DBRS Upgrades Rating on Madeleine SPV S.r.l.

DBRS Ratings GmbH (DBRS) upgraded its rating on the Class B Notes issued by Madeleine SPV S.r.l. (the Issuer) to AA (sf) from A (high) (sf).

The rating on the Class B Notes addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date.

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

-- Portfolio performance, in terms of delinquencies, defaults and losses as of the March 2019 payment date.
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables.
-- Current available credit enhancement to the notes to cover the expected losses at their respective rating levels.

Madeleine SPV S.r.l. is a securitisation of salary and pension assignment loans granted by Pitagora S.p.A. (Pitagora) to individuals resident in Italy. Pitagora, which is also servicing the portfolio, is the financial intermediary of Cassa di Risparmio di Asti S.p.A. banking group.

The transaction closed in May 2013 and was restructured in September 2014, when the new Class B Notes were issued and subsequently rated by DBRS.

PORTFOLIO PERFORMANCE
As of March 2019, loans that were two- to three-months in arrears represented 1.1% of the outstanding portfolio balance, up from 0.6% in June 2018. The 90+ delinquency ratio was 1.6%, up from 1.2% in June 2018. The cumulative default ratio was 8.0%, compared with 7.4% in June 2018.

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 12.3% and 27.2%, respectively.

CREDIT ENHANCEMENT
As of the March 2019 payment date, credit enhancement to the Class B Notes was 54.4%, up from 4.1% at the DBRS initial rating.

The transaction benefits from a reserve fund of EUR 2.3 million, equal to the 1.5% of the paid-up amount of the Class A Notes. It is available to cover senior fees, expenses and interest shortfall on the Class B Notes.

The Bank of New York Mellon SA/NV, Italian branch and The Bank of New York Mellon, London branch act as the Italian and English account bank for the transaction. Based on the 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 rated notes, as described in DBRS' "Legal Criteria for European Structured Finance Transactions" methodology.

The Bank of New York Mellon, London branch has replaced The Bank of New York Mellon SA/NV, London branch in its English account bank role by virtue of an agreement signed on 1 April 2019 by the transaction parties.

The transaction structure was analysed in Intex DealMaker.

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. DBRS acknowledges that The Bank of New York Mellon, London branch has replaced The Bank of New York Mellon SA/NV, London branch in its English account bank role by virtue of an agreement signed on 1 April 2019 by the transaction parties and has considered it in its analysis.

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 this rating include payment and investor reports provided by Securitisation Services S.p.A., servicer reports provided by Pitagora S.p.A and loan-level data provided by 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 17 January 2019 when DBRS discontinued the rating on the Class A Notes because of repayment in full. Prior to that, on 26 June 2018, DBRS upgraded the rating of the Class A Notes to AA (sf) from A (high) (sf), and the rating on the Class B Notes to A (high) (sf) from A (low) (sf).

The lead analyst responsibilities for this transaction have been transferred to Ettore Grassini.

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 with the parameters used to determine the rating (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 12.3% and 27.2%, 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 B Notes would be expected to remain at AA (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class B Notes would be expected to remain at AA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class B Notes would be expected to fall to AA (low) (sf).

Class B Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD, expected rating of AA (sf)
-- 50% increase in PD, expected rating of AA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (low) (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 GmbH are subject to EU and US regulations only.

Lead Analyst: Ettore Grassini, Financial Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 18 July 2014

DBRS Ratings GmbH
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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
-- Master European Structured Finance Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Servicers
-- 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.