DBRS Maintains Ratings on Madeleine SPV S.r.l. Under Review with Negative Implications

DBRS Ratings Limited (DBRS) has today maintained the Under Review with Negative Implications (UR-Neg.) status on the A (sf) and BBB (sf) ratings of the Class A Notes and Class B Notes (the Notes) respectively issued by Madeleine SPV S.r.l.

The rating actions reflect an annual review of the transaction. The note ratings were placed UR-Neg. on 23 August 2016 (http://www.dbrs.com/research/298552/dbrs-places-18-eu-sf-transactions-under-review-with-negative-implications-ur-neg-following-republic-of-italy-sovereign-rating-being-placed-ur-neg.html) following the rating of the Republic of Italy being placed UR-Neg. on 5 August 2016 (http://www.dbrs.com/research/297987/dbrs-places-italy-a-low-under-review-with-negative-implications-on-heightened-risks.html).

The issuer is a securitisation of salary assignment loans and pension assignment loans granted by Pitagora S.p.A. to individuals resident in Italy. Most loans are disbursed to private individuals working for governmental or quasi-governmental organisations and pensioners. As a result, the performance of the notes is assumed to be highly correlated with the sovereign rating.

The notes are performing within DBRS expectations. As of the September 2016 payment date, 0-30, 30-60 and 60-90 day delinquencies were 3.41%, 0.75% and 0.31% of the performing principal outstanding balance, respectively, while delinquencies greater than 90 days were 0.88%. The gross cumulative default ratio was 4.67% of the aggregated original portfolio balance with cumulative recoveries at 70.90%.

Credit Enhancement for Class A Notes (25.11%) is provided by the subordination of the Class B and C Notes and the Cash Reserve. The Credit Enhanacement for Class B Notes (11.23%) is provided by subordination of the Class C Notes and the Cash Reserve.

The amortising Cash Reserve is equal to 3.2% of the Outstanding Balance of the Senior Notes and its balance is at its target level of EUR 4,842,001.50.

The Bank of New York Mellon (Luxembourg) S.A. - Italian Branch acts as Account Bank for this transaction. The DBRS Deposits & Senior Debt rating at AA (low) 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.

DBRS will resolve the UR-Neg. status of the notes upon the resolution of the UR-Neg. status of the rating of the Republic of Italy.

Notes:
All figures are in Euro unless otherwise noted.

The principal methodology applicable is:
“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.

DBRS is undertaking a review and will remove the rating from this status as soon as it is appropriate.

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 information provided by Pitagora S.p.A. (the Servicer) and Securitisation Services S.p.A. (the Calculation Agent).

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 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.

The last rating action on this transaction took place on 23 August 2016, when the ratings on the Class A and B Notes were placed UR-Neg.

Information regarding DBRS ratings, including definitions, policies and methodologies, is 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):

-- DBRS expected a lifetime base case probability of default (PD) and loss given default (LGD) for the pool based on a review of the transaction performance. Adverse changes to 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 for the Issuer are 14.26% (including sovereign stress) and 44.20% (including sovereign stress), 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 at 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 remain at A (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 A (low) (sf).

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

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

For further information on DBRS historical 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: Alessio Pignataro
Initial Rating Date: 17 July 2014
Initial Rating Committee Chair: Chuck Weilamann

Lead Surveillance Analyst: Antonio Di Marco, Senior Financial Analyst
Rating Committee Chair: Chuck Weilamann, Managing Director

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

-- 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

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