DBRS Confirms Ratings on Credico Finance 9 S.r.l. and Credico Finance 10 S.r.l.

DBRS Ratings GmbH (DBRS) confirmed the following ratings on two Credico Finance transactions:

Credico Finance 9 S.r.l. (CF9):
-- Class A Notes at AAA (sf)

Credico Finance 10 S.r.l. (CF10):
-- Class A Notes at AAA (sf)

The ratings on the Class A Notes address timely payments of interest and the ultimate payment of principal on or before the respective final maturity dates.

The rating actions follow an annual review of the transactions and are based on the following analytical considerations:
-- Portfolio performances, in terms of delinquencies and defaults, as of the April 2019 payment date for each transaction;
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions on the remaining collateral portfolios;
-- Current available credit enhancement (CE) to the rated notes to cover the expected losses at the AAA (sf) rating level.

The transactions´ structures were analysed in Intex DealMaker.

CF9 and CF10 are securitisations of Italian residential mortgages originated by multiple Italian co-operative banks, which closed in July 2011 and April 2012, respectively. The pools are static and serviced by the Italian originators with ICCREA Banca S.p.A. acting as the backup servicer of the transactions. As of April 2019, the CF9 portfolio totaled EUR 222.9 million with a pool factor of 35.0%, while the CF10 portfolio totaled EUR 595.8 million with a pool factor of 37.7%.

PORTFOLIO PERFORMANCE
The portfolios are performing within DBRS’s expectations. In both transactions, loans more than 90 days delinquent decreased over the past year. As of the April 2019 payment dates, the respective ratios stood at 0.6%, and 0.7% of the outstanding collateral pool of CF9 and CF10. The cumulative default ratios were 0.7%, and 0.4% computed on the original portfolio balances of CF9 and CF10, respectively.

PORTFOLIO ASSUMPTIONS
DBRS conducted loan-by-loan analyses on the remaining collateral pools of receivables and updated its PD and LGD assumptions as follows:
-- In CF9, the base case PD and LGD are 3.0% and 0.5%, respectively,
-- In CF10, the base case PD and LGD are 3.3% and 4.1%, respectively.

CREDIT ENHANCEMENT
The CE available to the rated notes have continued to increase as the transactions continue to deleverage. The CEs consist of the overcollateralisation provided by the outstanding collateral portfolios and include the difference of the cash reserve and 4% of the outstanding Class A Notes at the preceding payment date. In CF9, the CE was 49.1% as of the April 2019 payment date increasing from 38.3% as of the April 2018 payment date. In CF10, the CE was 52.6% as of the April 2019 payment date increasing from 43.3% as of the April 2018 payment date.

The reserves of CF9 and CF10 are available to pay senior fees and expenses, missed interest on the Class A Notes and partially provide credit support to the rated Notes. As of the April 2019 payment date, the available commitment amount of CF9 was EUR 26.7 million and the cash reserve of CF10 was at its target level of EUR 79.2 million.

BNP Paribas Securities Services SCA, Milan branch is the account bank with BNP Paribas Securities Services SCA, London branch being appointed as the English account bank for both transactions. Based on the private 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 ratings assigned to the notes, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology.

J.P. Morgan Securities PLC is the swap counterparty for CF9. DBRS’s private rating of the swap counterparty is consistent with the first rating threshold as defined in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology. CF10 is unhedged.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is: “Master European Structured Finance Surveillance Methodology”.

DBRS has applied the principal methodology consistently and conducted a review of the transactions in accordance with the principal methodology.

A review of the transactions legal documents was not conducted as the legal documents have remained unchanged since the most recent rating action.

Other methodologies referenced in the transactions 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 the CF9 and CF10 ratings include investor and servicer reports provided by Accounting Partners S.r.l. and loan-by-loan level data from the European DataWarehouse GmbH.

DBRS did not rely upon third-party due diligence in order to conduct its analyses.

At the time of the initial ratings, DBRS was not supplied with third-party assessments. However, this did not impact the rating analyses.

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 actions on these transactions took place on 27 April 2018, when DBRS confirmed the ratings on the Class A Notes of CF9 and CF10 at AAA (sf).

The lead analyst responsibilities for these transactions have been transferred to Ettore Grassini.

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 ratings, DBRS considered the following stress scenarios, as compared to 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.

-- In CF9, the base case PD and LGD of the pool of mortgages are 3.0% and 0.5%, respectively. At the AAA (sf) rating level, the corresponding PD is 26.6% and the LGD is 11.5%.
-- In CF10, the base case PD and LGD of the pool of mortgages are 3.3% and 4.1%, respectively. At the AAA (sf) rating level, the corresponding PD is 26.8% and the LGD is 17.5%.
-- 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 remain 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 remain at AAA (sf), assuming no change in the PD. Furthermore, if both the PD and LGD increase by 50%, the rating on the Class A Notes would be expected to remain at AAA (sf).

CF9: 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)

CF10: 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: Ettore Grassini, Financial Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
CF9 Initial Rating Date: 11 July 2011
CF10 Initial Rating Date: 25 April 2012

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.

-- Derivative Criteria for European Structured Finance Transactions
-- Interest Rate Stresses for European Structured Finance Transactions
-- Legal Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- 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.