DBRS Upgrades Rating on BPL Mortgages S.r.l. – Series V
RMBSDBRS Ratings Limited (DBRS) has today upgraded its rating of the Class A Floating Rate Notes (the Class A Notes) of BPL Mortgages S.r.l. – Series V (the Issuer) to A (high) (sf) from A (sf).
BPL Mortgages S.r.l. – Series V is a securitisation of a portfolio of Italian first and second ranking mortgage loans originated and serviced by Banco Popolare Società Cooperativa and Credito Bergamasco S.p.A. (merged into Banco Popolare Soc. Coop on 1 June 2014). The transaction follows the standard structure under the Italian Securitisation Law and closed in December 2012. At closing, only a part of the total Class A issuance of EUR 2.44 billion was paid up. On the first payment date fallen in April 2013, the Issuer purchased a further portfolio with the proceeds of the second issuance.
On 7 April 2016 the transaction has been amended: the definition of “Eligible Institution” has been modified in the relevant transaction documents, incorporating the update to DBRS‘s “Legal Criteria for European Structured Finance Transactions” methodology. Additionally, the definition of “Class A rate of interest” has also been amended in order to introduce a floor to 0% in relation to the rate of interest applicable to the Class A Notes.
The rating action reflects the following analytical considerations:
-- Updated and more granular rating levels introduced by the “Legal Criteria for European Structured Finance Transactions” for account bank institution replacement triggers.
-- Portfolio performance, in terms of delinquencies and defaults, as of the January 2016 payment date.
-- Updated portfolio default rate, loss given default and expected loss assumptions 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 for the Class A Notes to cover the expected losses at the A (high) (sf) rating level.
The portfolio is performing in line with DBRS’s expectations. The 90+ delinquency ratio (excluding defaulted loans) as a percentage of the performing balance of the portfolio stands at 1.35% and the gross cumulative default ratio as a percentage of the original portfolio increased to 4.91%.
The Class A Notes are supported by subordination of the Class B Notes. The credit enhancement to the Class A Notes (as a percentage of the performing portfolio) increased to 44.87% in January 2016. A non-amortising cash reserve of EUR 64.00 million provides liquidity support to the Class A Notes. The reserve is filled up immediately after the interest payment on the Class A Notes and is currently at the initial and target level of EUR 64.00 million.
BNP Paribas Securities Services, London branch and Banco Popolare S.c., are the Additional Transaction Bank and Transaction Bank for this transaction, respectively. The Additional Transaction Bank holds the collection and expenses account, while the Transaction Bank holds the cash reserve account. The DBRS ratings of BNP Paribas Securities Services, London branch and Banco Popolare S.c., are at least equal to the Minimum Institution Rating given the rating assigned to the Class A Notes, as described in the DBRS Legal Criteria for European Structured Finance Transactions.
Notes:
All figures are in euros unless otherwise noted.
The principal methodology applicable is the Master European Structured Finance Surveillance Methodology.
This 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. DBRS conducted a review of the amendments to the Agency and Accounts Agreement executed on 7 April 2016. The other transaction legal documents have remained unchanged since the most recent rating action, and were not reviewed.
Other methodologies referenced in this transaction are listed at the end of this press release.
For a more detailed discussion of 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 include investor reports provided by BNP Paribas Securities Services, Milan branch 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 19 February 2016, when DBRS confirmed the ratings of the Class A Notes at A (sf) and removed the Under Review with Negative Implications status.
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 Probability of Default (PD) and Loss Given Default (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 10.82% and 14.73%, respectively. At the A (high) (sf) rating level, the corresponding PD is 28.32% and the LGD is 29.42%.
-- 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 of the Class A Notes would be expected to remain at A (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A Notes would be expected to remain at A (high) (sf), assuming no change in the LGD. Furthermore, if both PD and LGD increase by 50%, the rating for the Class A Notes would be expected to remain to A (high) (sf).
Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD, expected rating of A (high) (sf)
-- 50% increase in PD, expected rating of A (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (high) (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: 24 December 2012
Initial Rating Committee Chair: Claire Mezzanotte
Lead Surveillance Analyst: Antonio Di Marco
Rating Committee Chair: Quincy Tang
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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)
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.
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