DBRS Confirms Rating of Vela Consumer S.r.l.

DBRS Ratings Limited (DBRS) confirmed the AAA (sf) rating of the Class A Notes issued by Vela Consumer S.r.l. (the Issuer).

The rating of the Class A Notes addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date in April 2032.

The confirmation follows an annual review of the transaction and is based on the following analytical considerations:

-- Portfolio performance, in terms of delinquencies, defaults and losses as of October 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 Class A Notes to cover the expected losses at the AAA (sf) rating level.

Vela Consumer S.r.l. is a securitisation transaction collateralised by a portfolio of unsecured consumer loans granted by Banca Nazionale del Lavoro S.p.A. (BNL) to retail clients residing in Italy. The transaction, which follows the standard structure under Italian securitisation law, closed in December 2015 when the special-purpose vehicle issued one senior class of fixed-rate notes (the Class A Notes) and one junior class of variable return notes (the Class B Notes).

PORTFOLIO PERFORMANCE
The portfolio performance has remained stable over the past year and is performing within DBRS’s expectations. As of October 2018, loans that were two- to three-months in arrears represented 0.2% of the outstanding portfolio balance whereas the 90+ delinquency ratio was 0.5%, unchanged from one year ago. As of October 2018, the cumulative default ratio was 1.7%, increasing from 1.1% as of October 2017.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and has maintained its base case PD and LGD assumptions at 9.3% and 91.9%, respectively.

CREDIT ENHANCEMENT
Credit enhancement (CE) to the Class A Notes is provided by the portfolio overcollateralisation and includes the cash reserve. As of the October 2018 payment date, CE to the Class A Notes was 93.4%, up from 61.2% as of October 2017. The cash reserve, which is currently at its floor level of EUR 4.2 million, is available to cover senior fees and expenses, shortfall of interest on the Class A Notes and to clear any principal deficiency ledger.

BNL acts as the account bank for the transaction. Based on the reference rating of BNL at A (high), the downgrade provisions outlined in the transaction documents, and structural mitigants, DBRS considers the risk arising from the exposure to BNL to be consistent with the ratings assigned to the Class A 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 rating 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/333487/rating-sovereign-governments.pdf.

The sources of data and information used for this rating include quarterly servicer report provided by BNL, payments and investors 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 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.

The last rating action on this transaction took place on 12 December 2017, when the Class A Notes were confirmed at AAA (sf).

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 9.3% and 91.9%, 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 A Notes would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating for 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 also 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)

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: Alfonso Candelas, Senior Vice President
Initial Rating Date: 22 December 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.

-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Legal Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Servicers

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.