DBRS Confirms Ratings on Voba N. 5 S.r.l. Class A1 and A2 Notes

DBRS Ratings Limited (DBRS) has today confirmed the following ratings on the Class A1 and Class A2 Notes (the Class A Notes) issued by Voba N. 5 S.r.l. (the Issuer):

• Class A1 Notes at AAA (sf)
• Class A2 Notes at AAA (sf)

The confirmation of the ratings on the Class A Notes is based on the following analytical considerations as described more fully below:

-- An amendment to the servicing agreement signed on 13 January 2016.
-- Portfolio performance, in terms of defaults and level of delinquencies as of 30 November 2015.
Updated 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 AAA (sf) rating level.

Voba N. 5 S.r.l. is a securitisation of first-lien fully amortising mortgage loans originated primarily in the regions of Trentino Alto Adige and Veneto in Italy. The originator and servicer of the transaction is Banca Popolare dell’Alto Adige S.c.p.a. (Volksbank).

The amendment to the servicing agreement consists of a reduction of the minimum renegotiation limit for fixed-rate loans to 2.2% from 4.50% and margin for floating-rate loans to 1.50% from 1.90%. There is also an increased limit on these renegotiations (excluding payment holidays) to 6% from 2% of the original outstanding portfolio balance.

As of November 2015, two- to three-month arrears were at 0.65%, and the 90+ delinquency ratio was at 0.35%. The current cumulative default ratio is low at 0.08%.

As of November 2015, credit enhancement to the Class A1 Notes was 80.5%, consisting of subordination of the Class A2 Notes, the collateralised portion of the Class J Notes and the cash reserve. Credit enhancement to the Class A2 Notes was 27.7%, provided by the subordinated collateralised Class J Notes and the cash reserve.

The transaction benefits from an amortising Cash Reserve Fund that is available to cover senior fees and interest shortfall on the Class A Notes. The Cash Reserve Fund is currently at the target level of EUR 7.578 million.

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 A 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 the Master European Structured Finance Surveillance Methodology, which can be found on www.dbrs.com at http://www.dbrs.com/about/methodologies.

DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology. DBRS conducted a review of the amendments to the servicing agreement. The other transaction legal documents have remained unchanged since the most recent rating action, and were not reviewed.

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 commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/

The sources of information used for this rating include information provided by Securitisation Services S.p.A. (the “calculation agent”), Volksbank 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 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 on this transaction took place on 7 April 2015, when DBRS confirmed the ratings on the Class A Notes.

The lead responsibilities for this transaction have been transferred to Antonio Di Marco.

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 5.78% and 10.07%, respectively. At the AAA (sf) rating level, the corresponding PD is 28.02% and the LGD is 31.47%.
-- 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 AAA (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 AAA (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 AAA (sf).

Class A1 and A2 Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AAA (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: Davide Nesa
Initial Rating Date: 8 April 2014
Initial Rating Committee Chair: Quincy Tang

Lead Surveillance Analyst: Antonio Di Marco
Rating Committee Chair: Quincy Tang

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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 (December 2015)
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda (January 2016)
-- 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.