Press Release

DBRS Morningstar Assigns Ratings to Civitas SPV S.r.l. – Series 2019-1

Structured Credit
October 17, 2019

DBRS Ratings Limited (DBRS Morningstar) assigned ratings to the EUR 320,000,000 Series 2019-1-A Asset-Backed Floating Rate Notes due October 2055 (the Class A Notes) and the EUR 50,000,000 Series 2019-1-B Asset-Backed Floating Rate Notes due October 2055 (the Class B Notes) issued by Civitas SPV S.r.l. under the Series 2019 (the Issuer or Civitas 2019) as follows:

-- Class A Notes at A (high) (sf)
-- Class B Notes at BBB (low) (sf)

The rating on the Class A Notes addresses the timely payment of interest and ultimate repayment of principal on or before the final maturity date in October 2055. The rating on the Class B Notes addresses the timely payment of interest and ultimate repayment of principal on or before the final maturity date, in accordance with the transaction documentation. The Issuer also issued EUR 88,500,000 Series 2019-1-C Asset Backed Notes due October 2055, which were not rated by DBRS Morningstar.

Civitas 2019 is a cash flow securitisation collateralised by a portfolio of performing loans to small and medium-sized enterprises (SME), entrepreneurs, artisans and producer families based in Italy. The loans were granted by Banca di Cividale S.C.p.A. (Banca di Cividale).

The valuation date, defined as when the portfolio was transferred from the Originator to the Issuer, was 9 October 2019. As of the valuation date, the portfolio consisted of 3,072 loans extended to 2,488 borrowers. At that time, the portfolio’s aggregate par balance was EUR 450.33 million.

The structure allows interest on the Class B Notes to be paid before the principal of the Class A Notes, but it incorporates triggers on the performance of the portfolio to defer these interest payments after the full redemption of the Class A Notes. In a post-enforcement scenario, the Class A Notes rank in priority to the interest and principal on the Class B Notes.

The transaction includes a cash reserve of EUR 7.4 million, which is available to cover senior fees and interest on the Class A Notes and, if no deferral trigger is breached, the Class B Notes. The cash reserve will amortise during the life of the transaction at an amount equal to 2.0% of the Class A and Class B Notes. When the deferral trigger is breached and the Class A Notes are still outstanding, the balance of the cash reserve will be equal to 2.0% of the Class A Notes only.

The Class A and the Class B Notes benefit from a total credit enhancement of 30.6% and 19.5%, which is provided by the overcollateralisation of the portfolio and the cash reserve.

The transferred portfolio consists of senior unsecured loans representing 23.1% of the outstanding portfolio balance and mortgage-backed loans representing the majority of the portfolio at 76.9%. Historical performance data indicates that mortgage-backed loans have a higher historical probability of default (PD) than unsecured loans. This data is in line with other SME loan originators. The higher PD for mortgage loans is compensated by higher recoveries expectations compared with unsecured loans.

The portfolio is mainly concentrated in the Italian regions of Friuli-Venezia Giulia (61.7% of the portfolio outstanding balance), Veneto (33.6%) and Lombardy (2.3%). This reflects the bank’s concentrated business activity in these regions.

The portfolio exhibits a moderate sector concentration. The top three sector exposures, according to DBRS Morningstar’s industry classifications, are Building & Development, Farming & Agriculture and Lodging & Casinos, which represent 36.0%, 15.6% and 10.2% of the outstanding portfolio balance, respectively. The portfolio has a significant borrower concentration, as the largest borrower group accounts for 2.3% of the outstanding portfolio balance and the largest five and ten borrower groups account for 8.9% and 14.6%, respectively.

Banca di Cividale acts as servicer and Securitisation Services S.p.A. acts as the backup servicer facilitator for this transaction. In case of the servicer’s appointment termination, the Issuer appoints a substitute of the servicer with the help of the backup servicer facilitator within 30 business days. To account for the absence of backup servicer arrangements at closing, DBRS Morningstar has factored a commingling loss in its cash flow analysis, in line with other Italian SME collateralised loan obligation (CLO) transactions.

The ratings are based on DBRS Morningstar’s review of the following analytical considerations:
-- The PD for the portfolio was determined using the historical performance information supplied. DBRS Morningstar assumed an annualised PD of 7.1% for mortgage and 4.4% for non-mortgage loans.
--The assumed weighted-average life (WAL) of the portfolio was 5.5 years.
-- The PDs and WAL were used in the DBRS Morningstar Diversity Model to generate the hurdle rate for the assigned ratings.
-- The recovery rate was determined by considering the market value declines for Europe, the security level and collateral type. Recovery rates of 67.1% and 16.3% were used for the secured and unsecured loans, respectively, at the A (high) (sf) rating level.
-- The break-even rates for the interest rate stresses and default timings were determined using DBRS Morningstar’s cash flow tool.

All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is: “Rating CLOs Backed by Loans to European SMEs”.

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

Other methodologies referenced in this transaction are listed at the end of this press release.

These may be found on at:

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 “Global Methodology for Rating Sovereign Governments” at:

The sources of data and information used for these ratings include the originator Banca di Cividale, and indirectly, the arranger, FISG S.r.l.

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

DBRS Morningstar was supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS Morningstar considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.

DBRS Morningstar 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 Morningstar ratings on this financial instrument.

Information regarding DBRS Morningstar ratings, including definitions, policies and methodologies, is available on

To assess the impact of changing the transaction parameters on the rating, DBRS Morningstar considered the following stress scenarios, as compared to the parameters used to determine the rating (the Base Case):

-- PD Used: Base case PD of 7.1% for mortgage loans and 4.4% for non-mortgage loans, a 10% and 20% increase on the base case PD.
-- Recovery Rates Used: Base case recovery rate of 50.0% at the A (high) (sf) rating level, and of 53.6% at the BBB (low) (sf), a 10% and 20% decrease in the base case recovery rate.

DBRS Morningstar concludes that a hypothetical increase of the base case PD by 20%, ceteris paribus, would lead to a confirmation of the Class A Notes at A (high) (sf), and a downgrade of the Class B Notes to BB (high) (sf). A hypothetical decrease of the base case recovery rate by 20%, ceteris paribus, would lead to a confirmation of the Class A Notes at A (high) (sf), and a downgrade of the Class B Notes to BB (high) (sf). A scenario combining both an increase in the base case PD by 10% and a decrease in the base case recovery rate by 10% would lead to a confirmation of Class A Notes at A (high) (sf), and a downgrade of the Class B Notes to BB (high) (sf).

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see:

Ratings assigned by DBRS Ratings Limited are subject to EU and US regulations only.

Lead Analyst: Mudasar Chaudhry, Senior Vice President
Rating Committee Chair: Gareth Levington, Managing Director
Initial Rating Date: 17 October 2019

DBRS Ratings Limited
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London EC3M 3BY United Kingdom
Registered and incorporated under the laws of England and Wales: Company No. 7139960

The rating methodologies used in the analysis of this transaction can be found at:

-- Rating CLOs Backed by Loans to European SMEs
-- Legal Criteria for European Structured Finance Transactions
-- Interest Rate Stresses for European Structured Finance Transactions
-- Cash Flow Assumptions for Corporate Credit Securitizations
-- Rating CLOs and CDOs of Large Corporate Credit
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Operational Risk Assessment for European Structured Finance Originators
-- Operational Risk Assessment for European Structured Finance Servicers

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at:

For more information on this credit or on this industry, visit or contact us at [email protected].