DBRS Upgrades Ratings on Class A2 and Class B Notes Issued by Voba N.6 S.r.l.

DBRS Ratings Limited (DBRS) upgraded its ratings on the Notes issued by Voba N.6 S.r.l. (the Issuer) as follows:

-- Class A2 Notes upgraded to AAA (sf) from AA (high) (sf)
-- Class B Notes upgraded to AA (high) (sf) from A (sf)

The rating on the Class A2 Notes addresses the timely payment of interest and ultimate payment of principal on or before the Final Maturity Date, while the rating on the Class B Notes addresses the ultimate payment of interest and principal on or before the Final Maturity Date.

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 the May 2018 payment date.
-- Probability of default (PD), recovery rate and expected loss assumptions for the remaining collateral pool.
-- The current levels of credit enhancement (CE) available to the Class A2 Notes and Class B Notes to cover the expected losses assumed in line with their respective rating levels.

The transaction is a cash flow securitisation that is collateralised by a portfolio of performing mortgage and non-mortgage loans to Italian small- and medium-sized enterprises, entrepreneurs, artisans and producer families. The loans were mainly granted by Banca Popolare dell’Alto Adige S.C.p.A. (BPAA or the Originator), but also by Banca Popolare di Marostica S.C.p.a.r.l. (BPM) and Banca di Treviso S.p.A. (Banca di Treviso) before being merged into BPAA in 2015.

PORTFOLIO PERFORMANCE
The portfolio is performing within DBRS’s expectations. As of May 2018, the 90+ delinquency ratio was at 0.2% and the cumulative default ratio was at 1.3%.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis on the remaining pool and updated its portfolio default and recovery assumptions. The annualised weighted-average base case PD was maintained at 4.2%.

CREDIT ENHANCEMENT
The CE available to the Class A2 Notes and Class B Notes continues to increase as the transaction continues to deleverage. As of the May 2018 payment date, the CE available to the Class A2 Notes and Class B Notes was 60.1% and 41.3%, respectively. The increase in the CE prompted the upgrade of the ratings.

BNP Paribas Securities Services SCA/Milan holds the Transaction Account for the transaction. The DBRS private rating of BNP Paribas Securities Services SCA/Milan is consistent with the Minimum Institution Rating, given the rating assigned to the Class A2 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: “Rating CLOs Backed by Loans to European SMEs.”

DBRS has applied the principal methodology consistently and conducted a review of the transaction 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 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 reports provided by Securitisation Services S.p.A., 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, 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 17 October 2017 when DBRS upgraded its ratings on the Class A2 Notes and Class B Notes to AA (high) (sf) and A (sf) from AA (sf) and BBB (high) (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”):
-- PD Rates Used: The annualised weighted-average PD was maintained at 4.2%, based on a PD of 3.9% to mortgage loans originated by BPAA, 2.5% to non-mortgage loans originated by BPAA, 8% to loans originated by BPM and Banca di Treviso and 22.7% to the top borrower of the portfolio, a 10% increase of the base case and a 20% increase of the base case PD.

-- Recovery Rates Used: Base case recovery rates of 35.5% at the AAA (sf) stress level and 41.2% at the AA (high) (sf) stress level for the Class A2 Notes and Class B Notes, respectively; 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.

For the Class A2 Notes, DBRS concluded that a hypothetical increase of the base case PD by 20%, ceteris paribus, would lead to a confirmation of the Class A2 Notes at AAA (sf), and a hypothetical decrease of the recovery rate by 20%, ceteris paribus, which would lead to a confirmation of the Series A2 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 concluded that a hypothetical increase of the base case PD by 20%, ceteris paribus, would lead to a confirmation of the Class B Notes at AA (high) (sf), and a hypothetical decrease of the recovery rate by 20%, ceteris paribus, which would lead to a confirmation of the Class B Notes at 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 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: Alfonso Candelas, Senior Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 22 September 2016

DBRS Ratings Limited
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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 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 Securitizations

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.