DBRS Confirms Ratings on the Notes in Three Berica Transactions

DBRS Ratings Limited (DBRS) has today confirmed the ratings on multiple notes in three Italian residential mortgage-backed securities transactions: Berica ABS S.r.l, (Berica ABS), Berica ABS 2 S.r.l. (Berica 2), and Berica 10 Residential MBS S.r.l (Berica 10) as follows:

Berica ABS
-- Class A1 confirmed at AAA (sf)
-- Class A2 confirmed at AAA (sf)

Berica 2
-- Class A1 Notes confirmed at AAA (sf)
-- Class A2 Notes confirmed at AAA (sf)

Berica 10
-- Class A1 Notes confirmed at AAA (sf)

Today’s rating actions are 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 rated notes to cover the expected losses at the AAA (sf) rating level.

All three transactions closed between 2011 and 2012, and are the securitisations of portfolios of Italian first lien mortgage loans originated and serviced by Banca Popolare di Vicenza S.c.p.a. and Banca Nuova S.p.A. Banca Popolare di Vicenza also acts as the Master Servicer on all three transactions.

Berica ABS’s collateral pool is performing as DBRS has expected. As of 30 November 2015, Loans more than 90 days delinquent as a percentage of the outstanding non-defaulted collateral pool balance were at 1.91%, up from 1.74% 12 months ago. The cumulative default ratio as a percentage of the collateral pool balance at the transaction closing increased to 4.35% from 2.57% 12 months ago. DBRS has maintained the same PD assumption as in the previous rating review for Berica ABS.

The performance of the collateral pools in Berica 2 and Berica 10 is better than DBRS has expected. As of 31 January 2016, loans more than 90 days delinquent were at 1.44% and 0.74% respectively, a level similar to 12 months ago. The cumulative default ratio remains low for both transactions at 2.13% and 2.17% respectively. DBRS has reduced the PD assumptions for Berica 2 and Berica 10 at the AAA (sf) rating level to 27.35% and 28.43% respectively in this rating review.

The weighted-average loan-to-value ratio in all three transactions has decreased as their collateral pools continue to amortise. DBRS has reduced the LGD assumptions for Berica ABS, Berica 2 and Berica 10 at AAA (sf) rating level to 29.64%, 24.48%, and 26.27% respectively.

The credit enhancement (CE) available to the senior notes in all three transactions has increased as the transactions continue to deleverage. The CE increased to 60.97% and 47.36 for the Berica ABS Class A1 and A2 notes respectively as of 31 December 2015, to 89.91% and 38.75% for the Berica 2 Class A1 Notes and Class A2 Notes respectively as of 29 February 2016, and to 39.18% for the Berica 10 Class A1 notes as of 29 February 2016. The source of credit enhancement includes the subordination of the Class B notes and the overcollateralisation.

Deutsche Bank AG, London Branch, is the Account Bank in all three transactions. The bank’s current DBRS private rating meets the Minimum Institution Rating criteria given the ratings assigned to each transaction’s Class A notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

J.P. Morgan Securities plc is the swap counterparty in all three transactions. DBRS’s private rating on J.P. Morgan Securities plc meets the swap counterparty rating requirement given the ratings assigned to each transaction’s Class A Notes, as described in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology. In addition, JPMorgan Chase Bank, N.A. (AA (low)/R-1) is acting as the swap guarantor in all three transactions.

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 sources of information used for this rating includes the investor reports provided by Deutsche Bank Trust & Securities Services 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 Berica ABS took place on 10 April 2015 when DBRS confirmed its AAA (sf) rating on the Class A1 and A2 notes. The last rating action on Berica 2 took place on 10 April 2015 when DBRS confirmed its AAA (sf) rating on the Class A1 and A2 Notes. The last rating action on Berica 10 took place on 1 Oct 2015 when DBRS discontinued the rating on the Class A2 Notes. The lead responsibilities for all three 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 Berica ABS pool of mortgages are 7.76% and 6.02%, respectively. At the AAA (sf) rating level, the corresponding PD is 31.01% and the LGD is 29.64%.

-- The base case PD and LGD of the Berica 2 pool of mortgages are 4.40% and 4.11%, respectively. At the AAA (sf) rating level, the corresponding PD is 27.35% and the LGD is 24.48%.

-- The base case PD and LGD of the Berica 10 pool of mortgages are 6.25% and 3.05%, respectively. At the AAA (sf) rating level, the corresponding PD is 28.43% and the LGD is 26.27%.

-- 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, with regard to Berica ABS, 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).

Berica ABS

Class A1 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)

Class A2 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)

Berica 2

Class A1 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)

Class A2 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)

Berica 10

Class A1 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.

Berica ABS

Initial Lead Analyst: Alessio Pignataro
Initial Rating Date: 20 Feb 2012
Initial Rating Committee Chair: Claire Mezzanotte

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

Berica 2

Initial Lead Analyst: Alessio Pignataro
Initial Rating Date: 17 December 2012
Initial Rating Committee Chair: Claire Mezzanotte

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

Berica 10

Initial Lead Analyst: Alessio Pignataro
Initial Rating Date: 5 December 2011
Initial Rating Committee Chair: Claire Mezzanotte

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

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