates the ratings expected for the Class A Notes and Class B Notes if the PD and LGD increase by a certain percentage over the base case assumptions. For example, if the LGD increases by 50%, the rating for the Class A Notes would be expected to fall to A (low) and Class B Notes to BB (high) (sf), all else being equal. If the PD increases by 50%, the rating for the Class A Notes would be expected to fall to A (low) (sf) and Class B Notes to BB (high), all else being equal. Furthermore, if both the PD and LGD increase by 50%, the rating for the Class A Notes would be expected to fall to BB (high) (sf) and Class B Notes to B (low) (sf), all else being equal.

Class A Notes risk sensitivity:
-- 25% increase in LGD, expected rating of A (sf)
-- 50% increase in LGD, expected rating of A (low) (sf)
-- 25% increase in PD, expected rating of A (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (sf)
-- 50% increase in PD, expected rating of A (low) (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 BB (high) (sf)

Class B Notes risk sensitivity:
-- 25% increase in LGD, expected rating of BBB (sf)
-- 50% increase in LGD, expected rating of BB (high) (sf)
-- 25% increase in PD, expected rating of BBB (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BB (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of B (high) (sf)
-- 50% increase in PD, expected rating of BB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of B (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of B (low) (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: 17 July 2014
Initial Rating Committee Chair: Chuck Weilamann

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

DBRS Ratings Limited
1 Minster Court, 10th Floor
Mincing Lane
London EC3R 7AA
United Kingdom

Registered in England and Wales: No. 7139960

The rating methodologies 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
-- Rating European Consumer and Commercial Asset-Backed Securitisations

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.