DBRS Confirms Class A Notes Issued by Grecale ABS S.r.l - Series 6

DBRS Ratings GmbH (DBRS) confirmed its AAA (sf) rating on the Class A Notes issued by Grecale ABS S.r.l. – Series 6 (Grecale ABS or 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 October 2018 payment date;
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions for the remaining pool; and
-- Current credit enhancement (CE) available to the Class A Notes to cover the expected losses at the AAA (sf) rating level.

The rating on the Class A Notes addresses the timely payment of interest and ultimate payment of principal on or before the Final Maturity Date in April 2056. 

Grecale ABS closed in July 2009 and is a securitisation of first-lien Italian residential mortgages originated by UGF Banca S.p.A. (also known as Unipol Banca). The transaction makes payments on the notes semi-annually and DBRS assigned its AAA (sf) rating to the Class A Notes in May 2011.

PORTFOLIO PERFORMANCE
The asset portfolio is performing within DBRS’s expectations. As of 30 September 2018, loans more than 30 days delinquent represented 1.9% of the outstanding collateral pool balance, and loans more than 90 days delinquent represented 0.4% of the balance. The cumulative gross default ratio was at 7.3% of the original portfolio balance.

PORTFOLIO ASSUMPTIONS
DBRS updated its base case PD and LGD assumptions for the remaining collateral pool to 6.0% and 3.3%, respectively.

CREDIT ENHANCEMENT
As of the October 2018 payment date, the CE available to the Class A Notes has increased to 67.7%, up from 44.6% a year prior. The CE consists of subordination of the Class B Notes.

The Class A Notes benefit from a non-amortising Cash Reserve currently at the target amount of 2.5% of the portfolio balance at closing, EUR 15.3 million. The Cash Reserve provides liquidity support through covering shortfalls in senior fees and interest on the Class A Notes.

The Bank of New York Mellon S.A./N.V., Milan Branch and London Branch are the Italian and English Account Banks for the transaction, respectively. Based on the reference public ratings of the Account Banks, the downgrade provisions outlined in the transaction documents, and structural mitigants, DBRS considers the risk arising from the exposure to the Account Banks to be consistent with the rating assigned to the Class A Notes, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology.

UBS Limited (UBS) acts as the Swap Counterparty to the transaction. DBRS’s private rating of UBS complies with the first rating threshold as defined in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology. Obligations under the swap agreements are guaranteed by UBS AG.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is: “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 the 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 action include the investor reports provided by the Calculation Agent, The Bank of New York Mellon S.A./N.V., London Branch, and the loan-by-loan data obtained 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.

This last rating action on this transaction took place on 12 March 2018, when DBRS confirmed its rating on the Class A Notes at AAA (sf).

The lead analyst responsibilities for this transaction have been transferred to Ilaria Maschietto.
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 to the parameters used to determine the rating (the Base Case):

-- DBRS expected a base case PD and LGD for the remaining collateral 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 assumptions for the remaining collateral pool are 6.0% and 3.3%, respectively. At the AAA (sf) rating level, the corresponding PD is 28.2% and the LGD is 19.9%.

-- 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 on the Class A Notes would be expected to be at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Class A Notes would be expected to be at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating on the Class A Notes would be expected to be 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 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: 16 November 2011

DBRS Ratings GmbH
Neue Mainzer Straße 75
60311 Frankfurt am Main - Deutschland
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.

-- Legal Criteria for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Servicers
-- Interest Rate Stresses for European Structured Finance Transactions
-- 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.