DBRS Confirms Ratings on Mars 2600 S.r.l. Series 5

DBRS Ratings Limited (DBRS) confirmed its ratings on the Class A1 and Class A2 Notes (together, the Class A Notes) issued by Mars 2600 S.r.l. Series 5 (the Issuer) at AA (sf).

The confirmation of the ratings is based on the following analytical considerations:

-- Portfolio performance, in terms of delinquencies and defaults, as of the October 2017 payment date.
-- Updated portfolio default rate, loss given default (LGD) and expected loss assumptions for the remaining collateral pool.
-- Current available credit enhancement (CE) to the Class A Notes to cover the expected losses at the AA (sf) rating level.

Mars 2600 S.r.l. Series 5 is a securitisation of first-ranking Italian residential mortgages originated and serviced by Banca Sella S.p.A., which DBRS currently rates BBB (low) with a Stable trend.

PORTFOLIO PERFORMANCE AND ASSUMPTIONS
As of October 2017, two-to-three-month arrears were at 0.4%, up from 0.3% in October 2016. The 90+ delinquency ratio was equal to 0.5%, up from 0.2% in October 2016. The cumulative default ratio was low at 1.0%.

DBRS updated its base case assumptions for the probability of default (PD) rate and the LGD to 3.94% and 1.01%, respectively.

CREDIT ENHANCEMENT AND RESERVE
As of the October 2017 payment date, CE to the Class A Notes was 33.2%, consisting of subordination of the Class D Notes.

The transaction benefits from an amortising reserve fund that is available to cover senior fees and interest shortfall on the Class A Notes. At the October 2017 payment date, the reserve fund was at the target level of EUR 8.0 million.

BNP Paribas Securities Services SCA/Milan holds the Transaction Account for the transaction. The DBRS private rating of BNP Paribas Services SCA/Milan 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 Transaction” 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 data provided by Securitisation Services S.p.A. (the “Calculation Agent”) and the European DataWarehouse GmbH.

DBRS does 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.

The last rating action on this transaction took place on 11 November 2016 when DBRS confirmed its rating on the Class A Notes at AA (sf).

The lead analyst responsibilities for this transaction have been transferred to Clare Wootton.

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 PD and 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 mortgages for the Issuer are 3.94% and 1.01%, respectively. At the AA (sf) rating level, the corresponding PD is 20.33% and the LGD is 12.06%.
-- 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 the same at AA (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 the same at AA (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 remain the same at AA (sf).

Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD, expected rating of AA (sf)
-- 50% increase in PD, expected rating of AA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (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 (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: Clare Wootton, Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 28 May 2014

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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
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- 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