DBRS Upgrades Ratings on Notes Issued by Alchera SPV S.r.l.

DBRS Ratings Limited (DBRS) upgraded its ratings on the following Notes issued by Alchera SPV S.r.l. (the Issuer):

-- Series A-2013 Notes upgraded to AA (sf) from AA (low) (sf)
-- Series A-2017 Notes upgraded to AA (sf) from AA (low) (sf)
-- Series M-2017 Notes upgraded to BBB (high) (sf) from BBB (sf)

The ratings on the Series A-2013 Notes and Series A-2017 Notes (Series A Notes) address the timely payment of interest and the ultimate payment of principal on or before the Final Maturity Date in November 2048, while the rating on the Series M-2017 Notes (Series M Notes) addresses the ultimate payment of interest and principal on or before the Final Maturity Date in November 2050.

The upgrades follow an annual review of the transaction and are based on the following analytical considerations:

-- Portfolio performance, in terms of level of delinquencies and defaults, as of November 2017;
-- Probability of default rate (PD), recovery rate and expected loss assumptions for the remaining collateral pool; and
-- The current available credit enhancement (CE) to the Series A Notes and Series M Notes to cover expected losses assumed in line with the AA (sf) and BBB (high) (sf) rating levels, respectively.

Alchera SPV S.r.l. is a cash flow securitisation collateralised by a portfolio of bank loans to Italian small- and medium-sized enterprises (SMEs), entrepreneurs, artisans and self-employed individuals that were originally granted by Banca Cassa di Risparmio di Savigliano S.p.A. (CR Savigliano), Cassa di Risparmio di Saluzzo S.p.A. (CR Saluzzo) and Banca Mediocredito del Friuli Venezia Giulia S.p.A. (MCFVG).

The transaction originally closed in June 2013 and was restructured in February 2017. Following the restructuring, CR Saluzzo withdrew from the transaction and Banca Alpi Marittime Credito Cooperativo Carrú Societa Cooperativa per Azioni (BAM) and Cassa di Risparmio di Cento (CR Cento) were incorporated as new Originators. Together, BAM and CR Cento serve with CR Savigliano and MCFVG as the Originators. They each act as the Servicer for their respective loans in the portfolio.

PORTFOLIO PERFORMANCE AND ASSUMPTIONS
As of the 10 November 2017 cut-off date, the overall portfolio consisted of 3,890 loans with an aggregate principal balance of EUR 699.6 million. The portfolio is performing within DBRS’s expectations. As of the cut-off date, the percentage of loans in arrears for more than 90 days represented 1.6% of the outstanding portfolio balance.

DBRS conducted a loan-by-loan analysis on the remaining pool and updated its PD and recovery assumptions on the outstanding portfolio to 47.7% and 39.3%, respectively, at the AA (sf) rating level, and 35.3% and 45.2%, respectively, at the BBB (high) (sf) rating level.

CREDIT ENHANCEMENT
As of November 2017, the CE to the Series A Notes was 42.3% and 26.1% to the Series B Notes, respectively up from 35.7% and 22.0% since restructuring. The Series A Notes benefit from four amortising Cash Reserves, with an aggregate balance of EUR 11.1 million, which corresponds to 2% of the initial balance of the Series A Notes. Each of the Cash Reserves is available to cover senior expenses and interest shortfalls on the Series A Notes throughout the life of the transaction and will only be available as credit support when the Series A Notes will be redeemed, or at the Final Maturity Date.

Citibank N.A., Milan Branch is the Italian Account Bank and Citibank N.A., London Branch is the English Account Bank. The DBRS private rating of Citibank N.A., Milan Branch and Citibank N.A., London Branch comply 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 ratings is: “Rating CLOs Backed by Loans to European SMEs.”

DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the surveillance section of 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 these ratings include reports provided Accounting Partners S.r.l., 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 restructuring, 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 10 February 2017 when DBRS downgraded the Series A-2013 Notes to AA (low) (sf) from AAA (sf) and assigned new ratings of AA (low) (sf) and BBB (sf) to the Series A-2017 Notes and Series M Notes, respectively, following the transaction restructuring.

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

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”):

-- PD Rates Used: Base-case PD of 4.33%, a 10% increase of the base case and a 20% increase of the base-case PD.
-- Recovery Rates Used: Base-case recovery rates of 39.3% at the AA (sf) stress level for the Series A Notes and a base-case recovery rates of 45.2% at the BBB (high) (sf) stress level for the Series M Notes, 10% and 20% decrease in the base-case recovery rates. Note that the percentage decreases in the recovery rates are assumed for the other stress recovery rate levels.

DBRS concludes that a hypothetical increase of the base-case PD by 20% or a hypothetical decrease of the recovery rate by 20%, ceteris paribus, would lead to a confirmation of the Series A Notes at AA (sf). A scenario combining both an increase in the base-case PD by 10% and a decrease in the base-case recovery rate by 10%, ceteris paribus, would also lead to a confirmation of the Series A Notes at AA (sf).

Regarding the Series M Notes a hypothetical increase of the base-case PD by 20% or a hypothetical decrease of the recovery rate by 20%, ceteris paribus, would lead to a confirmation of the Series M Notes at BBB (high) (sf). A scenario combining both an increase in the base-case PD by 10% and a decrease in the base-case recovery rate by 10%, ceteris paribus, would lead to a downgrade of the Series M Notes to BBB (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: Vito Natale, Senior Vice President
Initial Rating Date: 27 June 2013

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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 CLOs Backed by Loans to European SMEs
-- Rating CLOs and CDOs of Large Corporate Credit
-- Operational Risk Assessment for European Structured Finance Servicers
-- Interest Rate Stresses for European Structured Finance Transactions
-- Cash Flow Assumptions for Corporate Credit Securitizations

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.