DBRS Upgrades Rating on Locat SV S.r.l. – Series 2011

DBRS Ratings Limited (DBRS) has today upgraded its rating on the Series 2011, Class A notes (the Class A notes) issued by Locat SV S.r.l. (the Issuer) to AA (sf) from AA (low) (sf).

The rating action is based upon the following analytical considerations, as described more fully below:
-- Portfolio performance, in terms of defaults and level of delinquencies, as of the March 2016 payment date.
-- Actual default rate, recovery rate and expected losses are within DBRS’s expectations.
-- Current available credit enhancement for the Class A notes to cover the expected losses at the AA (sf) rating level.

Locat SV S.r.l. is a securitisation of a mixed pool of leases receivables related to real estate, equipment, vehicles and naval vessels. The receivables were originated and are serviced by UniCredit Leasing S.P.A. The transaction follows the standard structure under the Italian Securitisation Law and closed in February 2011.

As of March 2016, the portfolio consists of 91.03% real estate leases, 5.52% equipment leases, 0.72% vehicle leases and 2.73% nautical leases. Therefore the pool is heavily concentrated in real estate leases.

The portfolio is currently performing within DBRS’s expectations in terms of delinquencies and defaults. The current 90+ delinquency rate decreased over the year at 2.08% of the performing collateral portfolio. The gross cumulative default ratio as a percentage of the original portfolio increased over the year to 17.66%, but is still below DBRS’s base case default rate.

The Class A notes are supported by subordination of the Class B notes and a Cash Reserve Fund. Current credit enhancement to the Class A notes (as a percentage of the performing balance of the portfolio) is 80.81%, up from 64.38% in March 2015. The entire Cash Reserve Fund has been used and therefore its current balance is EUR 0.00. The Class A notes are further supported by a Debt Service Reserve equal to 1.50% of the outstanding balance of the Class A notes.

BNP Paribas Securities Services, Milan branch is the account bank for the transaction. The DBRS private rating of BNP Paribas Securities Services, Milan branch 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.

Credit Suisse International is the swap counterparty for the transaction. The DBRS private rating of Credit Suisse International is above the First Rating Threshold as described in DBRS’s “Derivative 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 the 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 reports provided by UniCredit Leasing S.P.A. and Securitisation Services S.p.A.

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 20 May 2015, when DBRS confirmed the rating on the Class A notes at AA (low) (sf). The lead responsibilities for this transaction have been transferred to Antonio Di Marco.

Information regarding DBRS ratings, including definitions, policies and methodologies is available at www.dbrs.com.

To assess the impact of 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 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 leases for the Issuer are 30.99% (including sovereign stress) and 75.53%, respectively.
-- 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 drop to A (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A notes would be expected to drop to A (low) (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 drop to BBB (sf).

Class A notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (high) (sf).
-- 50% increase in LGD, expected rating of A (sf).
-- 25% increase in PD, expected rating of A (high) (sf).
-- 50% increase in PD, expected rating of A (low) (sf).
-- 25% increase in PD and 25% increase in LGD, expected rating of A (low) (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (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: Alessio Pignataro
Initial Rating Date: 17 February 2011
Initial Rating Committee Chair: Claire Mezzanotte

Lead Surveillance Analyst: Antonio Di Marco, Senior Financial Analyst
Rating Committee Chair: Diana Turner, Senior Vice President

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