DBRS Confirms Ratings on Claris RMBS 2014 Srl Class A1 and Class A2 Notes

DBRS Ratings Limited (DBRS) has today confirmed the following ratings on the Class A1 and Class A2 notes (collectively, the Notes) issued by Claris RMBS 2014 Srl (the Issuer or Claris 2014):

-- Class A1 notes at AAA (sf)
-- Class A2 notes at AAA (sf)

Claris 2014 is a securitisation of first-lien fully amortising mortgage loans originated by Banca Apulia S.p.A. (BAP) and Veneto Banca S.p.A. (VB). BAP is part of Veneto Banca Group as a result of the merger of BAP and Banca Meridiana in 2010. The portfolio is serviced by VB.

The confirmations of the ratings are based on the following analytical considerations:
-- Portfolio performance, in terms of defaults and level of delinquencies, as of the December 2015 Payment Date.
-- Updated Portfolio Default Rate, Loss Given Default (LGD) and Expected Loss for the remaining collateral pool.
-- Incorporation of a sovereign-related stress component to address the impact of macroeconomic variables on collateral performance given the long-term foreign and local currency rating of A (low) for the Republic of Italy.
-- Current available credit enhancement to each class of notes to cover the Expected Losses at the AAA (sf) rating level.

As of the December 2015 payment date, the 90+ delinquency ratio as a percentage of the performing balance of the portfolio increased to 2.52% and the cumulative defaults as a percentage of the original balance increased as well to 1.17%.

Credit enhancement to the Class A1 notes is provided by subordination of a Class A2 and Class J notes. Current credit enhancements as a percentage of the performing balance of the portfolio for the Class A1 notes stands at 50.65%, while credit enhancement for the Class A2 notes stands at 26.78%.

The Cash Reserve Fund stands at its target balance of EUR 15,317,433 with a floor of 1.5% of the initial outstanding amount of the rated notes and is amortising. The Cash Reserve is available to cover interest shortfalls to the Notes and principal at the payment date on which the rated notes are redeemed in full or cancelled.

The mortgage portfolio consists of loans that have variable interest rates, fixed rates and loans that have the option to change rates from floating to fixed and fixed to floating. The transaction is exposed to basis and fixed interest rate risk of the collateral versus floating rate paid under the rated notes. The Issuer has entered into several hedging agreements with JP Morgan Securities Plc and Natixis SA to mitigate both basis and fixed interest rate risk. The transaction swap documents reflect the DBRS swap methodology in respect to fixed to floating swaps but are not in full compliance in respect to basis swaps. DBRS has stressed its cash flow assumptions accordingly.

The Bank of New York Mellon (Luxembourg) S.A. - Italian Branch acts as the Italian Account Bank and Paying Agent, while The Bank of New York Mellon - London Branch acts as the English Account Bank. The Backup Servicer is Securitisation Services S.p.A. The DBRS rating of The Bank of New York Mellon (Luxembourg) S.A. - Italian Branch and The Bank of New York Mellon - 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.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is the Master European Structured Finance Surveillance Methodology.

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 on www.dbrs.com at:
http://www.dbrs.com/about/methodologies

For a more detailed discussion of 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 investor reports provided by The Bank of New York Mellon Corporate Trust 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 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 14 April 2015, when DBRS confirmed the rating on the Class A1 and A2 notes at AAA (sf).

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

To assess the impact of the 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 LGD for the pool based on a review of the current receivables. 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 5.72% and 8.56%, respectively. At the AAA (sf) rating level, the corresponding PD is 27.98% and the LGD is 31.99%.
-- DBRS assumed that the time of recovery lag was 60 months.
-- 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 A1 and Class A2 notes would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Class A1 and Class A2 notes would be expected to remain at AAA (sf), assuming no change in the LGD. Furthermore, if both PD and LGD increase by 50%, the rating on the Class A1 notes would be expected to remain at AAA (sf).

Class A1 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)

Class 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: David Sanchez Rodriguez
Initial Rating Date: 15 April 2014
Initial Rating Committee Chair: Quincy Tang

Lead Surveillance Analyst: Vito Natale
Rating Committee Chair: Quincy Tang

DBRS Ratings Limited
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Registered in England and Wales: No. 7139960.

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 (February 2016)
-- Master European Structured Finance Surveillance Methodology (April 2016)
-- 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)
-- Derivative Criteria for European Structured Finance Transactions (February 2016)

A description of how DBRS analysis structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375