DBRS Assigns Rating to Class A Notes Issued by Siena NPL 2018 S.r.l.

DBRS Ratings Limited (DBRS) assigned a BBB (sf) rating to the EUR 2,918,200,000 Class A notes issued by Siena NPL 2018 S.r.l. (the Issuer).

The Class A notes are backed by a EUR 24.1 billion portfolio by gross book value (GBV) consisting of unsecured and secured non-performing loans originated by Banca Monte dei Paschi di Siena S.p.A., MPS Capital Services Banca per le Imprese S.p.A. and Monte dei Paschi di Siena Leasing & Factoring (the Originators).

The majority of loans in the portfolio defaulted between 2000 and 2017 and are in various stages of resolution. The receivables are serviced by Credito Fondiario S.p.A. (Credito Fondiario), Italfondiario S.p.A., Juliet S.p.A. (a joint venture between Cerved S.p.A. and the servicing platform of Banca MPS) and Prelios S.p.A. (collectively, the Special Servicers). Credito Fondiario operates as the Master Servicer in the transaction.

Approximately 57.8% of the pool by GBV is secured and 51.0% of the secured loans by GBV benefit from a first-ranking lien. The secured loans in the portfolio are backed by properties located across Italy, with concentrations in the regions of Tuscany, Veneto, Lombardy and Campania. In its analysis, DBRS assumed that the loans are worked out through an auction process, which generally has the longest resolution timeline.

Interest on the Class B notes, which represent mezzanine debt, may be repaid prior to principal of the Class A notes unless certain performance related triggers are breached. DBRS does not rate the Class B notes.

The transaction anticipates the presence of an external Reoco financed by the Italian Recovery Fund (IRF) in the form of a minibond issued by the Reoco and subscribed for by IRF.

The rating is based on DBRS’s analysis of the projected recoveries of the underlying collateral, the historical performance and expertise of the Special Servicers, the availability of liquidity to fund interest shortfalls and special-purpose vehicle expenses, the cap agreement and the transaction’s legal and structural features. DBRS’s BBB (sf) rating stress assumes a haircut of approximately 33.3% to the Special Servicers’ business plan for the portfolio.

DBRS analysed the transaction structure using Intex Deal Maker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is: “Rating European Non-Performing Loans 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 this transaction are listed at the end of this press release. This 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 the rating includes the Originators and the Special Servicers.

DBRS did not rely upon third-party due diligence to conduct its analysis. DBRS was supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

DBRS does not audit or independently verify the data or information it receives in connection with
the rating process.

These 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 are 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 with the parameters used to determine the rating (the Base Case):

-- Recovery Rates Used: Cumulative Base Case Recovery Amount of ca. EUR 4.9 billion at the BBB stress level, a 10% and 15% decrease of the Cumulative Base Case Recovery Rate.
-- DBRS concludes that a hypothetical decrease of the Recovery Rate by 10%, ceteris paribus, would lead to a downgrade of the Class A notes to BB (high) (sf).
-- DBRS concludes that a hypothetical decrease of the Recovery Rate by 15%, ceteris paribus, would lead to a downgrade of the Class A notes to BB (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: Alessio Pignataro, Senior Vice President, Global Structured Finance
Initial Rating Date: 10 May 2018
Rating Committee Chair: Christian Aufsatz, Managing Director, Head of European Structured Finance, Global Structured Finance

DBRS Ratings Limited
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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 Non-Performing Loans Securitisations
--Rating European Consumer and Commercial Asset-Backed Securitisations
--Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
--European CMBS Rating and Surveillance Methodology
--Operational Risk Assessment for European Structured Finance Servicers
--Legal Criteria for European Structured Finance Transactions
--Derivative Criteria for European Structured Finance Transactions
--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.