DBRS Confirms Rating on Class A Notes Issued by Credico Finance 12 S.r.l.

DBRS Ratings GmbH (DBRS) confirmed its AAA (sf) rating on the Class A Notes issued by Credico Finance 12 S.r.l. (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, as of the 18 June 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 Class A Notes to cover the expected losses at AAA (sf) rating level.

Credico Finance 12 S.r.l. is a securitisation of first-lien Italian residential mortgages originated by 35 co-operative banks (BCCs) and currently serviced by 33 BCCs. The transaction follows the standard structure under Italian securitisation law and closed in August 2013.

PORTFOLIO PERFORMANCE
As of the June 2019 payment date, loans two- to three-months in arrears represented 0.2% of the outstanding portfolio balance, down from 0.4% in June 2018; the 90+ delinquency ratio was 1.2%, down from 1.3% in June 2018; and the cumulative default ratio was 0.9%.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and has updated its PD and LGD assumptions to 26.7% and 14.5%, respectively, at the AAA (sf) rating level.

CREDIT ENHANCEMENT
The CE available to the Class A Notes has increased as the transaction continues to deleverage. The current CE, consisting of subordination of the Class B1-B35 Notes and a portion of the cash reserve, stood at 36.6% as of the June payment date, up from 30.4% one year ago.

The transaction benefits from a cash reserve that is available to cover senior fees and interest on the Class A Notes and is partially available to cover principal shortfall on the Class A Notes. The cash reserve is non-amortising and currently at its target level of EUR 41.7 million.

For this transaction, BNP Paribas Securities Services, Milan branch is the transaction bank and BNP Paribas Securities Services SCA, London branch is the English transaction bank. The transaction bank holds the payment account, collection account, cash reserve accounts and the reserve account. The English transaction bank holds the investment account and principal amortisation reserve account. Based on the DBRS’s private rating of both entities, 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 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.

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 Accounting Partners S.r.l., 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 31 July 2018 when DBRS upgraded its rating of the Class A Notes to AAA (sf) from AA (sf).

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 3.3% and 1.1%, 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 remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A Notes would be expected to remain at AAA (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 remain 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: Shalva Beshia, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 12 August 2013

DBRS Ratings GmbH
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Geschäftsführer: Detlef Scholz
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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.