DBRS Takes Rating Actions on Grecale RMBS 2015 S.r.l.

DBRS Ratings Limited (DBRS) took the following rating actions on the Class A, Class B and Class C Notes (the Notes) issued by Grecale RMBS 2015 S.r.l. (the Issuer):

-- Class A Notes confirmed at AAA (sf)
-- Class B Notes upgraded to AA (high) (sf) from AA (low) (sf)
-- Class C Notes upgraded to AA (sf) from A (sf)

The rating actions follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies and defaults, as of September 2017;
-- Portfolio default (PD) rate, loss given default (LGD) rate and expected loss assumptions for the outstanding collateral pool;
-- Current available credit enhancement (CE) to the Notes to cover the expected losses assumed with their recommended rating levels.

The rating on the Class A Notes addresses the timely payment of interest and ultimate payment of principal payable on or before the Final Maturity Date in December 2067. The ratings on the Class B and Class C Notes address the ultimate payment of interest and principal payable on or before the Final Maturity Date in December 2067.

Grecale RMBS 2015 S.r.l. is a securitisation of first-lien residential mortgage loans originated in Italy by Unipol Banca S.p.A. (Unipol) and Banca SAI S.p.A. (merged by incorporation into Unipol in 2014). The portfolio is serviced by Unipol, with Zenith Services S.p.A. appointed as back-up servicer since closing. As of September 2017, the portfolio consisted of 5,686 loans, with a pool factor of 72.6% two years after closing. The portfolio has a low weighted-average current loan-to-value of 50.8% and is well distributed across different Italian regions.

PORTFOLIO PERFORMANCE
The portfolio is performing well and within DBRS’s expectations. As of September 2017, loans more than 90 days delinquent accounted for 0.8% of the outstanding collateral portfolio balance, down from 0.9% in September 2016. Cumulative defaulted loans as a percentage of the initial portfolio balance were still low at 0.3%.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis on the outstanding pool of receivables and updated the base case PD and LGD assumptions on the outstanding collateral portfolio to 6.6% and 6.8%, respectively.

CREDIT ENHANCEMENT
CE to the Notes is provided by the overcollateralisation of the outstanding collateral portfolio balance. As of September 2017, CE to the Class A Notes was 35.5%, up from 28.4% as of last year. CE to the Class B and Class C Notes were 24.5% and 19.0%, respectively, up from 18.8% and 14.1% in September 2016. The reserve fund, which is currently at its target level of EUR 10.8 million (3.0% of the outstanding balance of the Class A Notes), is available to pay senior fees, expenses and missed interest on the Class A Notes. The increased CE prompted the rating upgrades.

BNP Paribas Securities Services, Milan Branch and London Branch are the Italian and English Account Bank for the transaction, respectively. The DBRS private ratings on the Account Banks comply 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.

J.P. Morgan Securities plc is the Swap Counterparty to the transaction and its DBRS private rating complies with the First Rating Threshold defined in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology. Its obligations under the swap agreement are guaranteed by J.P. Morgan Chase Bank N.A.

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.

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 this rating include servicer reports provided by Unipol, payments and investors reports provided by Securitisation Services S.p.A. and loan-by-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 25 November 2016, when DBRS confirmed the rating on the Class A Notes at AAA (sf) and upgraded the ratings on the Class B and the Class C Notes to AA (low) (sf) from A (sf) and to A (sf) from BBB (high), 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 Base Case PD and LGD for the portfolio 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 pool of mortgages for the Issuer are 6.6% and 6.8%, respectively. At the AAA (sf) rating level, the corresponding PD is 28.8% and the LGD is 30.7%. At the AA (high) (sf) rating level, the corresponding PD is 26.0% and the LGD is 28.7%. At the AA (sf) rating level, the corresponding PD is 23.1% and the LGD is 26.6%.

-- 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 increased by 50%, the rating of the Class A Notes would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increased by 50%, the rating for the Class A Notes would be expected to remain at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increased by 50%, the rating of the Class A Notes would be expected to remain at AAA (sf).

Class A Notes risk sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AAA (sf)

Class B Notes risk sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD, expected rating of AA (high) (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 (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf)

Class C 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: Ilaria Maschietto, Senior Financial Analyst
Rating Committee Chair: Vito Natale, Senior Vice President
Initial Rating Date: 27 November 2015

DBRS Ratings Limited
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London EC3M 3BY
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
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Operational Risk Assessment for European Structured Finance Servicers
-- Unified Interest Rate Model for European Securitisations
-- Derivative Criteria for European Structured Finance Transactions

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