DBRS Confirms Rating on Class A Notes of Valsabbina SPV 1 S.r.l. (RMBS)

DBRS Ratings Limited (DBRS) confirmed its rating on the Class A Notes issued by Valsabbina SPV 1 S.r.l. (RMBS) (the Issuer) at AAA (sf).

The confirmation reflects 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 assumptions for the remaining collateral pool.
-- The current available credit enhancement (CE) to the Class A Notes to cover the expected losses at the AAA (sf) rating level.

Valsabbina RMBS closed in January 2012 and is a securitisation of first-lien Italian residential mortgages originated by Banca Valsabbina S.C.p.A. (Banca Valsabbina). The transaction was restructured in January 2015 when additional loans were added into the transaction collateral pool and the Class A Notes balance was increased.

PORTFOLIO PERFORMANCE
The performance of the collateral portfolio is within DBRS’s expectations. As of the October 2017 payment date, loans more than 90 days in arrears represented 1.4% of the outstanding performing portfolio collateral balance. There have been no defaulted receivables, which are defined as loans in arrears for more than 12 months, reported since the transaction closing.

As of October 2017, cumulative repurchases were at 4.9% of the total securitised collateral balance, below the maximum cumulative repurchase allowance of 7.0%.

PORTFOLIO ASSUMPTIONS
DBRS has reduced its Base Case PD and LGD assumptions on the remaining collateral pool to 10.5% and 21.5% from 10.8% and 24.4% respectively. The reductions in PD and LGD were driven by increased seasoning and reduced loan-to-value ratios.

CREDIT ENHANCEMENT
CE to the Class A Notes consists of subordination of the junior notes and the overcollateralisation. The transaction’s priority of payment pays out any net excess spread available in the transaction as principal to the Class A Notes, thereby building up the overcollateralisation. As of the October 2017 payment date, overcollateralisation represented 14.1% of the outstanding collateral balance. CE increased to 66.1% from 47.8% since October 2016.

BNP Paribas Securities Services, Milan Branch, (BNP Milan) is the Account Bank of the transaction. The DBRS private rating of BNP 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 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 investor reports from Securitisation Services S.p.A. 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 its rating of AAA (sf) on the Class A Notes.

The lead analyst responsibilities for this transaction have been transferred to Francesco Amato.

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 lifetime 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 assumptions for the remaining portfolio collateral are 10.5% and 21.5%, respectively. At the AAA (sf) rating level, the corresponding PD is 37.1% and the LGD is 52.1%.

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

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: Francesco Amato, Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 31 January 2012

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.

-- Master European Structured Finance Surveillance Methodology
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Legal Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
-- Interest Rate Stresses 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.

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