DBRS Takes Rating Actions on Dyret SPV S.r.l.

DBRS Ratings Limited (DBRS) took the following rating actions on the notes issued by Dyret SPV S.r.l. (the Issuer):

-- Class A notes confirmed at A (sf)
-- Class B notes confirmed at BBB (high) (sf)
-- Class C notes upgraded to BBB (low) (sf) from BB (high) (sf)

The ratings address the timely payment of interest and ultimate payment of principal on or before the legal final maturity date in December 2038.

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

-- Portfolio performance, in terms of delinquencies, defaults and losses.
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables.
-- Current available credit enhancement (CE) to the notes to cover the expected losses at their respective rating levels.
-- No Purchase Termination Event has occurred.

The Issuer is a securitisation of salary and pension assignment loan receivables (SA and PA, respectively), as well as payment delegation loan receivables granted by Dynamica Retail S.p.A. (Dynamica) to individual borrowers in Italy, established in May 2014. As of November 2018, the EUR 148.6 million performing portfolio consisted of 46.7% SA loans, 33.6% PA loans and 19.7% payment delegation loans.

PORTFOLIO PERFORMANCE
As of the November 2018 payment date, loans that were one- to two-months and two- to three-months delinquent represented 0.1% and 0.04% of the portfolio balance, respectively, while loans more than three months delinquent represented 0.2%. As of November 2018, the cumulative default ratio was 3.0%.

RAMP-UP PERIOD
The transaction contains a ramp-up period, extended to the December 2018 payment date (inclusive) with the most recent transaction amendment in December 2017. During this period, the Issuer may issue additional notes up to the respective Class’ maximum amount, subject to maximum tranching ratios and use the proceeds of such issuance, together with collection proceeds from the portfolio, to acquire additional receivables originated by Dynamica, subject to certain eligibility criteria and portfolio concentration limits. Since the initial rating date and as of the November 2018 payment date, additional receivables totalling EUR 21.5 million were purchased.

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 to 7.9% and 39.7%, respectively.

CREDIT ENHANCEMENT
CE is provided by the subordination of junior obligations. As of the November 2018 payment date, CE to the Class A notes was 15.7%; CE to the Class B notes was 5.5%; and CE to the Class C notes was 1.0%.

The transaction benefits from an amortising reserve fund available to cover senior expenses and interest payments on the rated notes. This reserve was funded at closing through the proceeds of the initial note issuance and has been topped up over the life of the transaction with the ramp-up of the portfolio, with a target balance equal to 2.0% of the outstanding performing portfolio balance. As of the November 2018 payment date, the cash reserve was funded to EUR 3.0 million.

BNP Paribas Securities Services, Milan branch (BPSS-Milan) acts as the account bank for the transaction. Based on the DBRS private rating of BPSS-Milan, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS considers the risk arising from the exposure to the account bank to be consistent with the ratings assigned to the 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/333487/rating-sovereign-governments.pdf.

The sources of data and information used for these ratings include investor reports provided by Zenith Service S.p.A. (the Servicer and Calculation Agent) and sub-servicer reports and loan-level data provided by Dynamica Retail S.p.A. (the Originator and Sub-Servicer).

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 12 March 2018, when DBRS assigned ratings of BBB (high) (sf) and BB (high) (sf) to the Class B notes and Class C notes, respectively.

The lead analyst responsibilities for this transaction have been transferred to Joana Seara da Costa.

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 ratings, DBRS considered the following stress scenarios as compared with the parameters used to determine the ratings (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 7.9% and 39.7%, 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 fall to A (low) (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A notes would be expected to fall to A (low) (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 fall to BBB (high) (sf).

Class A notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (low) (sf)
-- 50% increase in LGD, expected rating of A (low) (sf)
-- 25% increase in PD, expected rating of A (low) (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 BBB (high) (sf)
-- 50% increase in PD, expected rating of A (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf)
Class B notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in LGD, expected rating of BBB (sf)
-- 25% increase in PD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in PD, expected rating of BBB (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BB (low) (sf)
Class C notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in LGD, expected rating of BB (low) (sf)
-- 25% increase in PD, expected rating of BB (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BB (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of B (high) (sf)
-- 50% increase in PD, expected rating of BB (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of B (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of below 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: Joana Seara da Costa, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 27 December 2017

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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

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.