DBRS Assigns Rating to Dyret SPV S.r.l.

DBRS Ratings Limited (DBRS) assigned ratings of BBB (high) (sf) to the EUR 26,400,000 Class B Asset Backed Fixed Rate Notes due 2038 (the Class B Notes) and BB (high) (sf) to the EUR 14,300,000 Class C Asset Backed Fixed Rate Notes due 2038 (the Class C Notes) issued by Dyret SPV S.r.l. (the Issuer).

The ratings address the timely payment of interest and ultimate repayment of principal on or before the legal final maturity date in December 2038. The Issuer is a limited liability company incorporated under the laws of the Republic of Italy.

On 20 December 2017, DBRS assigned the EUR 210,600,000 Class A Asset Backed Fixed Rate Notes due 2038 (the Class A Notes) a rating of ‘A’ (sf).

The transaction is a securitisation of salary and pension assignment loan loan receivables as well as payment delegation loan receivables granted by Dynamica Retail S.p.A. (Dynamica) to individual borrowers in Italy. Zenith Services S.p.A. acts as the transaction servicer and Dynamica as the sub-servicer.

The transaction was established on 23 May 2014 and the ratings follow the execution of amendments to the transaction structure on 20 December 2017 and 8 March 2017. The Notes are currently backed by EUR 161,135,266. However, the issuer may purchase additional receivables offered by Dynamica provided that certain criteria are met until the payment date falling in December 2018. The portfolio may increase to a maximum of EUR 250,000,000 provided that the purchase of the accretive portfolios is funded with payments made by the noteholders.

The ratings are based on DBRS’s review of the following analytical considerations:
--The transaction’s capital structure including the form and sufficiency of available credit enhancement in the form of (1) subordination, (2) reserve funds and (3) excess spread;
--Credit enhancement levels are sufficient to support DBRS’s projected expected cumulative loss assumption under various stressed cash flow assumptions for the Notes;
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms of the transaction documents;
--The cash flow analysis reflects the timely payment of interest under the Class B Notes and Class C Notes;
--The originator, servicer and sub-servicer’s capabilities with respect to originations, underwriting, servicing and financial strength;
--DBRS conducted an operational risk review at Zenith’s premises in Milan and deems it an acceptable servicer;
--The credit quality of the collateral and ability of the servicer to perform collection activities on the collateral;
-- The sovereign rating of the Republic of Italy, currently at BBB (high); and
--The consistency of the transacton’s legal structure with DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology and the presence of legal opinions addressing the assignment of the assets to the Issuer.

The transaction cash flow structure was analysed in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is: “Rating European Consumer and Commercial Asset-Backed Securitisations”.

DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

Other methodologies referenced in these transactions 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 includes portfolio and performance data provided by Dynamica. In particular, DBRS received delinquency and historical gross default and recovery data relating to Dynamica originations by quarterly vintage, dating back to 2009. A detailed loan-by-loan portfolio and amortisation schedule as at early November 2017 and early December 2017 were also provided.

DBRS did not rely upon third-party due diligence in order to conduct its analysis.

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.

This rating concerns a newly issued financial instrument. This is the first DBRS rating on this financial instrument.

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 with the parameters used to determine the rating:
-- DBRS expected a lifetime expected gross loss (EL) and loss given default (LGD) 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 EL and LGD of the current pool of loans for the Issuer are in the BBB (high) scenario at 15.5% and 54.5%, respectively.
-- The EL and LGD of the current pool of loans for the Issuer are in the BB (high) scenario at 10.75% and 41%, respectively.
-- The Risk Sensitivity overview below illustrates the ratings expected if the EL and LGD increase by a certain percentage over the base case assumption. For example, if the LGD increases by 50%, the ratings of the Class B Notes and Class C Notes would be expected to fall to BBB (low) (sf) and BB (low) (sf) respectively, assuming no change in the EL. If the EL increases by 50%, the ratings of the Class B Notes and Class C Notes would be expected to fall to BBB (low) (sf) and BB (low) (sf) respectively, assuming no change in the LGD. Furthermore, if both the EL and LGD increase by 50%, the ratings of the Class B Notes would be expected to fall to BB (sf) and the rating of the Class C Notes would be expected to fall to B (sf).

Class B Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (sf)
-- 25% increase in EL, expected rating of BBB (sf)
-- 25% increase in EL and 25% increase in LGD, expected rating of BBB (low) (sf)
-- 25% increase in EL and 50% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in EL and 25% increase in LGD, expected rating of BB (high) (sf)

Class C Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of BB (sf)
-- 25% increase in EL, expected rating of BB (sf)
-- 25% increase in EL and 25% increase in LGD, expected rating of BB (low) (sf)
-- 25% increase in EL and 50% increase in LGD, expected rating of B (high) (sf)
-- 50% increase in EL and 25% increase in LGD, expected rating of B (high) (sf)

For further information on DBRS historic 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: Paolo Conti, Senior Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 22 December 2017

DBRS Ratings Limited
20 Fenchurch Street, 31st Floor, London, EC3M 3BY, United Kingdom
Registered in England and Wales: No. 7139960.

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
-- Legal Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Originators
-- 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.

Note that this press release was amended shortly after publishing to correct the Class B Note amount to EUR 26,400,000 from EUR 26,400,000,000.