DBRS Upgrades Rating on ProFamily Securitisation S.r.l.

DBRS Ratings Limited (DBRS) upgraded its rating on the Class A Notes issued by ProFamily Securitisation S.r.l. (the Issuer) to AAA (sf) from AA (sf).

This rating action follows an annual review of the transaction and is based on the following analytical considerations as described more fully below:
-- Portfolio performance, in terms of delinquencies and defaults, as of 31 August 2017.
-- Updated default, recovery and loss assumptions on the remaining receivables.
-- Current available credit enhancement (CE) to the Class A Notes to cover the expected losses at the AAA (sf) rating level.

The Issuer is a securitisation of Italian consumer loans originated by ProFamily S.p.A. and serviced by the same entity. The transaction was originally structured with a revolving period, which ended in May 2017.

PORTFOLIO PERFORMANCE
As of August 2017, two- to three-month arrears were at 0.1% and the 90+ delinquency ratio was at 0.5%. The cumulative default ratio was low at 0.7%.

PORTFOLIO ASSUMPTIONS
DBRS has conducted an analysis of the remaining collateral pool and reduced its cumulative net loss assumption to 3.6% from 4.3%. The decreased loss assumption is driven by an assessment of the current portfolio composition rather than a worst-case portfolio composition as the revolving period has ended, and the increased sovereign stress applied in Italian securitisation transactions following DBRS’s downgrade of the Republic of Italy’s Long-Term Foreign and Local Currency Issuer Ratings to BBB (high) from A (low) on 13 January 2017.

CREDIT ENHANCEMENT
As of September 2017, CE to the Class A Notes, which is provided by subordination of the Class J Notes, increased to 20.6% from 18.0% at closing.

The transaction benefits from a Cash Reserve that was funded from part of the Class J Notes issuance proceeds and is available to cover senior fees and interest on the Class A Notes. As of the September 2017 payment date, the Cash Reserve was at the target level of EUR 11.7 million.

Deutsche Bank AG, London Branch acts as the account bank for the transaction. The DBRS private rating of Deutsche Bank AG, London Branch 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.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating 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 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 this rating include monthly reports provided by Securitisation Services S.p.A. and ProFamily S.p.A., and loan-level data from 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 these ratings 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 21 November 2016, when DBRS confirmed its rating on the Class A Notes at AA (sf).

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 with 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. 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 for the Issuer are 3.97% and 89.51%, 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 fall to AA (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A Notes would be expected to fall to AA (high) (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 fall to AA (low) (sf).

Class A Notes Risk 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 AA (low) (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 and US regulations only.

Lead Analyst: Andrew Lynch, Assistant Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 27 November 2015

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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
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- 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.