DBRS Confirms Class A Notes Issued by Grecale ABS S.r.l. - Series 6 at AAA (sf)

DBRS Ratings Limited (DBRS) has today confirmed its AAA (sf) rating on the Class A notes issued by Grecale ABS S.r.l. - Series 6 (Grecale).

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 probability of default rate (PD), 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.

Grecale closed in July 2009 and is a securitisation of first-lien Italian residential mortgages originated by UGF Banca S.p.A (also Unipol Banca S.p.A.). The transaction makes payments semi-annually and DBRS assigned a AAA (sf) rating to the Class A notes in May 2011.

The collateral portfolio is performing in line with DBRS’s expectations. As of 30 September 2015, loans more than 90 days delinquent as a percentage of the outstanding collateral pool balance excluding defaulted loans were at 0.76%, down from 1.46% 12 months earlier. The cumulative default as a percentage of the collateral pool balance at the transaction’s closing increased to 6.04% from 5.11% 12 months earlier. DBRS has maintained the transaction’s lifetime PD and LGD assumptions at the AAA (sf) rating level at 30.89% and 33.93% respectively in this review.

The credit enhancement available to the Class A notes is 26.61% without the cash reserve and 32.65% with the cash reserve. The non-amortising cash reserve is currently at the target level and mainly provides liquidity support to the Class A notes.

The Bank of New York Mellon, London branch, is the Account Bank on the transaction. The bank’s 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.

UBS Limited is the swap counterparty on the transaction with UBS AG acting as the swap guarantor. UBS Limited’s DBRS private rating meets the rating requirement given the rating assigned to the Class A notes, as described in DBRS’s “Derivative 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.

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

The source of information used for this rating include the investor reports provided by the bank of New York Mellon and the loan by loan data from European Data Warehouse 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.

The last rating action on this transaction took place on 25 March 2015 when DBRS confirmed its AAA (sf) rating on the Class A notes. 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 are 7.71% and 12.83%, respectively. At the AAA (sf) rating level, the corresponding PD is 30.89% and the LGD is 33.93%.

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

Class A notes 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 (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: 10 May 2011
Initial Rating Committee Chair: Claire Mezzanotte

Lead Surveillance Analyst: Kevin Ma
Rating Committee Chair: Mary Jane Potthoff

DBRS Ratings Limited
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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
-- Operational Risk Assessment for European Structured Finance Servicers
-- Unified Interest Rate Model for European Securitisations
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Derivative Criteria for European Structured Finance Transactions

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