DBRS Confirms Ratings of Grecale RMBS 2015 S.r.l.

DBRS Ratings Limited (DBRS) confirmed the ratings on the bonds issued by Grecale RMBS 2015 S.r.l. (the Issuer) as follows:

--Class A Notes confirmed at AAA (sf)
--Class B Notes confirmed at AA (high) (sf)
--Class C Notes confirmed at AA (sf)

The rating of the Class A Notes addresses the timely payment of interest and ultimate payment of principal payable on or before the final maturity date in December 2067. The ratings of the Class B Notes and Class C Notes address the ultimate payment of interest and principal payable on or before the 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 September 2018 payment date.
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables.
-- Current available credit enhancement to the rated notes to cover the expected losses at their respective rating levels.

Grecale RMBS 2015 S.r.l. is a securitisation of first-lien residential mortgage loans originated in Italy by Unipol Banca S.p.A. (Unipol) and Banca SAI S.p.A. (merged by incorporation into Unipol in 2014). The portfolio is serviced by Unipol, with Zenith Services S.p.A. appointed as backup servicer. The transaction closed in December 2015 when the Issuer issued one senior class of floating-rate notes (the Class A Notes), two mezzanine classes of floating-rate notes (the Class B Notes and Class C Notes) and one junior class of floating-rate notes (the Class J Notes).

PORTFOLIO PERFORMANCE
As of August 2018, loans that were two- to three-months in arrears represented 0.3% of the outstanding portfolio balance, down from 0.4% in August 2017. The 90+ delinquency ratio was 0.9%, up from 0.8% in August 2017. The cumulative default ratio was 0.7%, up from 0.3% in August 2017.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and has updated its base case PD and LGD assumptions at 5.9% and 5.1%, respectively.

CREDIT ENHANCEMENT
Credit enhancement available to the notes has continued to increase as the transaction deleverages and is provided by the overcollateralisation of the outstanding collateral portfolio. As of the September 2018 payment date, credit enhancements to the Class A Notes, Class B Notes and Class C Notes were 44.6%, 32.1% and 25.9%, increasing from 35.5%, 24.5% and 19.0% as of the last annual review. The reserve fund, which is currently at its target level of EUR 8.4 million (3.0% of the outstanding balance of the Class A Notes), is available to pay senior fees, expenses and missed interest on the Class A Notes.

BNP Paribas Securities Services, Milan and London branches are the Italian and English Account Banks for the transaction. The DBRS private ratings on the Account Banks are consistent with the Minimum Institution Rating, given the rating assigned to the notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

J.P. Morgan Securities plc is the Swap Counterparty to the transaction. The DBRS private rating of J.P. Morgan Securities plc is consistent with the First Rating Threshold defined in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology. The Swap Counterparty’s obligations under the swap agreement are guaranteed by JPMorgan Chase Bank N.A.

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.

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 payment and investor reports provided by Securitisation Services S.p.A., servicer reports provided by Unipol Banca S.p.A. 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 22 November 2017, when DBRS confirmed the rating of the Class A Notes at AAA (sf) and upgraded the ratings of the Class B and Class C Notes to AA (high) (sf) and AA (sf), from AA (low) (sf) and BBB (high) (sf), respectively.

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 5.9% and 5.1%, respectively.
-- The respective PD and LGD at the AAA (sf), AA (high) (sf) and AA (sf) rating levels are 28.1% and 27.9%, 25.3% and 25.9%, 22.3% and 23.8%.
-- 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 A Notes would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A Notes would be expected to remain at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected to remain at AAA (sf).

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

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

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, Assistant Vice President
Rating Committee Chair: Vito Natale, Senior Vice President
Initial Rating Date: 27 November 2015

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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
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Interest Rate Stresses for European Structured Finance Transactions
-- Derivative Criteria 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.