DBRS Confirms Rating on Valsabbina SPV 1 S.r.l. (RMBS)

DBRS Ratings GmbH (DBRS) confirmed its AA (sf) rating on the Class A Notes issued by Valsabbina SPV 1 S.r.l. (RMBS) (the Issuer).

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

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

-- Portfolio performance, in terms of delinquencies, defaults and losses.
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables.
-- Current available credit enhancement (CE) to the Class A Notes to cover the expected losses at the AA (sf) rating level.

The Issuer is a securitisation of first-lien Italian residential mortgages originated by Banca Valsabbina S.C.p.A. and Credito Veronese S.p.A. The Class A Notes were originally issued in January 2012. In January 2015, through the additional issuance of Class A Notes, additional loans totalling EUR 151.5 million were purchased, and the reserve fund (RF) was increased to EUR 12.8 million from EUR 8.3 million. The additionally purchased loans were originated by Credito Veronese S.p.A., which Banca Valsabbina acquired in April 2011.

In July 2018, an additional loan portfolio was purchased, funded through the additional issuance of Class A Notes, which increased the outstanding principal amount of the Class A Notes to EUR 366.6 million from EUR 37.7 million. The RF was increased to EUR 11.0 million from EUR 2.7 million, with a target level of 3.0% of the outstanding balance of the Class A Notes, down from 5.0% prior to the 2018 restructuring. Additionally, the interest rate cap on the Class A Notes’ three-month Euribor reference rate was reduced to 3.0% from 8.0%. The introduction of a target amortisation formula for the Class A Notes, as well as the replacement of the backup servicer Nuova Cassa di Risparmio di Ferrara S.p.A. by Cassa di Risparmio di Asti, were also part of the 2018 restructuring.

PORTFOLIO PERFORMANCE
As of April 2019, loans with two to three months in arrears represented 0.4% of the outstanding portfolio balance, down from 0.5% in April 2018. As of April 2019, the 90+ delinquency ratio was 0.6%, down from 1.7% in April 2018 and the cumulative default ratio remained unchanged at 0.0%.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and has maintained its base case PD and LGD assumptions at 13.1% and 24.9%, respectively.

CREDIT ENHANCEMENT
The CE to the Class A Notes consists of subordination of the Class B Notes and is equal to 21.9% as of the April 2019 payment date, up from 21.5% when the transaction was restructured in 2018.

The transaction benefits from the RF of EUR 10.1 million, covering senior expenses and interest on the Class A Notes. The target amount is set at 3% of the outstanding balance of Class A Notes and is permitted to amortise, subject to a floor of EUR 2.0 million

BNP Paribas Securities Services, Milan Branch acts as the account bank for the transaction. Based on DBRS’s private rating of BNP Paribas Securities Services, Milan Branch, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS considers the risk arising from the exposure to the account bank 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.

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.

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 investor reports provided by Securitisation Services S.p.A., servicer reports provided by Banca Valsabbina S.C.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 purpose 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 27 July 2018, when DBRS downgraded its rating of AAA (sf) to AA (sf) on the Class A Notes following the restructuring of the transaction.

The lead analyst responsibilities for this transaction have been transferred to Shalva Beshia.

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 13.1% and 24.9%, 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 A Notes would be expected to fall to A (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A Notes would be expected to fall to A (low) (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected to fall to BBB (low) (sf).

Class A Notes risk sensitivity:
-- 25% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD, expected rating of A (high) (sf)
-- 50% increase in PD, expected rating of A (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (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: Shalva Beshia, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 31 January 2012

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
-- 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.