DBRS Assigns Rating to Multi Lease AS S.r.l.

DBRS Ratings Limited (DBRS) assigned a rating of A (high) (sf) to the EUR 794,700,000 Asset-Backed Floating Rate Notes (Class A Notes) due July 2044 issued by Multi Lease AS S.r.l. (the Issuer).

The rating addresses the timely payment of interest and ultimate repayment of principal by the legal final maturity falling in July 2044. EUR 340,471,000 Class B Asset-Backed Fixed Rate Notes due July 2044 were also issued but are not rated by DBRS.

The notes are backed by approximately EUR 1.14 billion of receivables related to financial lease contracts granted by Sardaleasing S.p.A. (Sardaleasing) to retail and corporate customers in Italy. The securitised receivables are financial claims towards the payment of regular installments by lessees but exclude the final optional instalments that include residual value. DBRS reviewed the final portfolio selected by Sardaleasing which, as at 30 June 2018, comprises 71% real estate leasing, 16% equipment leases, 6% vehicle leases, 4% energetic and 3% naval receivables.

The ratings are based on the following analytical considerations:
-- The transaction’s capital structure and the form and sufficiency of available credit enhancement.
-- The credit enhancement in the form of subordination and liquidity reserve, which will be fully funded at issuance.
-- The ability of the transaction’s structure to withstand stressed cash flow assumptions in order to timely pay interest and ultimately repay principal due on the Class A Notes on or before the legal maturity date according to the terms of the transaction documents.
-- Sardaleasing’s experience as an originator and underwriter.
-- Sardaleasing’s financial strength and its capacity as servicer with respect to the assigned receivables.
-- The credit quality of the collateral as deduced from the available information and the ability of the servicer to perform collection activities on the collateral.
-- The sovereign rating of the Republic of Italy, which is currently rated by DBRS at BBB (high) with a Stable trend.
-- The consistency of the transaction’s with DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology and the presence of legal opinions that address the assignment of the assets to the Issuer.

The transaction structure was analysed in Intex DealMaker considering the default rates at which the rated notes did not return all specified cash flows.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is: “Rating European Consumer and Commercial Asset-Backed 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.

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 this rating include performance data relating to receivables, sourced by Sardaleasing directly or through its agent Zenith Service S.p.A. as arranger. DBRS received historical static gross loss data relating to Sardaleasing’s originations by quarterly vintages dating back to 2005. Data was also provided relating to static recoveries from 2007, delinquencies and prepayments in addition to a loan-by-loan data set for the initial portfolio selected by Sardaleasing, which 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 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 this rating to be of satisfactory quality.

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

This 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, 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”):

-- Probability of Default (PD): Base Case of 19.9%, a 25% and 50% increase on the base case PD.
-- Loss Given Default (LGD): Base Case of 52.8%, a 25% and 50% increase in the base case LGD.

DBRS concludes that for the Class A Notes:
-- A hypothetical increase of the base case PD by 25% or a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A Notes to BBB (high) (sf).
-- A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A Notes to BB (high) (sf).
-- A hypothetical increase of the base case PD by 50% would lead to a downgrade of the Class A Notes to BB (high) (sf).
-- A hypothetical increase of the base case LGD by 50% would lead to a downgrade of the Class A Notes to BBB (sf).
-- A hypothetical increase of the base case PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A Notes to BB (low) (sf).
-- A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A Notes to BB (high) (sf).
-- A hypothetical increase of the base case PD by 50% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A Notes to B (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, Assistant Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 6 November 2018

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The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies.

-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Legal Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators
-- Interest Rate Stresses for European Structured Finance Transactions
-- Rating CLOs Backed by Loans to European SMEs
-- 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.