DBRS Confirms AAA (sf) Rating on the Class A2 Notes Issued by Voba N. 5 S.r.l.

DBRS Ratings Limited (DBRS) confirmed the AAA (sf) rating on the Class A2 Notes issued by Voba N. 5 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 December 2017 payment date;
-- Probability of default (PD), loss given default rate (LGD) and expected loss assumptions for the outstanding collateral pool; and
-- The current credit enhancement (CE) available to the Class A2 Notes to cover the expected losses at the AAA (sf) rating level.

The rating on the Class A2 Notes addresses the timely payment of interest and ultimate payment of principal payable on or before the Final Maturity Date in June 2051.

Voba N. 5 S.r.l. is a securitisation of first-lien, fully amortising mortgage loans originated and serviced by Banca Popolare dell’Alto Adige S.p.A. (Volksbank or the Servicer). The Back-Up Servicer is Securitisation Services S.p.A. The transaction closed in April 2014. In May 2017, the servicing agreement was amended to provide more flexibility to the Servicer in managing the portfolio. The amendment did not have any rating impact.

As of November 2017, the portfolio consisted of 3,189 loans extended to borrowers residing in Italy and distributed mostly across Italian northern regions. The three most represented regions were Trentino Alto Adige, Veneto and Friuli Venezia Giulia, with respective percentages of 60.7%, 36.1% and 2.2%. The collateral is amortising relatively quickly with a pool factor of 58.0% after almost four years since closing. The weighted-average current loan-to-value was 42.1%, down from 44.7% in November 2016.

PORTFOLIO PERFORMANCE
The portfolio is performing well and within DBRS’s expectations. As of November 2017, the loans more than 90 days delinquent accounted for 0.7% of the outstanding collateral pool balance, up from 0.2% in November 2016. The cumulative defaulted loans as a percentage of the initial pool balance were 0.4%, up from 0.1% in November 2016.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis on the outstanding pool of receivables and updated the PD and LGD assumptions on the remaining collateral pool to 27.0% and 18.9%, respectively, at the AAA (sf) rating level.

CREDIT ENHANCEMENT
CE to the Class A2 Notes is provided by the overcollateralisation provided by the outstanding collateral portfolio. As of November 2017, CE to the Class A2 Notes was 39.0%, up from 16.5% at closing. The Cash Reserve Fund is available to pay senior fees and expenses and missed interest on the Class A2 Notes. The reserve is currently at its target level of EUR 4.5 million (2.5% of the outstanding balance of the Class A2 Notes at the preceding payment date).

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 Class A2 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.

DBRS reviewed the Servicing Agreement Amendment executed in May 2017. A review of any other transaction legal documents was not conducted as they 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 investor and payment reports provided by Securitisation Services S.p.A., servicer reports provided by Volksbank and 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 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 13 January 2017, when DBRS confirmed the Class A1 Notes and Class A2 Notes at AAA (sf). On 6 July 2017, DBRS discontinued the rating on the Class A1 Notes due to repayment in full.

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

Information regarding DBRS ratings, including definitions, policies and methodologies, is available at 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 current pool of mortgages for the Issuer are 3.7% and 3.0%, respectively. At the AAA (sf) rating level, the corresponding PD is 27.0% and the LGD is 18.9%.

-- 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 A2 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 A2 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 A2 Notes would be expected to remain at AAA (sf).

Class A2 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)

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: 8 April 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

-- Interest Rate Stresses for European Structured Finance Transactions
-- 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

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.