Press Release

DBRS Upgrades Rating on Malatesta Finance S.r.l. Series 2012

RMBS
July 05, 2016

DBRS Ratings Limited (DBRS) has today taken the following rating action on the bond issued by
Malatesta Finance S.r.l. (the Issuer):
-- Class A Notes upgraded to AA (high) (sf) from at AA (sf).

The upgrade of the rating on the Class A Notes is based on the following analytical considerations as described more fully below:

-- Portfolio performance, in terms of delinquencies and defaults, as of May 2016.
-- Default rate, loss given default and expected loss assumptions for the remaining collateral pool.
-- Current available credit enhancement to the Class A Notes to cover the expected losses at the AA (high) (sf) rating level.

Malatesta Finance S.r.l. is a securitisation of first lien Italian residential mortgages originated by Cassa di Risparmio di Cesena S.p.A. and Banca di Romagna S.p.A. The portfolio is serviced by Cassa di Risparmio di Cesena S.p.A. The transaction closed in May 2012.

As of May 2016, 30-60 day arrears are at 5.79%, up slightly from 5.78% in April 2015. The 90+ delinquency ratio is at 2.00%, down from 3.37% in April 2015. The cumulative default rate is currently at 1.25%.

As of the May 2016 payment date, credit enhancement to the Class A Notes stands at 24.66%, up from 20.69% in April 2015. Credit enhancement to the Class A Notes consists of subordination of the Class B1 and Class B2 Notes.

The transaction benefits from a Cash Reserve that is available to cover senior fees and any interest shortfall on the Class A Notes. The Cash Reserve is currently at its target level of EUR 3.49 million and amortises along with the Class A Notes.

The Bank of New York Mellon (Luxembourg) S.A. – Italian Branch (the Italian Account Bank) holds the collection account and the Bank of New York Mellon – London Branch (the English Account Bank) holds the Cash Reserve. The DBRS public ratings of the Italian Account Bank and the English Account Bank are AA (low) and AA respectively. These ratings comply 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. 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. These 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 investor reports provided by Accounting Partners S.r.l. (the Computation Agent), servicing reports provided by Cassa di Risparmio di Cesena S.p.A., and data from European Data Warehouse 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 purpose 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 8 July 2015 when DBRS upgraded the rating on the Class A Notes to AA (sf) from A (high) (sf).

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 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 mortgages for the Issuer are 9.37% and 3.42%, 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 remain the same at AA (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A Notes would be expected to remain the same at AA (high) (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 fall to AA (sf).

Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf).
-- 50% increase in LGD, expected rating of AA (high) (sf).
-- 25% increase in PD, expected rating of AA (high) (sf).
-- 50% increase in PD, expected rating of AA (high) (sf).
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (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: Konstantine Pastras, Vice President
Initial Rating Date: 25 May 2012
Initial Rating Committee Chair: Claire Mezzanotte, Managing Director

Lead Surveillance Analyst: Andrew Lynch, 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
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- 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.

Ratings

  • US = Lead Analyst based in USA
  • CA = Lead Analyst based in Canada
  • EU = Lead Analyst based in EU
  • UK = Lead Analyst based in UK
  • E = EU endorsed
  • U = UK endorsed
  • Unsolicited Participating With Access
  • Unsolicited Participating Without Access
  • Unsolicited Non-participating

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