Press Release

DBRS Morningstar Confirms Rating of Brera Sec. S.r.l. (SME)

Structured Credit
December 11, 2020

DBRS Ratings GmbH (DBRS Morningstar) confirmed its A (high) (sf) rating of the Class A Notes issued by Brera Sec. S.r.l. (SME) (the Issuer).

The rating addresses the timely payment of interest and the ultimate payment of principal by the final maturity date in October 2070.

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 October 2020 payment date.
-- The one-year base case probability of default (PD) and default and recovery rates on the receivables.
-- Current available credit enhancement to the Class A Notes to cover the expected losses at the A (high) (sf) rating level.
-- Current economic environment and an assessment of sustainable performance, as a result of the Coronavirus Disease (COVID-19) pandemic.

Brera Sec S.r.l (SME) is a cash flow securitisation collateralised by a portfolio of secured and unsecured loans granted to Italian small and medium-size enterprises (SMEs), entrepreneurs, artisans, and producer families by Intesa Sanpaolo S.p.A. (Intesa Sanpaolo), Banco di Napoli S.p.A. (Banco di Napoli), Cassa di Risparmio di Bologna S.p.A. (CR Bologna), and Banca CR Firenze S.p.A. (CR Firenze). Banco di Napoli, CR Bologna, and CR Firenze were incorporated into Intesa Sanpaolo between November 2018 and February 2019. Therefore, Intesa Sanpaolo currently covers all key roles in the securitisation, including servicer and account bank. The transaction follows the standard structure under Italian securitisation law and closed in December 2018.


As of the September 2020 cut-off date, delinquencies were low, with loans two to three months and 90+ days in arrears representing 0.1% and 0.9% of the outstanding portfolio balance, respectively, stable from the September 2019 cut-off date. However, a significant portion of the portfolio currently has payment holidays, as further detailed in the following paragraphs. The cumulative gross default ratio was 1.0% as of the September 2020 cut-off, up from 0.3% last year.


DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of receivables and updated its lifetime default and recovery assumptions on the outstanding portfolio to 38.1% and 44.1%, respectively, at the A (high) (sf) rating level. The base case one-year PD for secured and unsecured loans has been maintained at 5.2% and 1.9%, respectively; however, following coronavirus-related adjustments and considering the different secured/unsecured loans mix resulting from natural portfolio amortisation, DBRS Morningstar updated the weighted-average base case one-year PD to 4.7%.


Overcollateralisation of the outstanding collateral portfolio provides credit enhancement to the Class A Notes. As of the October 2020 payment date, credit enhancement to the Class A Notes was 59.7%, showing a notable increase from 44.7% as of the October 2019 payment date.

The transaction structure benefits from an amortising cash reserve, which provides liquidity support and is available to cover shortfalls on senior fees, expenses, and interest payments on the Class A Notes. The reserve, which has no floor, is currently at its target level of EUR 23.5 million, or 2.0% of the Class A Notes outstanding balance. Upon breach of a cash trapping condition (based on gross cumulative defaults), an additional cash reserve would be funded through the regular priority of payment in order to trap all the excess spread.

Intesa Sanpaolo acts as the account bank for the transaction. Based on the account bank reference rating of Intesa Sanpaolo at A (low), one notch below its DBRS Morningstar Long-Term Critical Obligations Rating of “A”, the downgrade provisions outlined in the transaction documents, and structural mitigants inherent in the transaction structure, DBRS Morningstar 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 Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.
DBRS Morningstar analysed the transaction structure in its proprietary cash flow engine.

The Coronavirus Disease (COVID-19) and the resulting isolation measures have caused an economic contraction, leading to sharp increases in unemployment rates and income reductions for many borrowers. DBRS Morningstar anticipates that delinquencies may continue to increase in the coming months for many SME transactions, some meaningfully. The rating is based on additional analysis and adjustments to expected performance as a result of the global efforts to contain the spread of the coronavirus.

For this transaction, DBRS Morningstar increased the expected default rate for obligors in certain industries based on their perceived exposure to the adverse disruptions of the coronavirus. As per DBRS Morningstar’s assessment, 23.0% of the outstanding portfolio balance belonged to industries classified in mid-high- and high-risk economic sectors, which leads to the underlying one-year PDs to be multiplied by 1.5 and 2.0, respectively, as per the commentaries mentioned below. In addition, DBRS Morningstar conducted additional sensitivity analysis to determine that the transaction benefits from sufficient liquidity support to withstand high levels of payment holidays in the portfolio. Reported payment holidays were considered in the asset and cash flow analysis. As of 30 September 2020, around 31.0% of the current portfolio balance benefitted from a coronavirus-related payment moratorium.

On 16 April 2020, the DBRS Morningstar Sovereign group released a set of macroeconomic scenarios for the 2020-22 period in select economies. These scenarios were last updated on 2 December 2020. For details, see the following commentaries: and The DBRS Morningstar analysis considered impacts consistent with the moderate scenario in the referenced reports.

On 18 May 2020, DBRS Morningstar released its “European Structured Credit Transactions’ Risk Exposure to Coronavirus (COVID-19) Effect” commentary, where DBRS Morningstar discussed the overall risk exposure of the SME sector to the coronavirus and provided a framework for identifying the transactions that are more at risk and likely to be affected by the fallout of the pandemic on the economy. For more details, please see: and

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release:

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release:


A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at:


All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is the “Rating CLOs Backed by Loans to European SMEs” (30 September 2020).

DBRS Morningstar has applied the principal methodology consistently and conducted a review of the transaction in accordance with the surveillance section of 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 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 Morningstar Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at:

The sources of data and information used for this rating include investor reports provided by Banca Finanziaria Internazionale S.p.A., servicer reports and additional information provided by Intesa Sanpaolo, and loan-level data provided by the European DataWarehouse GmbH.

DBRS Morningstar did not rely upon third-party due diligence in order 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 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.

The last rating action on this transaction took place on 13 December 2019, when DBRS Morningstar confirmed its A (high) (sf) rating on the Class A Notes.
Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies is available at

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):

-- PD Rates Used: Base case PD of 5.2% for secured loans and of 1.9% for unsecured loans, a 10% and 20% increase of the base case PD.

-- Recovery Rates Used: Base case recovery rates of 44.1% at the A (high) (sf) rating level, a 10% and 20% decrease in the base case recovery rates.

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 confirmation of the Class A Notes at A (high) (sf). Similarly, a scenario combining both an increase in the PD by 10% and a decrease in the recovery rate by 10% would lead to a confirmation of the Class A Notes at A (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 U.S. regulations only.

Lead Analyst: Daniele Canestrari, Senior Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 14 December 2018

DBRS Ratings GmbH
Neue Mainzer Straße 75
60311 Frankfurt am Main – Deutschland
Tel. +49 (69) 8088 3500

Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

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

-- Master European Structured Finance Surveillance Methodology (22 April 2020)
-- Rating CLOs Backed by Loans to European SMEs (30 September 2020) and SME Diversity Model v2.4.1.0
-- Rating CLOs and CDOs of Large Corporate Credit (21 July 2020)
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda (21 September 2020)
-- Cash Flow Assumptions for Corporate Credit Securitizations (21 July 2020)
-- Legal Criteria for European Structured Finance Transactions (11 September 2019)
-- Operational Risk Assessment for European Structured Finance Servicers (19 November 2020),
-- Interest Rate Stresses for European Structured Finance Transactions (28 September 2020)

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