DBRS Morningstar Takes Rating Actions on Alba 10 SPV S.r.l.

DBRS Ratings GmbH (DBRS Morningstar) took the following rating actions on the notes issued by Alba 10 SPV S.r.l. (the Issuer):

-- Confirmed the Class A1 Notes at AAA (sf)
-- Upgraded the Class A2 Notes to AAA (sf) from AA (high) (sf)
-- Upgraded the Class B Notes to AA (high) (sf) from A (high) (sf)
-- Upgraded the Class C Notes to A (low) (sf) from BBB (sf)

The ratings on the Class A1 and Class A2 Notes address the timely payment of interest and ultimate payment of principal on or before the legal final maturity date in October 2038. The ratings on the Class B and Class C Notes address the ultimate payment of interest and ultimate payment of principal on or before the legal final maturity date.

The rating actions follow an annual review of the transaction and are based on the following analytical considerations:

-- Portfolio performance, in terms of delinquencies, defaults and losses as of the October 2019 payment date;
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables; and
-- Current available credit enhancement to the notes to cover the expected losses at their respective rating levels.

Alba 10 SPV S.r.l. is a securitisation of lease receivables granted by Alba Leasing S.p.A. to corporates, small businesses and individual enterprises with their registered offices in Italy. The transaction closed in November 2018, when the SPV issued two senior classes of floating-rate notes (the Class A1 and Class A2 Notes), two mezzanine classes of floating-rate notes (the Class B and Class C Notes), and one class of junior notes, , (the Class J Notes).

PORTFOLIO PERFORMANCE

The portfolio is performing within DBRS Morningstar’s initial expectations. As of September 2019, loans that were two- to three-months in arrears represented 0.1% of the current outstanding portfolio balance, whereas the 90+ delinquency ratio was 0.0%. The gross cumulative default ratio stood at 1.1% of the initial outstanding portfolio balance.

PORTFOLIO ASSUMPTIONS
DBRS Morningstar conducted a loan-by-loan analysis of the outstanding pool of receivables and has updated its base case PD and LGD assumptions to 8.6% and 62.3%, respectively.

CREDIT ENHANCEMENT
Credit enhancement available to the rated notes increases as the transaction continues to deleverage. Credit enhancement is provided by overcollateralisation of the outstanding collateral portfolio and does not include the debt service reserve. As of the October 2019 payment date, credit enhancement available to the Class A1, Class A2, Class B and Class C Notes was 70.4%, 44.5%, 27.7% and 17.9%, respectively, up from 57.0%, 36.0%, 22.3% and 14.4%, respectively, at the DBRS Morningstar initial rating date.

The transaction structure also benefits from an amortising cash reserve (the Debt Service Reserve), which provides liquidity support and is available to cover any shortfall on senior fees, expenses and interest on the rated notes. The reserve is currently at its target level of EUR 6.7 million, which accounts for 1.0% of the rated notes outstanding balance.

Citibank NA, Milan branch acts as the account bank for the transaction. Based on the private rating of Citibank NA, Milan branch, the downgrade provisions outlined in the transaction documents, and structural mitigants, DBRS Morningstar considers the risk arising from the exposure to the account bank to be consistent with the rating assigned to the notes, as described in DBRS Morningstar'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 ratings is the “Master European Structured Finance Surveillance Methodology”. DBRS Morningstar 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 “Global Methodology for Rating Sovereign Governments” at: https://www.dbrs.com/research/350410/global-methodology-for-rating-sovereign-governments.

The sources of data and information used for these ratings include payment and investor reports provided by Securitisation Services S.p.A., servicer reports provided by Alba Leasing S.p.A. and loan-level data provided by the European DataWarehouse GmbH.

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

At the time of the initial rating, 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.

This is the first rating action since the initial rating date on 29 November 2018.
The lead analyst responsibilities for this transaction have been transferred to Daniele Canestrari.

Information regarding DBRS Morningstar 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 Morningstar considered the following stress scenarios as compared with the parameters used to determine the rating (the Base Case):

-- DBRS Morningstar 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 receivables are 8.6% and 62.3%, 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. Taking the Class A1 Notes as example, if the LGD increases by 50%, the rating of the Class A1 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 A1 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 A1 Notes would be expected to remain at AAA (sf).

Class A1 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)

Class A2 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 AA (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (low) (sf)

Class B Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD, expected rating of AA (high) (sf)
-- 50% increase in PD, expected rating of AA (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf)

Class C Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (low) (sf)
-- 50% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD, expected rating of A (low) (sf)
-- 50% increase in PD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of 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: 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: Daniele Canestrari, Financial Analyst
Rating Committee Chair: David Lautier, Senior Vice President
Initial Rating Date: 29 November 2018

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
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Interest Rate Stresses for European Structured Finance Transactions
-- Rating CLOs and CDOs of Large Corporate Credit
-- Rating CLOs Backed by Loans to European SMEs

A description of how DBRS Morningstar 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 [email protected].