DBRS Confirms Rating on Class A2 Notes Issued by Credico Finance 15 S.r.l.

DBRS Ratings Limited (DBRS) has today confirmed its AA (high) (sf) rating on the EUR 99,318,274.64 Class A2 Notes and discontinued its rating on the Class A1 Notes issued by Credico Finance 15 S.r.l. (the Issuer).

The transaction is a multi-originator cash flow securitisation collateralised by fourteen portfolios of bank loans to Italian small and medium-sized enterprises (SMEs), entrepreneurs, artisans and producer families, granted by fourteen unrated Italian cooperative banks (BCCs), as listed below (in brackets the contribution of each BCC to the aggregate of the fourteen portfolios):

-- Banca di Credito Cooperativo di Alba, Langhe, Roero e del Canavese S.C. (22.7%)
-- Credito Cooperativo Ravennate e Imolese Società cooperativa (14.1%)
-- Banca di Credito Cooperativo di Gradara S.c.r.l. (9.2%)
-- Banca di Credito Cooperativo Pordenonese sc (8.6%)
-- Banca di Credito Cooperativo di Sesto San Giovanni – Società Cooperativa (7.0%)
-- Cassa Rurale ed Artigiana di Castellana Grotte – Credito Cooperativo (6.5%)
-- Banca di Credito Cooperativo di Ostra e Morro d’Alba società cooperativa (5.6%)
-- Romagna EST Banca di Credito Cooperativo Società Cooperativa (5.0%)
-- Credito Cooperativo Mediocrati Soc. Coop. per Azioni (4.9%)
-- Banca di Ancona – Credito Cooperativo – Società Cooperativa (3.9%)
-- Bancasciano Credito Cooperativo Soc. Coop. (3.4%)
-- Credito Valdinievole – Banca di Credito Cooperativo di Montecatini Terme e Bientina Società Cooperativa (3.4%)
-- Banca di Credito Cooperativo del Metauro Soc. Coop. (3.1%)
-- Banca di Teramo di Credito Cooperativo S.c. (2.6%)

The rating on the Class A2 Notes addresses the timely payment of interest and the ultimate payment of principal payable on or before the Final Maturity Date in December 2053. DBRS does not rate the Class B1, Class B2, Class B3, Class B4, Class B5, Class B6, Class B7, Class B8, Class B9, Class B10, Class B11, Class B12, Class B13 and Class B14 Notes.

The rating action reflects the annual review of the transaction. As of the last payment date (15 December 2015), the Class A1 Notes have been paid down in full. The remaining balance of the Class A1 Notes before the payment in full was € 2,104,541.17 and the rating was AA (high) (sf). Following redemption in full of the Class A1 Notes, the Class A2 Notes have just started to amortise and are currently at 87.20% of their initial balance. 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 15 December 2015 payment date, 0-90 days delinquencies, 90-120 days delinquencies and over 120 days delinquencies were 8.719%, 0.292% and 1.114% of the original collateral balance respectively, while the cumulative gross default ratio was 0.155% of the original collateral balance.

There are fourteen non-amortising Cash Reserves (CRs), sized at 4% of the initial balance of Class A1 and Class A2 Notes (the Rated Notes), which are available to cover senior expenses, interest and principal shortfalls on the Rated Notes on the relevant waterfall and then on all other waterfalls. However, 2% of the outstanding balance of Class A1 and A2 Notes is exclusively available to cover senior expenses and interest shortfalls on the Rated Notes.
The current balance of the CRs is €6,514,596.99, below its initial amount of €6,556,000.00. This is due to Cassa Rurale ed Artigiana di Castellana Grotte’s €41,403.01 utilisation of the Cash Reserve as of the last payment date.

Each Servicer is allowed to buy back single loans up to 8% of the initial portfolio. As of the last payment date, Credito Valdinievole had breached that limit as reported repurchases were at 8.866%. These additional repurchases have been authorised by the representative of the noteholders.

As of September payment date, there was a disequilibrium event in some of the single portfolios that resulted in a payment to the Principal Amortisation Reserve Account of €3,349,609.77.

BNP Paribas Securities Services SCA/Milan holds the Transaction Account for the transaction. The DBRS private rating of BNP Paribas Securities Services SCA/Milan complies with the Minimum Institution Rating given the rating assigned to the Class A2 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 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 legal documents was not conducted as the documents have remained unchanged since the most recent rating action.

Other methodologies and criteria 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 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 Accounting Partners S.r.l. 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.

This is the first rating action since the Initial Rating Date (15 December 2014). The lead responsibilities for this transaction have been transferred to Alfonso Candelas.

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 5.15%, and a 10% and 20% increase in the base case PD.
-- Recovery rates used: base case recovery rates, corresponding to a recovery rate of 53.13% at the AA (high) (sf) stress level for the Class A2 Notes, 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 A2 Notes at their current rating. A scenario combining both a hypothetical increase in the PD by 20% and a hypothetical decrease in the Recovery Rate by 20% would also lead to model results suggesting a confirmation of the current rating of the Class A2 Notes.

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: Marcello Bonassoli
Initial Rating Date: 15 December 2014
Initial Rating Committee Chair: Carlos Silva

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

DBRS Ratings Limited
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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
-- Rating CLOs Backed by Loans to European Small and Medium-Sized Enterprises (SMEs)
-- Operational Risk Assessment for European Structured Finance Servicers
-- Unified Interest Rate Model for European Securitisations
-- Cash Flow Assumptions for Corporate Credit Securitizations
-- Rating CLOs and CDOs of Large Corporate Credit.
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda

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.