DBRS Upgrades Ratings on Arianna SPV S.r.l.

DBRS Ratings Limited (DBRS) has today taken the following rating actions on the bonds issued by Arianna SPV S.r.l. (the Issuer):

-- Class A Notes upgraded to A (sf)
-- Class B Notes upgraded to BBB (sf)

The rating actions on the Class A and Class B Notes are based on the following analytical considerations as described more fully below:

-- Portfolio performance, in terms of delinquencies and defaults, as of October 2015.
-- Actual default rate, recovery rate and expected losses are within DBRS’s expectations.
-- Current available credit enhancement to the Class A and Class B Notes to cover the expected losses at the A (sf) and BBB (sf) rating levels, respectively.

The Issuer is a securitisation of salary assignment loans, pension assignment loans and delegation of payment loans extended to individuals residing in Italy by Consum.it S.p.A., directly or through specialised dealers (Mandatarie). The portfolio is serviced by Zenith Service S.p.A.

As of October 2015, two- to three-month arrears were at 0.62% and the 90+ delinquency ratio was at 0.81%. The current gross cumulative default ratio is low at 1.84%.

As of October 2015, credit enhancement to the Class A Notes was 33.57%, up from 19.36% at the DBRS Initial Rating. Credit enhancement to the Class A Notes consists of subordination of the Class B Notes and part of the Class C Notes. Credit enhancement to the Class B Notes was 18.74%, up from 10.61% at the DBRS Initial Rating. Credit enhancement to the Class B Notes consists of subordination of part of the Class C Notes.

The transaction benefits from a Cash Reserve, funded from part of the proceeds of the Class C Notes. The Cash Reserve provides liquidity support to the Class A and Class B Notes. The Cash Reserve is currently at the target level of EUR 11,374,440.

BNP Paribas Securities Services S.A., Italian branch and BNP Paribas Securities Services S.A., London branch are the Italian and English account bank for the transaction, respectively. The DBRS’s private ratings of BNP Paribas Securities Services S.A., Italian branch and BNP Paribas Securities Services S.A., London branch comply with the Minimum Institution Rating, given the rating assigned to the Class A Notes, as described in DBRS’s Legal Criteria for European Structured Finance Transactions methodology.

Given the combination of the current rating of BNP Paribas Securities Services S.A., Italian branch and the replacement provision for the account bank, additional cash flow analysis for the Class A Notes included scenarios where the transaction did not benefit from the Cash Reserve.

The lead responsibilities for this transaction have been transferred to Andrew Lynch.

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.

For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to the DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” found at http://www.dbrs.com/industries/bucket/id/10036/name/commentaries.

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.

The sources of information used for this rating include reports provided by Zenith Service S.p.A.

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 18 December 2014, when DBRS confirmed the ratings of A (low) (sf) on the Class A Notes and BBB (low) (sf) on the 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):
-- 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 loans for the Issuer are 7.97% and 45.61%, 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 remain at A (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A Notes would be expected to remain at A (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 remain at A (sf).

Class 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 (sf)

Class B Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (sf)
-- 50% increase in LGD, expected rating of BBB (sf)
-- 25% increase in PD, expected rating of BBB (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 (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: Paolo Conti
Initial Rating Date: 23 December 2013
Initial Rating Committee Chair: Chuck Weilamann

Lead Surveillance Analyst: Andrew Lynch
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 (September 2015)
-- Master European Structured Finance Surveillance Methodology (December 2015)
-- Operational Risk Assessment for European Structured Finance Servicers (January 2015)
-- Rating European Consumer and Commercial Asset-Backed Securitisations (October 2015)
-- Unified Interest Rate Model for European Securitisations (October 2015)

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.