DBRS Upgrades Ratings on Class A2 and Class B Notes Issued by Voba N.6 S.r.l.

DBRS Ratings Limited (DBRS) upgraded the Notes issued by Voba N.6 S.r.l. (the Issuer) as follows:

-- Class A2 Notes upgraded to AA (high) (sf) from AA (sf)
-- Class B Notes upgraded to A (sf) from BBB (high) (sf)

The rating on the Class A2 Notes addresses the timely payment of interest and the ultimate payment of principal on or before the Final Maturity Date, while the rating on the Class B Notes addresses the ultimate payment of interest and ultimate payment of principal on or before the Final Maturity Date.

The upgrade follows an annual review of the transaction and is based on the following analytical considerations:

-- Portfolio performance in terms of delinquencies and defaults as of the August 2017 payment date.
-- Probability of Default (PD) rate for the remaining collateral pool.
-- The current available credit enhancement (CE) to the Class A2 and Class B Notes to cover expected losses assumed in line with the AA (high) (sf) and A (sf) rating levels, respectively.

The transaction is a cash flow securitisation that is collateralised by a portfolio of performing mortgage and non-mortgage loans to Italian small- and medium-sized enterprises, entrepreneurs, artisans and producer families. The loans were mainly granted by Banca Popolare dell’Alto Adige S.C.p.A. (BPAA or the Originator), but also by Banca Popolare di Marostica S.C.p.a.r.l. (BPM) and Banca di Treviso S.p.A. (Banca di Treviso) before being merged into BPAA in 2015.

PORTFOLIO PERFORMANCE
As of the 31 July 2017 cut-off date, the overall portfolio consisted of 3,617 loans with an aggregate principal balance of EUR 406.7 million. The portfolio is performing within DBRS’s expectations. Delinquent loans were at 1.2%, and the cumulative default ratio was at 0.4% of the initial outstanding balance of the portfolio.

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 53.3% and 38.2%, respectively, at the AA (high) (sf) rating level and 44.2% and 42.2% respectively, at the A (sf) rating level.

CREDIT ENHANCEMENT
As of August 2017, the CE to the Class A2 and Class B Notes was 47.7% and 32.9%, up from 34.7% and 23.4%, respectively, at closing. The CE of the Class A2 and Class B Notes considers the subordinated notes and the cash reserve (CR). The CR is available to cover shortfalls in relation to senior fees and interest payable on the Class A2 and Class B Notes and has been funded with proceeds available from the issuance of the Class J Notes. The CR is maintained at 3.0% of the outstanding balance of the Class A2 and Class B Notes and is at its target level of EUR 9.3 million.

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 A2 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” at: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.

The sources of data and information used for these ratings include reports provided by Securitisation Services S.p.A., BPAA 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 13 June 2017, when DBRS discontinued the rating on the Class A1 Notes. Prior to that, on 18 October 2016, DBRS finalised the ratings of AA (sf) and BBB (high) (sf) on the Class A2 and Class B Notes, 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: the annualised weighted-average PD was computed to be 4.24%, based on a PD of 3.93% to mortgage loans originated by BPAA, 2.48% to non-mortgage loans originated by BPAA, 8% to loans originated by BPM and Banca di Treviso, 22.72% to the top borrower of the portfolio, a 10% increase of the base case and a 20% increase of the base case PD.

-- Recovery Rates Used: base case recovery rates of 38.2% at the AA (high) (sf) stress level for the Class A2 Notes, and base case recovery rates of 42.2% at the A (sf) stress level for the Class B 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 A2 Notes at AA (high) (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 A2 Notes at AA (high) (sf).

Regarding the Class B Notes, a hypothetical increase of the base case PD by 20%, ceteris paribus, would lead to a downgrade of the Class B Notes to BBB (high) (sf). A hypothetical decrease of the recovery rate by 20%, ceteris paribus, would lead to a downgrade of the Class B Notes to A (low) (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 lead to a downgrade of the Class B Notes to BBB (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 and US regulations only.

Lead Analyst: Alfonso Candelas, Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 22 September 2016

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
-- 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.