DBRS Confirms Rating on Vela Consumer S.r.l.

DBRS Ratings Limited (DBRS) confirmed its AAA (sf) rating on the Class A Notes issued by Vela Consumer S.r.l. (the Issuer).

The confirmation 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 October 2017 payment date;
-- Probability of default (PD), loss given default (LGD) and expected loss (EL) assumptions for the outstanding collateral pool; and
-- Current available credit enhancement (CE) to the Class A Notes to cover the expected losses at the AAA (sf) rating level.

The rating of the Class A Notes addresses the timely payment of interest and ultimate repayment of principal on or before the legal Final Maturity Date in April 2032.

Vela Consumer S.r.l. is a securitisation transaction collateralized by a portfolio of approximately EUR 558 million unsecured consumer loans granted by Banca Nazionale del Lavoro S.p.A. (BNL) to retail clients residing in Italy. BNL also services the portfolio. The collateral portfolio is quickly amortising, with the pool factor currently standing at 48.1%, two years after closing.

PORTFOLIO PERFORMANCE
The portfolio performance has remained stable and within DBRS’ expectations over the last year. As of October 2017, loans more than 90 days delinquent accounted for 0.5% of the outstanding collateral pool balance, increasing from 0.4% as of October 2016. The current gross cumulative default ratio stood at 1.1% of the original collateral portfolio, increasing from 0.4% as of last year.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis on the outstanding portfolio of receivables and updated the PD and LGD assumptions on the outstanding collateral pool to 9.7% and 91.9%, respectively.

CREDIT ENHANCEMENT
CE to the Class A Notes is provided by the portfolio overcollateralisation and includes the Reserve Fund (RF). As of October 2017, CE to the Class A Notes was 61.2%, up from 42.1% as of last year. The RF, which is currently at its target level of EUR 11.5 million (4.0% of the outstanding balance of the Class A Notes), is available to cover senior fees and expenses, shortfall of interest on the Class A Notes and to clear any principal deficiency ledger.

BNL acts as the Account Bank for the transaction. The DBRS Long-Term Issuer rating of BNL at A (high) 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 “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Rating Sovereign Governments” methodology at: http://dbrs.com/research/319564/rating-sovereign-governments.pdf.

The sources of data and information used for this rating include quarterly servicer report provided by BNL, 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 22 December 2016, when the Class A Notes were upgraded to AAA (sf) from AA (sf).

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 and LGD of the current pool of receivables for the Issuer are 9.7% and 91.9% (including sovereign stress) for the Class A 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 AAA (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 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 be downgraded to AA (high) (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 AA (high) (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 AA (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (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: Ilaria Maschietto, Senior Financial Analyst
Rating Committee Chair: Vito Natale, Head of EU RMBS & CBs
Initial Rating Date: 22 December 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.

-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Master European Structured Finance Surveillance Methodology
-- Legal Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers

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.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.