DBRS Confirms Ratings on Class A and B Notes Issued by Florence SPV S.r.l.

DBRS Ratings Limited (DBRS) confirmed its AA (sf) and A (sf) ratings on the Class A and Class B notes, respectively, (together, the Notes) issued by Florence SPV S.r.l. (the Issuer).

The confirmation 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 October 2017;
-- No revolving termination events have occurred;
-- Portfolio default (PD) rate, loss given default (LGD) rate and expected loss assumptions for the outstanding collateral pool; and
-- Current available credit enhancement (CE) to the Class A and Class B notes to cover the expected losses at the AA (sf) and A (sf) rating levels, respectively.

The ratings address the timely payment of interest and ultimate payment of principal payable on or before the Final Maturity Date in October 2040.

Florence SPV S.r.l. is a securitisation of consumer loans granted by Findomestic Banca S.p.A. (Findomestic) to individuals residing in Italy. The transaction closed in May 2013 and was restructured in December 2015, when an additional pool was transferred to the Issuer and the amount of notes was increased (Increase Date). The transaction envisages a two-year revolving period, expected to end on the January 2018 payment date. During the revolving period, Findomestic may sell additional portfolios to the Issuer, subject to certain conditions and limitations.

PORTFOLIO PERFORMANCE
The portfolio is performing well and within DBRS’ expectations. As of October 2017, loans more than 90 days delinquent accounted for 0.5% of the outstanding collateral pool balance, up from 0.4% in October 2016. Cumulative defaulted loans as a percentage of the aggregate original portfolio balance were 4.4%, up from 4.1% in October 2016.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis on the outstanding portfolio of receivables and updated the PD and LGD and assumptions on the outstanding collateral pool to 13.1% and 89.4%, respectively.

CREDIT ENHANCEMENT
As of October 2017, CE to the Class A and Class B notes was 35.0% and 23.0%, in line with the CE as at the Increase Date. CE to the notes is provided by the portfolio overcollateralisation.

The transaction is structured with two reserves: a liquidity reserve, which is currently at its target level of EUR 16.1 million (0.5% of the outstanding balance of the Notes) and is available to cover senior fees, expenses and missed interest on the Notes; and the debt service reserve, which is currently at its target level of EUR 67.5 million and is available to cover senior fees, expenses, missed interest on the Notes, purchase price of any additional portfolios during the revolving period or principal redemption amount of the Notes during the amortisation period.

BNP Paribas Securities Services, Milan Branch is the Account Bank for the transaction. The DBRS private rating on the Account Bank complies with the Minimum Institution Rating, given the rating assigned to the 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: “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.

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

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 quarterly servicer reports provided by Findomestic, investors and payments reports provided by Securitisation Services S.p.A. and loan-by-loan 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 confirmed the Class A and Class B notes at AA (sf) and A (sf), respectively.

The lead analyst responsibilities for this transaction have been transferred to Ilaria Maschietto.

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”):

-- DBRS expected a lifetime base-case PD, LGD and EL 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, LGD and EL of the current pool of receivables for the Issuer are 13.1% and 89.4% (including sovereign stress) for the Class A and Class B notes.
-- 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 be downgraded to AA (low) (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A Notes would be expected to be downgraded to A (low) (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 be downgraded to BBB (high) (sf).

Class A notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in LGD, expected rating of AA (low) (sf)
-- 25% increase in PD, expected rating of A (high) (sf)
-- 50% increase in PD, expected rating of A (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf)

Class B notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (sf)
-- 50% increase in LGD, expected rating of A (sf)
-- 25% increase in PD, expected rating of A (low) (sf)
-- 50% increase in PD, expected rating of BBB (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (low) (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: Ilaria Maschietto, Senior Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 3 June 2013

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 European Consumer and Commercial Asset-Backed Securitisations
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators

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