Press Release

DBRS Morningstar Assigns A (low) (sf) Rating to Impresa TWO S.r.l.

Structured Credit
November 11, 2019

DBRS Ratings GmbH (DBRS Morningstar) assigned an A (low) (sf) rating to the EUR 7,746,400,000 Class A Asset-Backed Floating-Rate Notes due December 2061 (the Class A Notes) issued by Impresa TWO S.r.l. (the Issuer or Impresa TWO).

The rating on the Class A Notes addresses the timely payment of interest and ultimate payment of principal on or before the final maturity date in December 2061. The Issuer also issued EUR 3,319,908,880 Class B Asset-Backed Fixed-Rate and Variable Return Notes due December 2061 (together with the Class A Notes, the Notes), which were not rated by DBRS Morningstar.

Impresa TWO is a cash flow securitisation collateralised by a portfolio of performing mortgage and non-mortgage loans to Italian small and medium-sized enterprises (SMEs), entrepreneurs, artisans and producer families. The loans were granted by Unicredit S.p.A. (Unicredit or the Originator).

The initial valuation date when the economic effect of the portfolio transfer started was 1 October 2019. As of the initial valuation date, the portfolio consisted of 103,340 loans extended to 79,512 borrowers, with an aggregate par balance of EUR 11.06 billion, of which EUR 185.00 million were in arrears for less than 30 days.

The transaction includes a 24-month revolving period, scheduled to end in January 2022 (excluded), during which time the Originator may sell new receivables (i.e., further portfolios) to the Issuer subject to certain conditions and limitations. During the revolving period, the purchase of new receivables will be funded through principal collections and excess spread to make up for any defaulted loans. The revolving period will end prematurely if certain events occur, including the cumulative gross default rate exceeding dynamic limits, the inability to fully replenish the cash reserve (for two consecutive payment dates) and the insolvency of the Originator.

The transaction includes a cash reserve, which will be funded on the first payment dates through interest collections and it will be available to cover senior fees and interest on the Class A Notes. The cash reserve, which will start amortising on the first payment date following the end of the revolving period, has a target level of 1.5% of the outstanding balance of the Class A Notes and a floor of 0.75% of the original balance of the Class A Notes.

The deal is structured with separate waterfalls for the payment of interest and principal on the Notes and a principal deficiency ledger mechanism whereby provisioning occurs when a loan is classified as defaulted (i.e., classified as “sofferenza”, unlikely to pay by revoked overdraft facilities or in arrears by 365 days or more). In addition, when the cumulative gross default ratio exceeds 10.0%, the transaction will start trapping all excess spread to amortise the Class A Notes.

The Class A Notes benefit from a total credit enhancement of 31.0% that is provided by the overcollateralisation of the portfolio and the cash reserve.

DBRS Morningstar based its analysis on the worst-case portfolio created in line with the purchase conditions and the common and specific criteria for further portfolio.

The initial portfolio consists of senior unsecured loans representing 75.1% of the outstanding portfolio balance and mortgage-backed loans representing the remaining 24.9%. The purchase conditions limit the portion of mortgage-backed loans in the portfolio to a minimum of 12.0% at the end of the revolving period. DBRS Morningstar’s analysis was based on the minimum portion of mortgage loans in the portfolio.

The initial portfolio exhibits a moderate geographic concentration in the Italian region of Lombardy, which accounts for 25.6% of the portfolio outstanding balance. The portfolio is further concentrated in the regions of Emilia-Romagna and Lazio, accounting for 13.9% and 12.3%, respectively.

The initial portfolio exhibits a moderate sector concentration. The top three sector exposures, according to DBRS Morningstar’s industry classifications, are Building & Development, Business Equipment & Services and Food Products, which represent 25.3%, 14.4% and 7.8% of the outstanding portfolio balance, respectively. For the worst-case portfolio analysis, DBRS Morningstar assumed the largest industry to be 28.3%, in line with the replenishment conditions. The initial portfolio has a moderate borrower concentration, as the largest and top five- and ten-largest borrower groups account for 1.5%, 5.8% and 9.4% of the outstanding portfolio balance, respectively. The purchase conditions limit the exposure to the largest borrower to 1.1%, the top ten borrowers to 10.0% and the top two hundred to 40.0% of the portfolio; these limits were considered in the creation of the DBRS Morningstar worst-case portfolio.

Unicredit acts as the servicer and Securitisation Services S.p.A. acts as the backup servicer facilitator for this transaction. In case of the servicer’s appointment termination or the downgrade of the DBRS Morningstar public or private rating of UniCredit below BBB (low), or equivalent level by the other rating agencies (i.e., minimum ratings), the Issuer will appoint a servicer substitute with the help of the backup servicer facilitator.

DBRS Morningstar determined its rating based on the principal methodology and the following analytical considerations:
-- The probability of default (PD) for the portfolio was determined using the historical performance information supplied. DBRS Morningstar assumed a weighted-average annualised PD of 4.0%.
--The assumed weighted-average life (WAL) of the portfolio was 3.15 years.
-- The PDs and WAL were used in the DBRS Morningstar Diversity Model to generate the hurdle rate for the assigned rating.
-- The recovery rate was determined by considering the market value declines for Europe, the security level and collateral type. Recovery rates of 39.4% and 15.9% were used for the secured and unsecured loans, respectively, at the A (low) (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 rating 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.

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 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 this rating include the originator, Unicredit S.p.A., and indirectly, the arranger, Unicredit Bank AG.

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 this rating 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.

This rating concerns a newly issued financial instrument. This is the first DBRS Morningstar rating 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 Rates Used: Base case PD of 4.0%, a 10% and 20% increase on the base case PD.
-- Recovery Rates Used: Base case recovery rate of 18.8% at the A (low) stress level, a 10% and 20% 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.

DBRS Morningstar concludes that a hypothetical increase of the base case PD by 20% or a hypothetical decrease of the recovery rate by 20%, ceteris paribus, would lead to a downgrade of the Class A Notes to BBB (sf). A scenario combining both an increase in the PD by 10% and a decrease in the recovery rate by 10% would lead to a downgrade of the Class A Notes to BBB (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 GmbH are subject to EU and US regulations only.

Lead Analyst: Ilaria Maschietto, Assistant Vice President
Rating Committee Chair: Carlos Silva, Senior Vice President
Initial Rating Date: 11 November 2019

DBRS Ratings GmbH
Neue Mainzer Straße 75
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:

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

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].