DBRS Confirms Rating on ICCREA SME CART S.r.l.

DBRS Ratings Limited (DBRS) has today confirmed its AAA (sf) rating on the EUR 41,733,636 Class A 2011 Asset-Backed Floating Rate Notes (Class A notes) issued by ICCREA SME CART S.r.l. (the Issuer).

The rating action reflects an annual surveillance review of the transaction, based upon the following analytical considerations:
-- Portfolio performance, in terms of delinquencies and defaults, as of the March 2016 payment date, in line with DBRS’s expectations;
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms in which they have invested;
-- The current available credit enhancement to the Class A notes to cover expected losses assumed in line with AAA (sf) rating level.

The rating on the Class A notes addresses the timely payment of interest and the ultimate payment of principal on or before the Final Maturity Date in September 2042.

The Issuer is an Italian securitisation collateralised by a portfolio of lease contracts granted by Iccrea BancaImpresa SpA to Italian small and medium-sized enterprises. The transaction closed in November 2011 in accordance with the Italian securitisation law, and had a 2-year revolving period ending in December 2013.

The portfolio is divided into four sub-pools, with Real Estate representing 80.14% of the current balance (63.53% at closing). The other sub-pools relate to Equipment (16.90% of the current portfolio), Industrial Vehicles (2.01%) and Cars (0.95%).

The portfolio is granular, with the largest borrower representing 0.65% of the pool, and is mainly concentrated in the north of Italy (78.55%).

The portfolio is performing in line with DBRS’s expectations. As of the March 2016 payment date, 26-60 days and 61-90 days delinquencies were 1.44% and 1.29%, respectively, of the outstanding balance of lease contracts, while +90 days delinquencies were 0.85%. The gross cumulative default ratio was 3.95% of the aggregate original portfolio balance, with cumulative recoveries of 35.00%.

Credit enhancement for the Class A notes, currently at 93.98%, is provided by the subordination of the Class Z notes and the Debt Service Reserve Amount.

The transaction structure includes a Debt Service Reserve Account, where both the Debt Service Reserve Amount (EUR 15.00 million) and the Indemnity Amount (EUR 5.13 million) are deposited. The former is available to cover senior expenses and missed interest payments on the Class A notes, while the later mitigates potential commingling risk.

A swap structure is in place to hedge the interest rate mismatch between the Class A notes, indexed to 3-month Euribor, and the interest rate payments from the collateral portfolio. UBS Limited is the Counterparty of the Hedging Agreements; DBRS’s private rating of UBS Limited complies with the First Rating Threshold defined in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology.

BNP Paribas Securities Services SCA/London acts as Transaction Bank for this transaction. The DBRS private rating of BNP Paribas Securities Services SCA/London complies with the Minimum Institution Rating given the rating assigned to the 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 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’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., servicer reports provided by Iccrea BancaImpresa SpA 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 13 May 2015, when DBRS confirmed the rating of the Class A notes at AAA (sf). The lead responsibilities for this transaction have been transferred to Joana Seara da Costa.

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 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 receivables are 16.28% and 83.27%, respectively (including sovereign adjustment).

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

Class A 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 (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: Lena Katsnelson
Initial Rating Date: 16 November 2011
Initial Rating Committee Chair: Claire Mezzanotte

Lead Surveillance Analyst: Joana Seara da Costa, Financial Analyst
Rating Committee Chair: Diana Turner, Senior Vice President

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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
-- Master European Structured Finance Surveillance Methodology
-- Derivative Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Unified Interest Rate Model for European Securitisations

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