DBRS Assigns Provisional Ratings to AutoFlorence 1 S.r.l.

DBRS Ratings GmbH (DBRS) assigned provisional ratings of AA (sf) to the Class A Notes, A (low) (sf) to the Class B Notes, BBB (sf) to the Class C Notes, BB (high) (sf) to the Class D Notes, and B (high) (sf) to the Class E Notes to be issued by AutoFlorence 1 S.r.l. (the Issuer).

The ratings are provisional and can be finalised upon receipt of an executed version of the governing transaction documents. To the extent that the documents and the information provided to DBRS as of this date differ from the executed version of the governing transaction documents, DBRS may assign different finalised ratings to the Class A, Class B, Class C, Class D and Class E Notes.

The transaction represents the issuance of Class A, Class B, Class C, Class D, Class E and Class F Notes (together, the Notes) backed by EUR 500 million of receivables related to auto loan contracts granted by Findomestic Banca S.p.A. (the Seller) to individuals residing in Italy. DBRS does not rate the Class F Notes.

The rating on the Class A Notes addresses the timely payment of interest and ultimate repayment of principal by the legal final maturity date. The ratings on the Class B, Class C, Class D and Class E Notes address the ultimate payment of interest and ultimate repayment of principal by the legal final maturity date, in accordance with the transaction documentation.

The ratings are based on DBRS’s review of the following analytical considerations:

-- Transaction capital structure, including form and sufficiency of available credit enhancement.
-- Credit enhancement levels are sufficient to support DBRS-projected expected cumulative net losses under various stress scenarios.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested.
-- The Seller’s capabilities with regard to originations, underwriting and servicing and its financial strength.
-- DBRS conducted an operational risk review of the Seller and deems it to be an acceptable Servicer.
-- The transaction parties’ financial strength with regard to their respective roles.
-- The credit quality, diversification of the collateral and historical and projected performance of the Seller’s portfolio.
-- The sovereign rating of the Republic of Italy, currently rated BBB (high) by DBRS.
-- The consistency of the transaction’s legal structure with DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology and the presence of legal opinions that address the true sale of the assets to the Issuer. and non-consolidation of the Issuer with the Seller.

The transaction structure was analysed in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is: “Rating European Consumer and Commercial Asset-Backed Securitisations”.

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

An asset and a cash flow analysis were both conducted. Due to the inclusion of a revolving period in the transaction, the analysis is based on the worst-case replenishment criteria set forth in the transaction legal documents.

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 these ratings include data sourced from the Seller and provided through the transaction Arranger, BNP Paribas S.A., Milan branch:

-- Quarterly static default data from Q1 2008 to Q1 2019.
-- Quarterly static recoveries data from Q1 2008 to Q1 2019.
-- Quarterly static prepayment data from Q1 2008 to Q1 2019.
-- Monthly dynamic delinquency data from January 2008 to March 2019.
-- Monthly dynamic prepayment data from January 2008 to March 2019.

DBRS was also provided with detailed stratification tables as at 31 May 2019.

DBRS did not rely upon third-party due diligence in order 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 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.

These ratings concern a newly issued financial instrument. These are the first DBRS ratings on this financial instrument.

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):
-- Expected Default Rate Used: Base case probability of default (PD) of 4.9%, a 25% and 50% increase on the base case PD.
-- Recovery Rate Used: Recovery Rate of 15.0% at the AA (sf) stress level, a 25% and 50% decrease in the base case Recovery Rate. Note that the percentage decreases in the recovery rates are assumed for the other stress recovery rate levels.
-- Loss Given Default (LGD) Used: LGD rate of 85.0% at the AA (sf) stress level, a 25% and 50% increase in the base case LGD.

DBRS concludes that for the Class A Notes:
-- A hypothetical increase of the base case PD by 25% or a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A Notes to A (sf).
-- A hypothetical increase of the base case PD by 50%, ceteris paribus, would lead to a downgrade of the Class A Notes to A (low) (sf).
-- A hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A Notes to A (sf).
-- A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A Notes to BBB (high) (sf).
-- A hypothetical increase of the base case PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A Notes to BBB (sf).
-- A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A Notes to BBB (high) (sf).
-- A hypothetical increase of the base case PD by 50% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A Notes to BBB (sf).

DBRS concludes that for the Class B Notes:
-- A hypothetical increase of the base case PD by 25%, ceteris paribus, would lead to a downgrade of the Class B Notes to BBB (high) (sf).
-- A hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class B Notes to BBB (sf).
-- A hypothetical increase of the base case PD by 50% or a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class B Notes to BBB (sf).
-- A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class B Notes to BB (high) (sf).
-- A hypothetical increase of the base case PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class B Notes to BB (sf).
-- A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class B Notes to BB (high) (sf).
-- A hypothetical increase of the base case PD by 50% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class B Notes to BB (sf).

DBRS concludes that for the Class C Notes:
-- A hypothetical increase of the base case PD by 25% or a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class C Notes to BB (high) (sf).
-- A hypothetical increase of the base case PD by 50%, ceteris paribus, would lead to a downgrade of the Class C Notes to BB (sf).
-- A hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class C Notes to BB (high) (sf).
-- A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class C Notes to BB (low) (sf).
-- A hypothetical increase of the base case PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class C Notes to B (sf).
-- A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class C Notes to BB (low) (sf).
-- A hypothetical increase of the base case PD by 50% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class C Notes to B (sf).

DBRS concludes that for the Class D Notes:
-- A hypothetical increase of the base case PD by 25%, ceteris paribus, would lead to a downgrade of the Class D Notes to B (high) (sf).
-- A hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class D Notes to B (sf).
-- A hypothetical increase of the base case PD by 50% or a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class D Notes to B (sf).
-- A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class D Notes to a rating below B (low) (sf).
-- A hypothetical increase of the base case PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class D Notes to a rating below B (low) (sf).
-- A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class D Notes to a rating below B (low) (sf).
-- A hypothetical increase of the base case PD by 50% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class D Notes to a rating below B (low) (sf).

DBRS concludes that for the Class E Notes:
-- A hypothetical increase of the base case PD by 25%, ceteris paribus, would lead to a downgrade of the Class E Notes to B (low) (sf).
-- A hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class E Notes to a rating below B (low) (sf).
-- A hypothetical increase of the base case PD by 50% or a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class E Notes to a rating below B (low) (sf).
-- A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class E Notes to a rating below B (low) (sf).
-- A hypothetical increase of the base case PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class E Notes to a rating below B (low) (sf).
-- A hypothetical increase of the base case PD by 25% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class E Notes to a rating below B (low) (sf).
-- A hypothetical increase of the base case PD by 50% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class E Notes to a rating below B (low) (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: Christian Aufsatz, Managing Director
Initial Rating Date: 3 July 2019

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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

-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Legal Criteria for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators
-- 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.