Press Release

DBRS Morningstar Places Nine Ratings of Seven European Structured Finance Transactions Under Review Following an Asset Model Error

Structured Credit, Consumer/Commercial Leases

April 14, 2021

DBRS Ratings GmbH (DBRS Morningstar) placed the following ratings Under Review with Negative Implications:

Belgian Lion NV/SA. Compartment Belgian Lion SME III
-- Class A1 Notes rated AAA (sf)
-- Class A2 Notes rated AAA (sf)

Civitas SPV S.r.l. – Series 2019-1
-- Class B Notes rated BBB (low) (sf)

IM BCC Capital 1, FT
-- Class A Notes rated AA (sf)

Fanes S.r.l. – Series 2020-1
-- Class A Notes rated A (sf)

DBRS Morningstar placed the following ratings Under Review with Positive Implications:

IM Sabadell PYME 11, FT
-- Series B Notes rated B (high) (sf)

CaixaBank PYMES 12, FT
-- Series A Notes rated AA (low) (sf)
-- Series B Notes rated B (low) (sf)

abc SME Lease Germany S.A., acting in respect of its Compartment 6
-- Class B Notes rated A (high) (sf)

DBRS Morningstar also rates notes in these transactions that it did not place Under Review and are therefore not listed above. Please refer to www.dbrsmorningstar.com for more information.

KEY RATING DRIVERS AND CONSIDERATIONS
DBRS Ratings Limited and DBRS Ratings GmbH identified an implementation inconsistency in its SME Diversity Model version 2.4.2.0 (the Model) that is described in its “Rating CLOs Backed by Loans to European SMEs” methodology, last published in September 2020. The Model is used to assign ratings in European Structured Credit, European ABS, and European Covered Bonds.

The aim of the SME Diversity Model is to produce stressed default rates for use in a cash flow tool that tests specific tranches’ or notes’ ability to withstand stress assumptions at each rating level. The inconsistency relates to the Model’s results being dependent on how the analysed portfolio is sorted, which can cause unexpected variations in the stressed lifetime default rates for a given pool of credits. DBRS Morningstar expects that the affected ratings could either be up to two notches higher or lower following its correction of the Model. The Under Review rating actions do not reflect the performance of the transactions and are solely the result of the correction of such inconsistency. Ratings that are Under Review can also be confirmed at the end of the review period.

For more information, please refer to the 30 March 2021 press release:
https://www.dbrsmorningstar.com/research/376080/dbrs-morningstar-updates-on-european-sme-clo-diversity-model.

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 17 March 2021. For details, see the following commentaries: https://www.dbrsmorningstar.com/research/375376/global-macroeconomic-scenarios-march-2021-update and https://www.dbrsmorningstar.com/research/359903/global-macroeconomic-scenarios-application-to-credit-ratings. The DBRS Morningstar analysis considered impacts consistent with the moderate scenario in the referenced reports.

On 8 May 2020 and on 18 May 2020, DBRS Morningstar published commentaries outlining how the Coronavirus Disease (COVID-19) is likely to affect DBRS Morningstar-rated ABS and Structured Credit transactions, respectively, in Europe. For more details, please see: https://www.dbrsmorningstar.com/research/360734/european-abs-transactions-risk-exposure-to-coronavirus-covid-19-effect and https://www.dbrsmorningstar.com/research/361098/european-structured-credit-transactions-risk-exposure-to-coronavirus-covid-19 effect. Please also see https://www.dbrsmorningstar.com/research/362712/european-structured-finance-covid-19-credit-risk-exposure-roadmap.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at: https://www.dbrsmorningstar.com/research/373262.

Notes:
All figures are in euros unless otherwise noted.

The principal methodologies applicable to the ratings are the “Master European Structured Finance Surveillance Methodology” (8 February 2021) for abc SME Lease Germany S.A., acting in respect of its Compartment 6 and “Rating CLOs Backed by Loans to European SMEs” (30 September 2020) for the other six transactions.

Other methodologies referenced in these transactions are listed at the end of this press release. These may be found at: http://www.dbrsmorningstar.com/about/methodologies.

DBRS Morningstar is undertaking a review and will remove the ratings from this status as soon as it is appropriate.

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: https://www.dbrsmorningstar.com/research/364527/global-methodology-for-rating-sovereign-governments.

The sources of data and information used for these rating actions is solely the potential impact of the correction of the Model error. DBRS Morningstar reviews and ratings are under regular surveillance.

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

At the time of the initial rating for all seven transactions, DBRS Morningstar was supplied with one or more 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.

The last rating action on Belgian Lion NV/SA. Compartment Belgian Lion SME III took place on 11 December 2020, when DBRS Morningstar confirmed its AAA (sf) ratings on the Class A1 and A2 Notes.

The last rating action on CaixaBank PYMES 12, FT took place on 18 November 2020, when DBRS Morningstar finalised its provisional ratings of AA (low) (sf) and B (low) (sf) on the Series A and B Notes, respectively.

The last rating action on IM BCC Capital 1, FT took place on 5 October 2020, when DBRS Morningstar confirmed its rating on the Class A Notes at AA (sf) and downgraded its ratings on the Class B and C Notes to BBB (low) (sf) and BB (low) (sf), respectively.

The last rating action on IM Sabadell PYME 11, FT took place on 6 April 2021, when DBRS Morningstar upgraded its rating on the Series A Notes to AA (sf). The last rating action on the Series B Notes took place on 18 December 2020, when DBRS Morningstar upgraded its rating to B (high) (sf).

The lead analyst responsibilities for these four transactions have been transferred to Helvia Meana.

The last rating action on Fanes S.r.l. – Series 2020-1 took place on 12 June 2020, when DBRS Morningstar assigned a new rating of A (sf) to the Class A Notes.

The lead analyst responsibilities for this transaction have been transferred to Daniele Canestrari.

The last rating action on abc SME Lease Germany S.A., acting in respect of its Compartment 6 took place on 18 November 2020, when DBRS Morningstar confirmed its AAA (sf) and A (high) (sf) ratings on the Class A and B Notes, respectively.

The last rating action on Civitas SPV S.r.l. – Series 2019-1 took place on 16 October 2020, when DBRS Morningstar confirmed its A (high) (sf) and BBB (low) (sf) ratings on the Class A and B Notes, respectively.

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available on www.dbrsmorningstar.com.

These ratings are Under Review with either Negative or Positive Implications. Generally, the conditions that lead to the assignment of reviews are resolved within a 90-day period. Sensitivity analysis is not applicable.

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage: https://www.fca.org.uk/firms/credit-rating-agencies.

Lead Analyst:
Belgian Lion NV/SA. Compartment Belgian Lion SME III; IM BCC Capital 1, FT; IM Sabadell PYME 11, FT; and CaixaBank PYMES 12, FT: Helvia Meana, Senior Analyst
Civitas SPV S.r.l. – Series 2019-1 and abc SME Lease Germany S.A., acting in respect of its Compartment 6: Daniel Rakhamimov, Assistant Vice President
Fanes S.r.l. – Series 2020-1: Daniele Canestrari, Senior Analyst

Rating Committee Chair:
Alfonso Candelas, Senior Vice President

Initial Rating Dates:
Belgian Lion NV/SA. Compartment Belgian Lion SME III: 12 December 2018
Civitas SPV S.r.l. – Series 2019-1: 17 October 2019
IM BCC Capital 1, FT: 10 December 2018
IM Sabadell PYME 11, FT: 15 December 2017
Fanes S.r.l. – Series 2020-1: 12 June 2020
CaixaBank PYMES 12, FT : 12 November 2020
abc SME Lease Germany S.A., acting in respect of its Compartment 6: 19 November 2019

These ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

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 these transactions can be found at: http://www.dbrsmorningstar.com/about/methodologies.

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrsmorningstar.com/research/278375.

For more information on these credits or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.

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