DBRS Confirms Rating on the Class A2 Notes Issued by Voba N. 5 S.r.l.

DBRS Ratings GmbH (DBRS) confirmed its AAA (sf) rating on the Class A2 Notes issued by Voba N. 5 S.r.l. (the Issuer).

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

-- Portfolio performance, in terms of delinquencies and defaults, as of the December 2018 payment date;
-- Probability of default (PD), loss given default (LGD) rate and expected loss assumptions for the outstanding collateral pool; and
-- The current credit enhancement (CE) available to the Class A2 Notes to cover the expected losses at the AAA (sf) rating level.

The rating on the Class A2 Notes addresses the timely payment of interest and ultimate payment of principal payable on or before the Final Maturity Date in June 2051.

Voba N. 5 S.r.l. is a securitisation of first-lien, fully amortising mortgage loans originated and serviced by Banca Popolare dell’Alto Adige S.p.A. (Volksbank or the Servicer). The Back-Up Servicer is Securitisation Services S.p.A. The transaction closed in April 2014. In May 2017, the servicing agreement was amended to provide more flexibility to the Servicer in managing the portfolio.

As of November 2018, the portfolio consisted of 2,962 loans extended to borrowers residing in Italy and distributed mostly across northern regions of Italy. The three most represented regions were Trentino-Alto Adige, Veneto and Friuli-Venezia Giulia, with respective percentages of 60.3%, 36.5% and 2.2%. The collateral is amortising relatively quickly with a pool factor of 49.5% after almost five years since closing. The weighted-average current loan-to-value was 39.6%, down from 42.1% in November 2017.

PORTFOLIO PERFORMANCE
The portfolio is performing well and within DBRS’s expectations. As of November 2018, loans more than 90 days delinquent accounted for 0.6% of the outstanding collateral pool balance, slightly up from 0.4% in November 2017. The cumulative gross defaulted loans as a percentage of the initial pool balance were 0.6%, up from 0.4% in November 2017.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis on the outstanding pool of receivables and updated the PD and LGD assumptions on the remaining collateral pool to 26.8% and 15.8%, respectively, at the AAA (sf) rating level.

CREDIT ENHANCEMENT
CE to the Class A2 Notes is provided by the overcollateralisation of the outstanding collateral portfolio. As of November 2018, CE to the Class A2 Notes was 47.6%, up from 16.5% at closing. The Cash Reserve Fund is available to pay senior fees and expenses and missed interest on the Class A2 Notes. The reserve is currently at its target level of EUR 3.4 million (2.5% of the outstanding balance of the Class A2 Notes at the preceding payment date).

BNP Paribas Securities Services, Milan branch acts as the account bank for the transaction. Based on the reference private rating of BNP Paribas Securities Services, Milan branch, the downgrade provisions outlined in the transaction documents, and structural mitigants, DBRS considers the risk arising from the exposure to BNP Paribas Securities Services, Milan branch to be consistent with the rating assigned to the Class A2 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: https://www.dbrs.com/research/333487/rating-sovereign-governments.

The sources of data and information used for this rating include the quarterly servicer report provided by Volksbank, payment and investor 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 not 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 11 January 2018, when DBRS confirmed the rating on the Class A2 Notes at AAA (sf).

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”):

-- DBRS expected a Base Case PD and LGD for the portfolio 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 mortgages for the Issuer are 3.4% and 1.9%, respectively. At the AAA (sf) rating level, the corresponding PD is 26.8% and the LGD is 15.8%.

-- 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 increased by 50%, the rating of the Class A2 Notes would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increased by 50%, the rating for the Class A2 Notes would be expected to remain at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increased by 50%, the rating of the Class A2 Notes would be expected to remain at AAA (sf).

Class A2 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 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 GmbH 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: 8 April 2014

DBRS Ratings GmbH
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60311 Frankfurt am Main Germany
Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

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

-- Interest Rate Stresses for European Structured Finance Transactions
-- 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

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.