DBRS Assigns Rating to Vela Consumer S.r.l.

DBRS Ratings Limited (DBRS) has today assigned a rating of AA (sf) to the Class A notes (EUR 837,800,000) issued by Vela Consumer S.r.l. (Issuer).

The rating of the Class A notes addresses timely payment of interest and ultimate payment of principal on or before the legal final maturity date. The Issuer is a limited liability company incorporated in 2015 under the laws of the Republic of Italy.

Although the Transaction is the first consumer loans transaction originated by Banca Nazionale del Lavoro S.p.a. (BNL), they have well established experience in residential mortgage securitisation; in fact, in recent years BNL has issued eight RMBS transactions within the Vela series. This transaction is the second one originated by Banca Nazionale del Lavoro S.p.a. and rated by DBRS.

The Originator, Servicer and Account Bank of the transaction is Banca Nazionale del Lavoro S.p.a. The Back-up servicer facilitator is Securitisation Services. BNL’s private rating complies with DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology given the AA (sf) rating assigned to the Class A notes.

The notes are backed by unsecured consumer receivables originated by BNL to borrowers belonging to Bank of Italy category SAE 600. The securitised portfolio is well distributed across Italy. 39.90% of the properties securing the mortgage loans are located in the south of Italy, 33.15% in the centre and 26.95% in the north. As of 17 October 2015 (Valuation Date), the transaction portfolio consisted of 78,474 loans extended with a current balance of EUR 1,159 million and average loan balance of approximately EUR 14,782. The purchase price of the portfolio also includes accrued interest on the receivables at the date of the assignment equal to EUR 3.7 million.

Credit enhancement for the Class A notes is calculated as 29.44%, provided by the subordination of the Class J notes (28.00%) and the Cash Reserve (1.44%). The reserve fund will be established utilising a portion of the proceeds of the Class J notes at the issue date at EUR 16,756,000 (2.00% of the initial balance of the Class A notes) and can amortise during the life of the transaction to 4.00% of the outstanding Class A Notes if the follow conditions are met: (1) the outstanding amount of the Class A Notes is below 50% of the original amount, (2) the Cumulative Default Ratio is below 9.00%, (3) principal balance of the mortgages 90+ days in arrears is lower than 2.5%, (4) the unpaid Principal Deficiency Ledger is equal to zero and (5) the Reserve Fund is fully funded as of the previous payment date. Additionally, the Reserve Fund has a floor of EUR 4,189,000 (0.50% of the original amount of the Class A Notes). The Reserve Fund is available to pay the senior fees, the interest on the Class A Notes and to clear the principal deficiency ledger. At the issue date an Interest Reserve has been funded at the target amount equal to 4,000,000 million utilising the proceeds of the Class J notes. The Interest Reserve cannot amortise until the Class A notes are redeemed in full. Interest reserve can be utilised to cover any shortfall, if any, in senior fees and on the interest on the Class A notes.

For further details on the analysis please refer to the rating report available on www.dbrs.com.

The rating is based upon DBRS’s review of the following analytical considerations:

-- Transaction capital structure and form and sufficiency of available credit enhancement.

-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to terms in which they have invested.

-- The transaction parties’ capabilities with respect to originations, underwriting, servicing and financial strength.

-- The legal structure and presence of legal opinions addressing the assignment of the assets to the Issuer and the consistency with DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

-- Incorporation of a sovereign-related stress component in the stress scenarios due to the rating assigned by DBRS to the Republic of Italy’s of A (low) - Stable Trend.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is: “Rating European Consumer and Commercial Asset-Backed Securitisations.”

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 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 these ratings include performance and portfolio data sourced by BNL. DBRS received historical gross loss data, historical recovery data, dynamic prepayment and delinquency data. In addition, DBRS received portfolio stratification tables related to the portfolio as at October 2015. 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.

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.

This rating concerns a newly issued financial instrument. This is the first DBRS rating on this financial instrument.

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

To assess the impact of a change in the transaction parameters (probability of defaults and/or loss given default) on the rating of Class A notes, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the Base Case):
-- Probability of Default Rate Used: Base Case PD of 9.32%, a 25% and 50% increase on the base case PD.
-- Recovery Rate Used: Base Case Recovery Rate of 8.12%.
-- Loss Given Default (LGD): Base Case LGD of 91.88%, a 25% and 50% increase on the base case LGD.

DBRS concludes that for the Class A notes:
-- A hypothetical increase of the PD by 25%, ceteris paribus, would lead to a downgrade of the Class A notes to AA (low) (sf).
-- A hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A notes to AA(low) (sf).
-- A hypothetical increase of the PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A notes to A(high) (sf).
-- A hypothetical increase of the PD by 50%, ceteris paribus, would lead to downgrade the Class A notes to A (sf).
-- A hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A Notes to AA(low) (sf)
-- A hypothetical increase of the PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A notes to A (low) (sf).
-- A hypothetical increase of the PD by 25% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A notes to A(high) (sf).
-- A hypothetical increase of the PD by 50% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A notes to A (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: Davide Nesa, Senior Financial Analyst
Initial Rating Date: 22 December 2015
Initial Rating Committee Chair: Chuck Weilamann, Managing Director

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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

Rating European Consumer and Commercial Asset-Backed Securitisations
Criteria for European Structured Finance Transactions
Operational Risk Assessment for European Structured Finance Servicers
Operational Risk Assessment for European Structured Finance Originators

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