DBRS Confirms Valsabbina SPV 1 S.r.l. Class A Notes at AAA (sf)

DBRS Ratings Limited (DBRS) has today confirmed its AAA (sf) rating on the Class A Notes issued by Valsabbina SPV 1 S.r.l. (Valsabbina 1).

Today’s rating action is based on the following analytical considerations, as described more fully below:

-- Portfolio performance, in terms of delinquencies and defaults.
-- Portfolio default rate, loss given default (LGD) and expected loss assumptions for the remaining collateral pool.
-- Current credit enhancement available to the Class A Notes to cover the expected losses at the AAA (sf) rating level.

Valsabbina 1 closed in January 2012 and is a securitisation of first-lien Italian residential mortgages originated by Banca Valsabbina S.C.p.A. The transaction went through restructuring in January 2015 when additional loans were added into the transaction collateral pool and the total balance of the Class A Notes was increased.

As of 30 September 2015, loans more than 90 days delinquent as a percentage of the outstanding collateral pool balance have decreased to 1.51% from 1.98% since the restructuring. The originator continues to repurchase long delinquent loans out of the collateral pool. As a result, no default or loss has been realized. DBRS has reduced the transaction’s lifetime probability of default (PD) assumption at the AAA rating level to 37.67% from 40.77%.

The credit enhancement available to Class A Notes increased to 37.1% through transaction deleveraging and overcollateralization build-up. The sources of credit enhancement are the subordination of junior notes, the reserve fund representing 5% of the Class A Notes balance and currently at its target level, and the overcollateralization.

BNP Paribas Securities Services, Milan Branch, is the Account Bank on the transaction. Its current DBRS private rating meets the Minimum Institution Rating criteria 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 Master European Structured Finance Surveillance Methodology, which can be found on www.dbrs.com at http://www.dbrs.com/about/methodologies.

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.

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.

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 the investor reports provided by Securitisation Services S.p.A. and the loan-by-loan data from the European DataWarehouse.

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 27 January 2015, when the Class A Notes rating was confirmed at AAA (sf). The lead responsibilities for this transaction have been transferred to Kevin Ma.

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

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

-- DBRS expected a lifetime base case PD and 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 10.81% and 24.39%, respectively. At the AAA (sf) rating level for Class A Notes, the corresponding PD is 37.67% and the LGD is 55.33%.

-- 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 on the Class A Notes would be expected to be at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Class A Notes would be expected to be at AA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating on the Classes A Note would be expected to be at AA (sf).

Class A Note 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 AA (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 AA (high) (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (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: 31 January 2012
Initial Rating Committee Chair: Claire Mezzanotte

Lead Surveillance Analyst: Kevin Ma
Rating Committee Chair: Diana Turner

DBRS Ratings Limited
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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.

-- Unified Interest Rate Model for European Securitizations
-- Legal Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Servicers
-- 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.