DBRS Confirms Rating on Emilia SPV S.r.l.

DBRS Ratings Limited (DBRS) has today confirmed its A (sf) rating on the Class A Notes issued by Emilia SPV S.r.l. (the Issuer).

The rating on the Class A Notes addresses the timely payment of interest and ultimate payment of principal payable on or before the Legal Final Maturity Date in February 2064.

The rating action reflects the following analytical considerations:
-- Portfolio performance, in terms of delinquencies and defaults, as of the February 2016 payment date.
-- Updated Portfolio Default Rate, Loss Given Default (LGD) and Expected Loss for the remaining collateral pool.
-- Current available credit enhancement for the Class A Notes to cover the expected losses at the A (sf) rating level.

Emilia SPV S.r.l. is an Italian securitisation of first lien, fully amortising mortgage loans originated and serviced by Credito Emiliano S.p.A. (Credem).
The securitisation has a five-year Replenishment Period during which time the Issuer can purchase Subsequent Portfolios at each payment date. Purchases of Subsequent Portfolios are funded through further issuance of the Class A and Class B Notes subject to a total amount of EUR 3,900,000,000. Purchase of Subsequent Portfolios is subject to eligibility criteria of the Initial Portfolio and portfolio limits defined in the transaction documents.

The portfolio is performing in line with DBRS’s expectations. The 90+ delinquency ratio as a percentage of the performing balance of the portfolio stands at 0.58% and the arrears ratio is currently at 2.25%.

Credit enhancement for the Class A Notes at the Issue Date was 18.50%, consisting of subordination of the Class B Notes. During the Replenishment Period, credit enhancement for the Class A Notes is adjusted following the purchase of Subsequent Portfolios. On each payment date during the Replenishment Period following the purchase of Subsequent Portfolios, credit enhancement for the Class A Notes is defined based on a calculation defined in the transaction documents determined by the current loan-to-value and coupon of each loan in the portfolio at the valuation date. The current credit enhancement is above the floor of 18.5%.
The Reserve Fund has been established through an over-issuance of the Class B notes (2.25% of the Initial Portfolio equal to EUR 22,528,000). The Reserve Fund is available to pay senior fees and interest on the Class A Notes if collections are insufficient to meet the payments due. During the Replenishment Period, the Reserve Fund will increase in an amount equal to 2.25% of the further amount paid on the notes (both Class A and Class B). On the November 2015 payment date, following purchasing of Subsequent Portfolio, the cash reserve has been increased accordingly to the documentation reaching EUR 27,372,207.

Credem is the account bank for the transaction. The DBRS Private Rating of Credem complies 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.

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.
An asset and a cash flow analysis were both conducted. However, due to the inclusion of a revolving period in the transaction, and no change in assumptions, the initial analysis based on worst-case replenishment criteria set forth in the transaction legal documents was assumed.

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 Securitisation Services S.p.A. and Credem 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.

This is the first rating action since the Initial Rating Date. The lead responsibilities for this transaction have been transferred to Antonio Di Marco.

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

To assess the impact of a change in the transaction parameters (probability of defaults and/or loss given default) on the rating of Class A Notes, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the Base Case).
Considering the revolving pool for the Emilia SPV transaction, DBRS calculates the sensitivity analysis on the most stressful portfolio with a weighted-average current loan-to-value at 85%. The results are reported below:
-- In respect of the Class A Notes and a rating category of A (sf), the Probability of Default (PD) of 38.48%, a 25% and 50% increase on the PD.
-- In respect of the Class A Notes and a rating category of A (sf), Loss Given Default (LGD) of 45.81%, a 25% and 50% increase on the LGD. DBRS concludes that for the Class A Notes:
-- A hypothetical increase of the PD by 25%, ceteris paribus, would lead to a downgrade of the Class A Notes to BBB (low) (sf).
-- A hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A Notes to BBB (high) (sf).
-- A hypothetical increase of the PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A Notes to BB (high) (sf).
-- A hypothetical increase of the PD by 50%, ceteris paribus, would lead to a downgrade of the Class A Notes to BB (sf).
-- A hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A Notes to BBB (sf)
-- A hypothetical increase of the PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A Notes to BB (sf).
-- A hypothetical increase of the PD by 25% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A Notes to BB (high) (sf).
-- A hypothetical increase of the PD by 50% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A Notes to BB (low) (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: Davide Nesa
Initial Rating Date: 22 April 2015
Initial Rating Committee Chair: Quincy Tang

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.