DBRS Assigns Rating to Class A Notes Issued by Leviticus SPV S.r.l.

DBRS Ratings Limited (DBRS) assigned a BBB (sf) rating to the EUR 1,440,033,000 Class A notes issued by Leviticus SPV S.r.l. (the Issuer). The rating addresses the timely payment of interest and the ultimate payment of principal on or before its final maturity date in July 2040.

The notes are backed by a EUR 7.4 billion gross book value (GBV) portfolio consisting of secured and unsecured non-performing loans originated by Banco BPM S.p.A. (the Originator). The majority of loans in the portfolio defaulted between 2012 and 2018 and are in various stages of resolution.

The receivables will be serviced by Credito Fondiario S.p.A. (CF or the Servicer). A backup servicer, Zenith Service S.p.A., has also been appointed and will act as a servicer in case of termination of the appointment of CF.

Approximately 66.9% of the pool by GBV is secured and 62.0% of the portfolio benefits from a first-ranking lien. The secured pool is backed mainly by residential properties for approximately 40.0% of the updated market value (UMV); other major property types, representative of the secured pool, are land and agricultural real estate (15.5% of UMV), commercial properties/offices (7.3%) and industrial properties (6.5%).

The secured loans included in the portfolio are backed by properties distributed mainly in the Italian regions of Lombardy (38.9% of UMV) and Veneto (11.6%).

In its analysis, DBRS assumed that all loans are worked out through an auction process, which generally has the longest resolution timeline.

The transaction benefits from EUR 147.1 million in cash from recoveries collected between 1 July 2018 and 31 December 2018, which will be used to pay initial transaction costs and, for the remaining part, will be distributed in accordance with the priority of payments on the first payment date.

The rating is based on DBRS’s analysis of the projected recoveries of the underlying collateral; the historical performance and expertise of the Servicer; the availability of a liquidity reserve to fund the Class A interest payment and the Issuer expenses in case of cash flow shortfalls; an interest rate cap agreement with Banco Santander S.A. and Crédit Agricole Corporate and Investment Bank S.A.; and the transaction’s legal and structural features.

DBRS’s BBB (sf) rating stress assumes a haircut of 23.0% on the Servicer’s business plan for the portfolio.

DBRS analysed the transaction structure using Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is: “Rating European Non-Performing Loans 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: https://www.dbrs.com/research/333487/rating-sovereign-governments.

The sources of data and information used for this rating include loan-level and stratification information on the portfolio provided by the Originator and the Servicer.

DBRS did not rely upon third-party due diligence to conduct its analysis.

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.

This rating concerns a newly issued financial instrument. This is the first DBRS rating on this financial instrument.

Information regarding DBRS ratings, including definitions, policies and methodologies are 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 with the parameters used to determine the rating (the Base Case):

-- Recovery Rates Used: Cumulative Base Case Recovery Amount of approximately EUR 1.88 billion at the BBB (sf) stress level; a 5% and 10% decrease of the Cumulative Base Case Recovery Rate.
-- DBRS concludes that a hypothetical decrease of the Recovery Rate by 5%, ceteris paribus, would lead to a downgrade of the Class A notes to BB (low) (sf).
-- DBRS concludes that a hypothetical decrease of the Recovery Rate by 10%, ceteris paribus, would lead to a downgrade of the Class A notes to CCC (high) (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: Antonio Laudani, Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 6 February 2019

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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 Non-Performing Loans Securitisations
--Rating European Consumer and Commercial Asset-Backed Securitisations
--Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
--European CMBS Rating and Surveillance Methodology
--Operational Risk Assessment for European Structured Finance Servicers
--Legal Criteria for European Structured Finance Transactions
--Derivative Criteria for European Structured Finance Transactions
--Interest Rate Stresses 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.