DBRS Takes Rating Actions on Siena PMI 2015 S.r.l. and Siena PMI 2016 S.r.l.

DBRS Ratings Limited (DBRS) took rating actions on two SME transactions originated by Banca Monte dei Paschi di Siena SpA (BMPS) as follows:

Siena PMI 2015 S.r.l. (Siena 2015):
-- Class C Notes upgraded to AAA (sf) from AA (sf)

Siena PMI 2016 S.r.l. (Siena 2016):
-- Class A2 Notes confirmed at AAA (sf)
-- Class B Notes confirmed at AA (high) (sf)
-- Class C Notes upgraded to BBB (low) (sf) from BB (high) (sf)

The ratings on the Siena 2015 Class C Notes and Siena 2016 Class A2 Notes address the timely payment of interest and the ultimate payment of principal on or before the legal final maturity date. Previously, the rating on the Siena 2015 Class C Notes addressed the ultimate payment of interest and principal on or before the legal final maturity date.

The ratings on the Siena 2016 Class B Notes and Class C Notes address the ultimate payment of interest and principal on or before the legal final maturity date.

The rating actions follow an annual review of the transactions and are based on the following analytical considerations:

-- Portfolio performance in terms of delinquencies and defaults, as of May 2018.
-- Probability of default (PD), recovery rate and expected loss assumptions for the remaining collateral pools.
-- The credit enhancement (CE) available to the rated notes to cover the expected losses at their respective rating levels.

Both Siena 2015 and Siena 2016 are Italian cash flow securitisation transactions backed by a portfolio of bank loans to large Italian corporations, small- and medium-sized enterprises, entrepreneurs, self-employed individuals and associations. The loans were mainly granted and are serviced by BMPS.

PORTFOLIO PERFORMANCE
The portfolios of both transactions are performing within DBRS’s expectations. For Siena 2015, the 90+ delinquency ratio was at 1.5%, as of the May 2018 cut-off date, and the cumulative default ratio was 0.5%. For Siena 2016, the 90+ delinquency ratio was at 1.2%, as of the May 2018 cut-off date, and the cumulative default ratio was 0.3%.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis on the remaining pools and updated its portfolio default and recovery assumptions on the remaining collateral pools for both transactions. The base case PD was maintained at 4.3% for Siena 2015 and Siena 2016.

CREDIT ENHANCEMENT
The CEs available to all rated notes have continued to increase as the transactions continue to deleverage. The CE available to each series of rated notes was 80.1% for the Siena 2015 Class C Notes, as of the May 2018 payment date, and 87.7%, 71.6% and 37.9% for the Siena 2016 Class A2, B and C Notes, respectively, as of the May 2018 payment date. The increase in the CE prompted today’s confirmation and upgrade rating actions.

BNP Paribas Securities Services S.C.A., Milan branch (BNP Paribas) holds the Transaction Account Bank for both Siena 2015 and Siena 2016. The DBRS private rating of BNP Paribas complies with the Minimum Institution Rating, given the rating assigned to the most senior class of rated notes in each transaction, 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 transactions 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 actions.

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 include reports provided by Securitisation Services S.p.A. and BMPS, 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 initial rating of Siena 2015 and Siena 2016, 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 Siena 2015 took place on 25 May 2018 when DBRS discontinued its ratings on the Class B Notes. Prior to that on 9 August 2017, DBRS discontinued its ratings on the Class A2A Notes and Class A2B Notes and upgraded the Class B and Class C Notes to AAA (sf) and AA (sf) from A (low) (sf) and BBB (low) (sf), respectively. The last rating action on Siena 2016 took place on 12 December 2017, when DBRS discontinued its ratings on the Class A1 Notes. Prior to that on 2 November 2017, DBRS confirmed its rating on the Class A1 Notes at AAA (sf) and upgraded the Class A2, Class B and Class C Notes to AAA (sf), AA (high) (sf) and BB (high) (sf) from AA (high) (sf) AA (sf) and B (low) (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”):

Siena 2015
-- Probability of Default Rates Used: Base case PD of 4.3% a 10% increase of the base case and a 20% increase of the base case PD.
-- Recovery Rates Used: Base case recovery rates, corresponding to a recovery rate of 21.1% at the AAA (sf) stress level for the Class C Notes, a 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 Class C Notes at AAA (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 Class C Notes at AAA (sf).

Siena 2016
-- Probability of Default Rates Used: Base case PD of 4.3% a 10% increase of the base case and a 20% increase of the base case PD.
-- Recovery Rates Used: Base case recovery rates of 26.8% at the AAA (sf) stress level, 30.4% at the AA (high) (sf) stress level and 35.7% at the BBB (low) (sf) stress level, for the Class A1 Notes, Class B Notes and Class C Notes, respectively, a 10% and 20% decrease in the base case recovery rates.

For the Class A2 Notes, 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 Class A Notes at AAA (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 Class A2 Notes at AAA (sf).

For the Class B Notes, 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 Class B Notes to AA (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 also lead to a confirmation of the Class B Notes at AA (high) (sf).

For the Class C Notes, 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 downgrade of the Class C Notes to BB (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 also lead to a downgrade of the Class C Notes to BB (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: Francesco Amato, Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date:
Siena 2015: 6 August 2015
Siena 2016: 2 November 2016

DBRS Ratings Limited
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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.

-- 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 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.