DBRS Confirms Ratings of Asset-Backed Securitisation Transaction Twelve S.r.l.

DBRS Ratings Limited (DBRS) has today confirmed the ratings on the Notes issued by Asset-Backed Securitisation Transaction Twelve S.r.l. (A-BEST 12 or the Issuer) as follows:

-- Class A Notes at AAA (sf)
-- Class B Notes at A (sf)

The rating actions are based on the following analytical considerations:

-- The current portfolio performance, in terms of delinquencies and defaults.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms and conditions of the Notes.
-- Current credit enhancement (CE) available to the Notes to cover the expected losses at each tranche’s respective rating levels.

A-BEST 12 closed in August 2015 and is a securitisation of a portfolio of Italian auto loans originated and serviced by FCA Bank S.p.A., a joint venture of Fiat Group and Crédit Agricole Consumer Finance. The transaction is currently in the revolving period which will end in October 2017.

Portfolio Performance
The collateral pool is performing in line with DBRS’s expectations. As of 22 June 2016, loans more than 90 days delinquent but not defaulted were at 0.08% of the outstanding discounted portfolio balance. The cumulative default ratio, as a percentage of total collateral balance plus the portfolio replenishment amount, was 0.16%. As the transaction is still in its revolving period and the performance is as expected, DBRS has maintained the default, recovery and credit net loss assumptions at 2.78%, 11.47% and 2.72%, respectively.

Credit Enhancement
The CE available to the rated Notes remains the same as at the transaction closing as the transaction is in its revolving period. The CEs of the Class A and Class B Notes are 14.00% and 5.00%, respectively.

The transaction benefits from a non-amortising cash reserve of EUR 11.2 million funded through the subordinated loans provided by the originator. The cash reserve is available to cover senior expenses and interest on the Notes and is currently at the target level.

DBRS placed Italy’s sovereign rating Under Review with Negative Implications on 5 August 2016 (http://www.dbrs.com/research/297987/dbrs-places-italy-a-low-under-review-with-negative-implications-on-heightened-risks.html). Following the sovereign rating action, DBRS applied additional stresses in the cash flow analysis to test the ratings on the rated Notes in the event of a sovereign rating downgrade. DBRS concludes that the likelihood of a downgrade on the rated Notes in these stressed scenarios is remote.

Elavon Financial Services Limited acts as Account Bank to the transaction. The DBRS private rating on the Account Bank meets the Minimum Institution Rating criteria given the rating assigned to the Class A Notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

FCA Bank S.p.A. is the swap counterparty to the transaction. Its current DBRS private rating does not meet the minimum required rating. To mitigate the swap counterparty risk, UniCredit Bank AG (UniCredit) and Crédit Agricole Corporate & Investment Bank S.A. (Crédit Agricole) are the standby swap counterparties to the transaction. UniCredit’s current DBRS private rating is below DBRS’s First Rating Threshold. UniCredit is ready to post collateral when the swap is in-the-money for the Issuer. Crédit Agricole’s current DBRS private rating meets DBRS’s First Rating Threshold given the rating assigned to the Class A Notes 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, which 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 and current analysis are based on worst-case replenishment criteria set forth in the transaction legal documents.

A review of the transaction legal documents was not conducted as these 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 “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 the rating actions include the investor reports from Elavon Financial Services Limited and the loan-by-loan 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 purposes of providing these ratings to be 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 Kevin Ma.

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 and the transaction’s eligibility criteria. 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 loans are 2.78% and 88.53%, 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 on the Class A Notes would be expected to be at AA (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Class A Notes would be expected to be at AA (high) (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating on the Class A Notes would be expected to be at A (high) (sf).

Class A Notes Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD, expected rating of AAA (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 (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)

Class B Notes Sensitivity:
-- 25% increase in LGD, expected rating of A (low) (sf)
-- 50% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD, expected rating of A (low) (sf)
-- 50% increase in PD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BB (high) (sf)

For further information on DBRS historic default rates published by the European Securities and Markets Authority (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: Paolo Conti
Initial Rating Date: 10 August 2015
Initial Rating Committee Chair: Chuck Weilamann

Lead Surveillance Analyst: Kevin Ma, Assistant Vice President
Rating Committee Chair: Christian Aufsatz, Senior Vice President

DBRS Ratings Limited
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The rating methodologies 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
-- Operational Risk Assessment for European Structured Finance Originators
-- Unified Interest Rate Model for European Securitisations
-- Rating European Consumer and Commercial Asset-Backed 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.