DBRS Assigns Ratings to Alba 10 SPV S.r.l.

DBRS Ratings Limited (DBRS) assigned the following ratings to the notes issued by Alba 10 SPV S.r.l. (the Issuer):

-- EUR 408,400,000 Class A1 Asset-Backed Floating Rate Notes due by October 2038 (the Class A1 Notes) at AAA (sf)
-- EUR 200,000,000 Class A2 Asset-Backed Floating Rate Notes due by October 2038 (the Class A2 Notes) at AA (high) (sf)
-- EUR 130,000,000 Class B Asset-Backed Floating Rate Notes due by October 2038 (the Class B Notes) at A (high) (sf)
-- EUR 75,000,000 Class C Asset-Backed Floating Rate Notes due by October 2038 (the Class C Notes) at BBB (sf)

The ratings of the Class A1 and Class A2 Notes address the timely payment of interest and the ultimate repayment of principal by the final legal maturity date. The ratings on the Class B and Class C Notes address the ultimate payment of interest and ultimate repayment of principal by the final legal maturity date while junior to other outstanding classes of notes but the timely payment of interest when they are the senior-most tranche, in accordance with Issuer’s default definition provided in the transaction documents (Trigger Event). The EUR 145,434,000 Class J Asset-Backed Floating Rate Notes due by October 2038 are not rated by DBRS.

The notes are backed by approximately EUR 951 million of receivables related to financial lease contracts granted by Alba Leasing S.p.A. (AL) to retail and corporate customers in Italy. The securitised receivables are financial claims toward the payment of regular installments by lessees. The receivables exclude the final optional instalments that include residual value. DBRS reviewed the final portfolio selected by AL which, as at 12 October 2018, by securitised amount comprised 19% real estate leases, 57% equipment leases, 22% vehicle leases and 1.5% naval-aircraft-train leases.

The ratings are based on the following analytical considerations:
-- The transaction’s capital structure and the form and sufficiency of available credit enhancement in the form of subordination, reserve funds and excess spread.
-- The ability of the transaction’s structure and triggers to withstand stressed cash flow assumptions in order to timely or ultimately pay interest, as the case may be, and ultimately repay the principal under the notes before the final legal maturity date according to the terms of the transaction documents.
-- AL’s capabilities with respect to originations and underwriting.
-- AL’s financial situation and its capabilities with respect to servicing.
-- The presence of Securitisation Services S.p.A. as the appointed backup servicer as well as Agenzia Italia S.p.A. and Trebi Generalconsult S.r.l as the appointed sub backup servicers, and their capabilities in that respect.
-- DBRS conducted an operational risk review at AL’s premises in Milan in 2016 and did an updated review on the phone in 2018, and deems it an acceptable originator and servicer.
-- The credit quality of the collateral and ability of the servicer to perform collection activities on the collateral.
-- The sovereign rating of the Republic of Italy, currently rated BBB (high) with a Stable trend by DBRS.
-- The consistency of the legal structure with DBRS’s Legal Criteria for European Structured Finance Transactions methodology and presence of legal opinions addressing 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 ratings 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 these ratings include performance data relating to receivables, sourced by AL directly or through its agents Banca IMI S.p.A. and Société Général S.A., as the transaction arrangers. DBRS received historical static gross loss data relating to AL’s originations by quarterly vintages dating back to 2010 and up to Q1 2018, as well as dynamic arrears and default data since 2010 up to Q1 2018. Data was also provided relating to static recoveries from 2010, prepayments in addition to a loan-by-loan data set for the initial portfolio selected by AL, 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 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.

These ratings concerns a newly issued financial instrument. These are the first DBRS ratings 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): 35.4% at AAA (sf), 30.5% at AA (high) (sf), 25.5% at A (high) (sf) and 18.8% at BBB (sf), a 25% and 50% increase on the base case PD.
-- Loss Given Default (LGD): 24% at AAA (sf), 24.8% at AA (high) (sf), 26.9% at A (high) (sf) and 29.5% at BBB (sf), a 25% and 50% increase in the base case LGD.

DBRS concludes that for the Class A1 Notes:
-- A hypothetical increase of the base case PD by 25% or a hypothetical increase of the LGD by 25%, ceteris paribus, would not lead to any change of the rating of the Class A1 Notes.
-- A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would not lead to any change of the rating of the Class A1 Notes.
-- A hypothetical increase of the base case PD by 50% would not lead to any change of the rating of the Class A1 Notes.
-- A hypothetical increase of the base case LGD by 50% would lead to any change of the rating of the Class A1 Notes.
-- 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 A1 Notes to AA (high) (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 A1 Notes to AA (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 A1 Notes to AA (sf).

DBRS concludes that for the Class A2 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 A2 Notes to A (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 A2 Notes to A (low) (sf).
-- A hypothetical increase of the base case PD by 50% would lead to a downgrade of the Class A2 Notes to A (sf).
-- A hypothetical increase of the base case LGD by 50% would lead to a downgrade of the Class A2 Notes to A (high) (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 A2 Notes to BBB (high) (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 A2 Notes to BBB (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 A2 Notes to BBB (sf).

DBRS concludes that for the Class B 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 B 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 B Notes to BBB (sf).
-- A hypothetical increase of the base case PD by 50% would lead to a downgrade of the Class B Notes to BBB (sf).
-- A hypothetical increase of the base case LGD by 50% would lead to a downgrade of the Class B Notes to BBB (high) (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 B Notes to BB (high) (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 B 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 B Notes to BB (high) (sf).

DBRS concludes that for the Class C 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 C Notes to BB (low) (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 C Notes to B (high) (sf).
-- A hypothetical increase of the base case PD by 50% would lead to a downgrade of the Class C Notes to B (sf).
-- A hypothetical increase of the base case LGD by 50% would lead to a downgrade of the Class C Notes to B (high) (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 C Notes to B (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 C Notes to B (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 C Notes to B (low) (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: Paolo Conti, Senior Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 29 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.