DBRS Confirms Ratings of the Notes Issued by ICCREA SME CART 2016 S.r.l.

DBRS Ratings Limited (DBRS) confirmed its ratings on the bonds issued by ICCREA SME CART 2016 S.r.l. (the Issuer) as follows:

-- Class A1 Notes confirmed at AAA (sf) -- Class A2 Notes confirmed at AA (low) (sf) -- Class B Notes confirmed at A (sf)

The ratings address the timely payment of interest and ultimate payment of principal on or before the legal final maturity date.

The confirmations follow an annual review of the transaction and are based on the following analytical considerations:

-- Portfolio performance, in terms of delinquencies, defaults and losses, as of the June 2018 payment date.
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions.
-- Current available credit enhancement to the notes to cover the expected losses at their respective rating levels.
-- No revolving termination events have occured.

ICCREA SME 2016 is a securitisation of lease receivables originated and serviced by Iccrea BancaImpresa S.p.A. (the Originator). The lessees are corporations, small businesses and individual enterprises with registered offices in Italy. The pool comprises receivables in the form of real estate, automotives, industrial vehicles or equipment leases. The residual value of the lease contracts has not been securitised; however, each interest instalment includes the interest accrued on the residual value.

The transaction has a two-year revolving period. The amortisation of the notes is expected to start on the payment date falling in December 2018, to the extent that certain conditions are not breached before. During the revolving period, the Originator has the option to sell new receivables, funded through collections, subject to certain conditions and limitations.

PORTFOLIO PERFORMANCE AND PORTFOLIO ASSUMPTIONS

As of June 2018, loans that were two- to three-months in arrears represented 0.2% of the outstanding portfolio balance; this level has been stable since June 2017. The 90+ delinquency ratio was 0.5%, up from 0.2% in June 2017. The cumulative default ratio was 0.7%, up from 0.1% in June 2017.

DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and, given that the transaction is still within its revolving period, maintained its base case PD and LGD assumptions at 20.1% and 84.7% for the Class A1 Notes, and 83.9% for the Class A2 Notes and 83.7% for the Class B Notes, respectively, based on a worst-case portfolio composition as per the replenishment criteria set forth in the transaction legal documents.

CREDIT ENHANCEMENT
Because of the transaction revolving period ending in December 2018, as of the June 2018 payment date, credit enhancement to the Class A1, Class A2 and Class B Notes was 86.3%, 51.1% and 46.3%, respectively, stable since the DBRS initial rating date.

The transaction benefits from a reserve fund of EUR 14.9 million, equal to 2.0% of the outstanding balance of the rated notes. It is available to cover senior fees, expenses and interest shortfall on the rated notes.

Citibank N.A./Milan Branch acts as the account bank for the transaction. Based on the DBRS private rating of Citibank N.A./Milan Branch and the downgrade provisions outlined in the transaction documents, DBRS considers the risk arising from the exposure to the bank to be consistent with the ratings assigned to the rated 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 the “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.

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 investor reports provided by Accounting Partners S.r.l., servicer reports provided by Iccrea BancaImpresa SpA and loan-level data provided by 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 26 July 2017, when DBRS confirmed the ratings of the Class A1, Class A2, Class B Notes at AAA (sf), AA (low) (sf) and A (sf), respectively.

The lead analyst responsibilities for this transaction have been transferred to Ilaria Maschietto.

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 (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 loans for the Issuer are 20.1% and 84.7% for the Class A1 Notes, 83.9% for the Class A2 Notes and 83.7% for the Class B Notes, 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 A1 Notes would be expected to fall to AA (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A1 Notes would be expected to fall to A (high) (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A1 Notes would be expected to fall to A (sf).

Class A1 Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD, expected rating of AA (sf)
-- 50% increase in PD, expected rating of A (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (sf)

Class A2 Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (sf)
-- 50% increase in LGD, expected rating of A (sf)
-- 25% increase in PD, expected rating of A (sf)
-- 50% increase in PD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (sf)

Class B Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (sf)
-- 50% increase in LGD, expected rating of A (sf)
-- 25% increase in PD, expected rating of A (sf)
-- 50% increase in PD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (high) (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 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: Ilaria Maschietto, Senior Financial Analyst
Rating Committee Chair: Gareth Levington, Managing Director
Initial Rating Date: 10 August 2016

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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
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Interest Rate Stresses for European Structured Finance Transactions
-- Rating CLOs and CDOs of Large Corporate Credit

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.