DBRS Finalises Provisional Ratings of A (sf) and BBB (sf) on Towers CQ S.r.l.

DBRS Ratings Limited (DBRS) has today finalised the provisional ratings on the Class A and Class B Asset Backed Floating Rate Notes (the Rated Notes; and collectively with the unrated Class C Notes, the Notes) issued by Towers CQ S.r.l. (the Issuer) as follows:

-- A (sf) on the Class A Asset Backed Floating Rate Notes;
-- BBB (sf) on the Class B Asset Backed Floating Rate Notes

The Notes are backed by a pool of Italian salary assignment, pension assignment and payment delegation loans granted by Accedo S.p.A. (Accedo), a wholly owned subsidiary of Intesa Sanpaolo S.p.A. (Intesa).

The ratings are based on the considerations listed below:

-- The sufficiency of available credit enhancement in the form of subordination (14.2% for Class A and 8.3% for Class B Notes), a cash reserve and excess spread.
-- The ability of the transaction’s structure and triggers to withstand stressed cash flow assumptions and repay the Rated Notes according to the terms of the transaction documents.
-- Accedo’s capabilities with respect to originations and underwriting.
-- The legal structure and presence of legal opinions addressing the assignment of the assets to the Issuer and the consistency with DBRS’s “Legal Criteria for European Structured Finance Transactions.”

The transaction was modelled in Intex Dealmaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is:
Rating European Consumer and Commercial Asset-Backed Securitisations.

DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.
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 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 historical performance of default and recovery of the loans originated by Accedo by quarterly vintage on a cumulative basis from 2007 to 2015 through the arrangers (Banca IMI, Citigroup Global Market and Goldman Sachs International). In addition, DBRS received stratification tables and scheduled amortisation related to the provisional collateral portfolio.

DBRS does not rely upon third-party due diligence in order to conduct its analysis.

DBRS was 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 rating was disclosed to the arrangers, Banca IMI, Citigroup Global Market and Goldman Sachs International.

These ratings concern newly issued financial instruments. This is the first DBRS rating on these financial instruments.

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 to the parameters used to determine the rating (the Base Case):

-- Probability of default (PD): base case of 13.6%, a 25% and 50% increase on the Base Case PD.
-- Loss given default (LGD): base case of 40%, a 25% and 50% increase on the Base Case LGD.

DBRS concludes that for the Class A Notes:
-- A hypothetical increase of the Base Case LGD by 25%, ceteris paribus, would lead to a downgrade of the rating of the Class A Notes to A (low) (sf).
-- A hypothetical increase of the Base Case LGD by 50%, ceteris paribus, would lead to a downgrade of the rating of the Class A Notes to BBB (high) (sf).
-- A hypothetical increase of the Base Case PD by 25%, ceteris paribus, would lead to a downgrade of the rating of the Class A Notes to A (low) (sf).
-- A hypothetical increase of the Base Case PD by 50%, ceteris paribus, would lead to a downgrade of the rating of the Class A Notes to BBB (high) (sf).
-- A hypothetical increase of the Base Case 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 BBB (sf).
-- A hypothetical increase of the Base Case 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 (high) (sf).
-- A hypothetical increase of the Base Case 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 Base Case 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 B (high) (sf).

DBRS concludes that for the Class B Notes:
-- A hypothetical increase of the Base Case LGD by 25%, ceteris paribus, would not result in a downgrade of the BBB (sf) rating of the Class B Notes.
-- A hypothetical increase of the Base Case LGD by 50%, ceteris paribus, would lead to a downgrade of the rating of the Class B Notes to BBB (low) (sf).
-- A hypothetical increase of the Base Case PD by 25%, ceteris paribus, would not result in a downgrade of the BBB (sf) rating of the Class B Notes.
-- A hypothetical increase of the Base Case PD by 50%, ceteris paribus, would lead to a downgrade of the rating of the Class B Notes to BBB (low) (sf).
-- A hypothetical increase of the Base Case PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the rating of the Class B Notes to BB (high) (sf).
-- A hypothetical increase of the Base Case PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class B Notes to B (high) (sf).
-- A hypothetical increase of the Base Case PD by 25% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class B Notes to B (high) (sf).
-- A hypothetical increase of the Base Case PD by 50% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class B Notes to a rating below B (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: Kevin Chiang, Senior Vice President, Global Structured Finance
Initial Rating Date: 2 June, 2016
Initial Rating Committee Chair: Chuck Weilamann, Managing Director, US ABS, Global Structured Finance

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

The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies

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

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