DBRS Confirms Ratings on Class A and B Notes Issued by Florence SPV S.r.l. Following Amendment

DBRS Ratings Limited (DBRS) confirmed its AA (sf) and A (sf) ratings on the Class A and Class B Notes, respectively, (together, the Notes) issued by Florence SPV S.r.l. (the Issuer).

The confirmations follow a full review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies and defaults, as of January 2018;
-- An amendment (the Amendment) to the transaction becoming effective on 27 March 2018;
-- Updated portfolio default rate (PD), loss given default (LGD) and expected loss assumptions for the remaining collateral pool; and
-- Current available credit enhancement (CE) to the Class A and Class B notes to cover the expected losses at the AA (sf) and A (sf) rating levels, respectively.

The ratings address the timely payment of interest and ultimate payment of principal payable on or before the Final Maturity Date in October 2040.

Florence SPV S.r.l. is a securitisation of personal and vehicles loans granted and serviced by Findomestic Banca S.p.A. (Findomestic) to individuals residing in Italy. The transaction closed in May 2013 and was restructured in December 2015, when an additional pool was transferred to the Issuer and the notes balance was increased (the Increase Date).

AMENDMENT
The transaction envisaged a two-year revolving period, expected to end on the January 2018 payment date (included). However, following the Amendment, the revolving period has been extended by 24 months to January 2020 (included). The amortisation of the notes is expected to start on the payment date falling in April 2020, to the extent that certain conditions are not breached before. In addition, as part of the Amendment, the coupon on the Class A Notes was decreased to 0.40% from 0.75%, and the coupon on the Class B Notes was decreased to 0.75% from 0.90%.

There are eligibility criteria, concentration limits and performance triggers in place to mitigate any potential portfolio deterioration during the revolving period, all being met to date. Following the Amendment, some limits have been modified with regard to any subsequent portfolio to be added:
-- Decrease of the minimum limit of receivables backed by vehicles to 5.0% from 15.0%,
-- Increase of the maximum limit of receivables backed by personal loans, originated through the agents’ channel, to 13.5% from 12.5%,
-- Increase of the minimum interest rate paid by any subsequent receivable added to the portfolio to 6.5% from 6.0%.

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, down from 0.5% in October 2017. Cumulative defaulted loans as a percentage of the aggregate original portfolio balance were 5.0%, up from 4.9% in October 2017.

PORTFOLIO ASSUMPTIONS
DBRS has updated its PD and LGD assumptions based on the updated worst-case portfolio composition to 14.5% and 88.6%, respectively.

CREDIT ENHANCEMENT
As of January 2018, CE to the Class A and Class B notes was 37.0% and 25.0%, in line with the CE as at the Increase Date. CE to the Notes is provided by the portfolio overcollateralisation, and includes the debt service reserve.

The transaction is structured with two reserves: a liquidity reserve, which is currently at its target level of EUR 16.1 million (0.5% of the outstanding balance of the Notes) and is available to cover senior fees, expenses and missed interest on the Notes; and the debt service reserve, which is currently at its target level of EUR 67.5 million and is available to cover senior fees, expenses, missed interest on the Notes, purchase price of any additional portfolios during the revolving period or principal redemption amount of the Notes during the amortisation period.

BNP Paribas Securities Services, Milan Branch is the Account Bank for the transaction. The DBRS private rating on the Account Bank is consistent 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.

An asset and a cash flow analysis were both conducted. Due to the inclusion of a revolving period in the transaction, the analysis continues to be based on the worst-case replenishment criteria set forth in the transaction legal documents.

DBRS has conducted a review of the transaction’s legal document provided in the context of the aforementioned Amendments. A review of any other transaction’s legal documents was not conducted as the 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 servicer report provided by Findomestic, and payments and investors report provided by Securitisation Services S.p.A. In addition, the sources include performance data relating to receivables provided by Findomestic, through the Arranger, BNP Paribas S.A. DBRS received historical gross loss and recovery data on the portfolio originated by Findomestic by quarterly vintages dating back to 2008. Data was also provided relating to delinquencies and prepayments. A detailed summary and amortisation schedule were provided for the portfolio as at 31 December 2017 that allowed DBRS to further assess the collateral.

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

At the time of the Increase Date 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 these ratings 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 7 November 2017, when DBRS confirmed the Class A and the Class B Notes at AA (sf) and A (sf), respectively.

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 and 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 base case PD and LGD of the current pool of receivables for the Issuer are 14.5% (including sovereign stress) and 88.6%, respectively.
-- 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 be downgraded to A (high) (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 A (low) (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 BBB (high) (sf).

Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (high) (sf).
-- 50% increase in LGD, expected rating of A (high) (sf).
-- 25% increase in PD, expected rating of A (sf).
-- 50% increase in PD, expected rating of A (low) (sf).
-- 25% increase in PD and 25% increase in LGD, expected rating of A (low) (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating of A (low) (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf).

Class B Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (low) (sf).
-- 50% increase in LGD, expected rating of A (low) (sf).
-- 25% increase in PD, expected rating of BBB (high) (sf).
-- 50% increase in PD, expected rating of BBB (sf).
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (low) (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (low) (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: 3 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 European Consumer and Commercial Asset-Backed Securitisations
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators

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.