DBRS Takes Rating Actions on Siena PMI 2015 S.r.l.

DBRS Ratings Limited (DBRS) has today taken rating actions on the following Notes issued by Siena PMI 2015 S.r.l. (the Issuer):

-- Class A2A Notes, discontinued-repaid, previously rated AAA (sf)
-- Class A2B Notes, discontinued-repaid, previously rated AAA (sf)
-- Class B Notes upgraded to AAA (sf) from A (low) (sf)
-- Class C Notes upgraded to AA (sf) from BBB (low) (sf)

The discontinuations reflect the payment in full of the Class A2A Notes and Class A2B Notes (the Senior Notes) as of the payment date on 7 August 2017.

As the Senior Notes are no longer outstanding, Class B Notes are now the Most Senior Class of Notes and payment of interest can no longer be deferred. The DBRS rating on the Class B Notes now addresses the timely payment of interest and ultimate payment of principal on or before the Final Maturity Date.
The rating on the Class C Notes addresses the ultimate payment of interest and principal on or before the Final Maturity Date.

The abovementioned rating actions on the Class B and Class C Notes follow an annual review of the transaction and are based on the following analytical considerations:

-- Portfolio performance, in terms of level of delinquencies and defaults, as of May 2017;
-- Updated portfolio default rate, recovery rate and expected loss assumptions for the remaining collateral pool; and
-- The current available credit enhancement (CE) to the Class B and Class C Notes to cover expected losses assumed in line with the AAA (sf) and AA (sf) rating levels, respectively.

The Issuer is an Italian cash flow securitisation transaction backed by a portfolio of bank loans to Italian large corporates, small- and medium-sized enterprises, entrepreneurs, self-employed individuals and associations. The loans were mainly granted and are serviced by Banca Monte dei Paschi di Siena S.p.A. (BMPS).

PORTFOLIO PERFORMANCE
As of 15 May 2017 cut-off date, the overall portfolio consisted of 17,570 loans with an aggregate principal balance of EUR 1,529 million.

The portfolio is performing within DBRS’s expectations. The percentage of outstanding balance of loans in arrears for more than 90 days stands at 3.64% of the outstanding portfolio. The cumulative default ratio was at 0.7% in terms of the initial portfolio amount in October 2016. Following a repurchase of defaulted loans by BMPS, there are currently no cumulative defaults reported.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis on the remaining pool and updated its portfolio default and recovery assumptions on the outstanding portfolio to 50.9% and 20.8%, respectively, at the AAA (sf) rating level and 45.7% and 24.6% respectively, at the AA (sf) rating level. The portfolio lifetime default rate has deteriorated since the last rating action on 1 August 2016 reflecting DBRS’s downgrade of the Republic of Italy’s Long-Term Foreign Currency rating to BBB (high) with a Stable trend on 13 January 2017 (see DBRS press release entitled, “DBRS Downgrades Italy to BBB (high), Stable Trend”).

CREDIT ENHANCEMENT
As of August 2017, the CE to the Class B and C Notes was 80.7% and 60.7%, up from 59.9% and 47.9%, respectively, in August 2016. The CE of the Class B and C Notes considers the subordinated notes and the Cash Reserve (CR). The CR is available to cover shortfalls of senior fees and Class B interest on any payment date and is currently at its target level of EUR 8.7 million (2% of the outstanding balance of the Senior and Class B Notes).
The fast deleveraging of the transaction and consequently increased CE has prompted today’s upgrades.

BNP Paribas Securities Services SCA/Milan acts as the Transaction Account Bank for the transaction. DBRS’s private rating on BNP Paribas Securities Services SCA/Milan complies with the Minimum Institution Rating, given the rating assigned to the Class B 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 to the ratings is: “Rating CLOs Backed by Loans to European SMEs.”

DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the surveillance section of the principal methodology.

A review of the transaction legal documents was not conducted as the legal 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 data and information used for these ratings include reports provided by Zenith Service S.p.A. and BMPS, and loan-level data from the European DataWarehouse GmbH.

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

At the time of the initial rating, DBRS was 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.

The last rating action on this transaction took place on 18 November 2016 when DBRS discontinued its ratings on the Class A1A Notes and Class A1B Notes. Prior to that on 1 August 2016 DBRS confirmed the Class A1 Notes at AAA (sf), upgraded the Class A2, Class B and Class C Notes to AAA (sf), A (low) (sf) and BBB (low) (sf) from AA (sf), BBB (high) and BB (high) (sf), respectively.

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 (PD) Rates Used: base case PD of 4.3%, a 10% increase of the base case and a 20% increase of the base case PD.
-- Recovery Rates Used: base case recovery rates of 20.79% at the AAA (sf) stress level for the Class B Notes, and base case recovery rates of 24.6% at the AA (sf) stress level for the Class C Notes, a 10% and 20% decrease in the base case recovery rates. Note that the percentage decreases in the recovery rates are assumed for the other stress recovery rate levels.

DBRS concludes that a hypothetical increase of the base case PD by 20% or a hypothetical decrease of the recovery rate by 20%, ceteris paribus, would lead to a confirmation of the Class B Notes at AAA (sf). A scenario combining both an increase in the base case PD by 10% and a decrease in the base case recovery rate by 10%, ceteris paribus, would also lead to a confirmation of the Class B Notes at AAA (sf).

Regarding the Class C Notes a hypothetical increase of the base case PD by 20% or a hypothetical decrease of the recovery rate by 20%, ceteris paribus, would lead to a confirmation of the Class C Notes at AA (sf). A scenario combining both an increase in the base case PD by 10% and a decrease in the base case recovery rate by 10%, ceteris paribus, would also lead to a confirmation of the Class C Notes at AA (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 and US regulations only.

Lead Analyst: Alfonso Candelas, Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 6 August 2015

DBRS Ratings Limited
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United Kingdom
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
-- Rating CLOs Backed by Loans to European SMEs
-- Rating CLOs and CDOs of Large corporate Credit
-- Operational Risk Assessment for European Structured Finance Servicers
-- Unified Interest Rate Model for European Securitisations
-- Cash Flow Assumptions for Corporate Credit 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.