DBRS Upgrades Rating on Class A Notes Issued by Alchera SPV S.r.l. and Removes UR-Positive

DBRS Ratings Limited (DBRS) has today upgraded to A (high) (sf) from A (sf) the rating on the EUR 172,163,214.21 Class A Notes issued by Alchera SPV S.r.l. (the Issuer) and has removed Under Review with Positive Implications (UR-Pos.).

The rating on the Class A Notes addresses the timely payment of interest and the ultimate payment of principal payable on or before the Final Legal Maturity Date in November 2048.

The transaction is a multi-originator cash flow securitisation collateralised by a portfolio of bank loans to Italian Small and Medium-sized Enterprises (SMEs), which were originated by Cassa di Risparmio di Savigliano S.p.A., Cassa di Risparmio di Saluzzo S.p.A. and Banca Mediocredito del Friuli Venezia Giulia S.p.A. (MFVG).

The rating action reflects an annual review of the transaction and concludes the UR-Pos. status of the rating. The Class A Notes were placed UR-Pos. following a material update to the methodology DBRS applies to monitor the counterparty risks of the transaction (see “Legal Criteria for European Structured Finance Transactions”, published on 19 February 2016).

This methodology incorporates DBRS’s new Critical Obligations Ratings (CORs), which were introduced in the “Critical Obligations Rating Criteria” methodology published on 2 February 2016, and also provide more granular rating levels for account bank institution replacements and eligible investments.

The rating of Class A Notes has been upgraded based upon the following analytical considerations:
-- Portfolio Performance, in terms of delinquencies and defaults, as of the February 2016 payment date.
-- Updated and more granular rating levels introduced by the “Legal Criteria for European Structured Finance Transactions” for account bank institution replacement triggers.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms in which they have invested.
-- The current available credit enhancement to the notes to cover expected losses assumed in line with A (high) (sf) rating level for Class A Notes.

Citibank N.A., Milan Branch is the Italian Account Bank and Citibank N.A., London Branch is the English Account Bank. The DBRS private rating of Citibank N.A., Milan Branch and Citibank N.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.

The transaction is performing in line with DBRS’s expectations. As of the February 2016 payment date, gross cumulative defaults, as per the transaction definition, were 1.20% of the initial portfolio balance, and delinquencies greater than 90 days were 1.00% of the portfolio balance.

Credit enhancement has increased as a result of the deleveraging of the Class A Notes, currently at 41.09% of their initial balance. Credit enhancement for the Class A Notes (58.57%) is provided by the subordination of the Class B Notes and the Reserve Account.

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’s legal documents was not conducted, as the documents have remained unchanged since the most recent rating action.

Other methodologies referenced in this transaction are listed at the end of this press release. This may be found 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’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 action include information provided by the Originators, the Issuer and their agents, 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 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 19 February 2016, when the rating of the Class A Notes was placed UR-Pos. Prior to that, the rating of the Class A Notes was confirmed at A (sf) on 17 February 2015.

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 ratings, DBRS considered the following stress scenarios, as compared to the parameters used to determine the ratings (the Base Case):
-- Probability of Default (PD) Rates Used: Base Case PD of 3.37%, and a 10% and 20% increase in the Base Case PD.
-- Recovery Rates Used: Base Case Recovery Rates, corresponding to a recovery rate of 49.78% at the A (high) (sf) stress level, and 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 A Notes at their current rating. A scenario combining both a hypothetical increase in the PD by 10% and a hypothetical decrease in the Recovery Rate by 10% would also lead to model results suggesting a confirmation of the current rating.

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: 27 June 2013
Initial Rating Committee Chair: Jerry Van Koolbergen

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

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

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.