DBRS Upgrades Ratings on Tricolore 2014 SPV S.r.l.
Consumer/Commercial LeasesDBRS Ratings Limited (DBRS) upgraded its ratings on the Class A and the Class B Notes (the Notes) issued by Tricolore 2014 SPV S.r.l. (the Issuer), as follows:
-- Class A Notes upgraded to AAA (sf) from AA (sf)
-- Class B Notes upgraded to AA (high) (sf) from A (high) (sf)
The upgrades 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 January 2018 payment date;
-- Updated default, recovery and loss assumptions on the outstanding portfolio collateral balance;
-- The current credit enhancement (CE) available to the Class A and Class B Notes to cover the expected losses at their respective rating levels; and
-- Replacement of Deutsche Bank S.p.A. by Deutsche Bank A.G., London Branch as Account Bank, Paying Agent and Custodian Bank of the transaction.
The ratings of the Notes address the timely payment of interest and ultimate repayment of principal on or before the legal Final Maturity Date in October 2041.
Tricolore 2014 SPV S.r.l. is a securitisation of Italian mixed-lease receivables originated and serviced by Banca Privata Leasing S.p.A. The Back-Up Servicer is Sardaleasing S.p.A. The transaction closed in December 2014. As of January 2018 payment date, the portfolio consisted of 841 loans for an aggregate amount of EUR 82.8 million. The collateral portfolio currently represents a pool of real estate (96.8% of the outstanding balance), vehicles (1.7%) and equipment (1.5%) lease receivables granted to Italian small- and medium-size enterprises and individual entrepreneurs.
PORTFOLIO PERFORMANCE
The portfolio is performing well and within DBRS’s expectations. As of January 2018, loans more than 90 days delinquent accounted for 0.4% of the outstanding collateral pool balance, up from 0.3% in January 2017. The cumulative defaulted loans as a percentage of the initial pool balance represented 0.8% of the pool, which was up from 0.1% as of last year.
PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis on the outstanding pool of receivables and updated the probability of default rate (PD) and loss given default rate (LGD) assumptions on the outstanding collateral pool to 14.5% and 84.3%, respectively.
CREDIT ENHANCEMENT
CE to the Notes consists of the overcollateralisation provided by the outstanding collateral portfolio. As of the January 2018 payment date, CE to the Class A and Class B Notes was 95.4% and 71.3%, respectively, up from 72.2% and 53.5% as of January 2017. The Cash Reserve Fund is available to pay senior fees and expenses, and missed interest on the Notes. The reserve is currently at its target level of EUR 0.9 million (0.75% of the original balance of the Notes).
Deutsche Bank A.G., London Branch is the new Account Bank for the transaction. The entity replaced Deutsche Bank S.p.A. on 8 January 2018. The DBRS private Long Term Critical Obligations Rating on the Account Bank 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 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.
DBRS has reviewed the Account Bank replacement documentation. 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 investors and payment reports provided by Zenith Service S.p.A., servicer reports and loan-level data provided by Banca Privata Leasing S.p.A.
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 16 February 2017, when DBRS confirmed its rating on the Class A Notes at AA (sf), and upgraded its rating on the Class B Notes to A (high) (sf) from BBB (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 expected loss 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 14.5% and 84.3% (including sovereign stress) for the Class A and the Class B 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 remain at 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 (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 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 (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (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 (sf)
-- 50% increase in PD, expected rating of AA (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (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, Senior Vice President
Initial Rating Date: 18 December 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 Methodology
-- Legal Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Servicers
-- Rating European Consumer and Commercial Asset-Backed Securitisations
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.
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