DBRS Assigns Ratings to Azzurro SPV s.r.l.

DBRS Ratings Limited (DBRS) has today assigned ratings to the Class A and Class B Floating Rate Notes (the Rated Notes, and collectively with the unrated Class C Notes, the Notes) issued by Azzurro SPV s.r.l. (the Issuer) as follows:

-- Class A rated A (low) (sf)
-- Class B rated BBB (sf)

The Notes are backed by a pool of salary assignment loans granted by Fincontinuo S.p.A. (the Originator) and serviced by Zenith Service S.p.A. The loans have been granted to private individuals residing in Italy.

The transaction has a scheduled ramp-up period of 18 months, which will terminate on November 2018. During the ramp-up period, principal collections may be used to purchase receivables from the Originator and no principal is repaid on the Notes unless early termination events occur. The purchase of additional receivables is subject to certain concentration limits and performance triggers not being breached.

The ratings are based on DBRS’s review of the following analytical considerations:

-- The sufficiency of available credit enhancement in the form of subordination, 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.
-- Fincontinuo’s capabilities with respect to originations and underwriting.
-- Zenith’s experience and capabilities with respect to servicing.
-- 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” methodology.

The transaction was modelled in Intex Deal Maker and the default rates at which the Rated Notes did not return all specified cash flows in a timely manner.

Notes:
All figures are in euro 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.

For a more detailed discussion of the approach to Salary-backed loans in Structured Finance ratings, please refer to DBRS “Italian Salary-Assignment Loan Securitisation - Methodology”.
http://dbrs.com/research/310382/italian-salary-assignment-loan-securitisations-methodology.pdf

An asset and a cash flow analysis were both conducted. Due to the inclusion of a ramp-up period in the transaction, the analysis is based on the worst-case replenishment criteria set forth in the transaction legal documents.

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 data and information used for this rating include:
-- Portfolio loan-by-loan-level data.
-- Portfolio stratification tables.
-- Historical performance data.

All information used for these ratings was sourced by Fincontinuo directly or indirectly through the transaction arrangers (Jefferies International Limited and Natixis S.A.).

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

At the time of the initial rating DBRS was not supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS considers the data and information available to it for the purposes of providing this rating to be of satisfactory quality.

DBRS does not audit or independently verify the data or information it receives in connection with the rating process.

This rating concerns a newly issued financial instrument. This is the first DBRS rating on this financial instrument.

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

Probability of Default Rates Used (PD): 25.72% and 16.49%, for A (low) and BBB scenarios, respectively, a 25% and 50% increase on PD.

Recovery Rates Used: 23.71% and 40.97%, for A (low) and BBB scenarios, respectively.

Loss Given Default (LGD) Rates Used: 76.29% and 59.03%, for A (low) and BBB scenarios, respectively, a 25% and 50% increase in LGD.

DBRS concludes that for the Class A notes:
-- A hypothetical increase of the base case PD by 25% or a hypothetical increase of the LGD by 25%, ceteris paribus, would not lead to a change of the rating on the Class A notes.
-- A hypothetical increase of the base case PD by 50%, would lead to a downgrade of the Class A notes to BBB (high) (sf).
-- A hypothetical increase of the base case LGD by 50%, would not lead to a change of the rating on the Class A notes.
-- 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 (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 A notes to BBB (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 BBB (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 BBB (sf).

DBRS concludes that for the Class B notes:
-- A hypothetical increase of the base case PD by 25% or a hypothetical increase of the LGD by 25%, ceteris paribus, would not lead to change of the rating of the Class B notes.
-- A hypothetical increase of the base case PD by 50% or a hypothetical increase of the LGD by 50%, ceteris paribus, would not lead to a change of the rating of the Class B notes.
-- A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would not lead to a change of the rating of the Class B notes.
-- 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 BBB (low) (sf) (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 BBB (low) (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 BB (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.

Lead Analyst: Alessio Pignataro, Senior Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 7 June 2017

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

-- Italian Salary-Assignment Loan Securitizations — Methodology
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- 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
-- Derivative Criteria for European Structured Finance Transactions
-- 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