Press Release

DBRS Morningstar Upgrades Rating on Valsabbina SME SPV S.r.l.

Structured Credit
July 16, 2021

DBRS Ratings GmbH (DBRS Morningstar) upgraded its rating on the Class A Notes issued by Valsabbina SME SPV S.r.l. (the Issuer) to AA (low) (sf) from A (low) (sf).

The rating of the Class A Notes addresses the timely payment of interest and the ultimate payment of principal on or before the legal final maturity date in July 2060.

The upgrade 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 April 2021 payment date.
-- Base case probability of default (PD), and recovery rates on the revolving pool of receivables.
-- The current credit enhancement available to the Class A Notes to cover the expected losses at the AA (low) (sf) rating level.
-- Current economic environment and an assessment of sustainable performance, as a result of the Coronavirus Disease (COVID-19) pandemic.

The transaction is a cashflow securitisation collateralised by a portfolio of performing mortgage and non-mortgage loans to Italian small and medium-size enterprises (SMEs), entrepreneurs, artisans, and producer families. The loans were mainly granted by Banca Valsabbina S.C.p.A. (Banca Valsabbina), but also by Credito Veronese S.p.A., before being merged into Banca Valsabbina in 2012 (0.3% of the total initial portfolio).

The transaction included a 24-month revolving period, initially scheduled to end on the July 2021 payment date (included), during which time Banca Valsabbina could sell new receivables to the Issuer subject to certain conditions and limitations. Following an early revolving period termination notice received on 18 June 2021, the revolving period was terminated on 30 June 2021.

As of April 2021, loans two to three months in arrears represented 0.0% of the outstanding portfolio balance, down from 0.2% as of April 2020. The 90+ delinquency ratio was at 0.0%, down from 0.1% in the same period; and the cumulative default ratio remained at 0.0%.

DBRS Morningstar conducted a loan-by-loan analysis on the revolving pool of receivables and updated its portfolio default and recovery assumptions at the AA (low) (sf) rating level to 43.4% and 31.5%, respectively, from 51.1% and 28.1% one year ago, both including COVID-19 adjustments. The improved portfolio assumptions resulted from using the current portfolio composition following the end of the revolving period and prompted the upgrade.

The Class A Notes benefit from a total credit enhancement of 37.3% as of the April 2021 payment date, provided by the overcollateralisation of the portfolio and the cash reserve. The credit enhancement has remained unchanged since transaction closing, due to the revolving period.

The transaction includes a cash reserve, which is available to cover senior fees and interest on the Class A Notes. The cash reserve will start amortising from the first payment date after the end of the revolving period, subject to the target level being equal to 1.8% of the outstanding balance of the Class A Notes, up to a floor of 0.5% of the original amount of the Class A Notes. As of the April 2021 payment date, the cash reserve was at its target level of EUR 9.5 million.

BNP Paribas Securities Services S.C.A., Milan branch (BNP Paribas) acts as the transaction account bank. Based on DBRS Morningstar’s private rating of BNP Paribas, the downgrade provisions outlined in the transaction documents, and other mitigating factors 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 Excel-based cashflow 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 payment holidays and delinquencies may continue to increase in the coming months for many SME transactions, some meaningfully. The ratings are based on additional analysis and, where appropriate, 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, 3.9% and 29.9% of the outstanding portfolio balance represented industries classified in the mid-high and high-risk economic sectors, respectively. This led the underlying one-year PDs to be multiplied by 1.5 and 2.0 times, respectively, as per DBRS Morningstar’s “European Structured Credit Transactions’ Risk Exposure to Coronavirus (COVID-19) Effect” commentary released on 18 May 2020, wherein 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 more likely to be affected by the fallout of the pandemic on the economy.

For more details, please see: and

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 18 June 2021. For details, see the following commentaries: and The DBRS Morningstar analysis considered impacts consistent with the moderate scenario in the referenced reports.

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:

For more information regarding the structured finance rating approach 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 can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings 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” (28 June 2021).

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found at:

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.

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 “Rating Sovereign Governments” methodology at: :

The sources of data and information used for this rating include transaction reports provided by Banca Valsabbina and Securitisation Services S.p.A., 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 17 July 2020, when DBRS Morningstar confirmed its A (low) (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):

-- One year base case Probability of Default (PD) Rates used: an annualised one-year base case PD of 7.5% and 3.1% for mortgage and non-mortgage loans, respectively, a 10% increase of the base case and a 20% increase of the base case PD.
-- Recovery Rates used: base case recovery rates of 31.5% at the AA (low) (sf) stress level, a 10% and 20% decrease in the base case recovery rates.

For the Class A Notes, DBRS Morningstar concluded that a hypothetical increase of the base case PD by 20%, ceteris paribus, would lead to a confirmation of the Class A Notes at AA (low) (sf), and a hypothetical decrease of the recovery rate by 20%, ceteris paribus, would also lead to a confirmation of the Class A Notes at AA (low) (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%, ceteris paribus, would lead to a downgrade of the Class A Notes to 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: DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage:

This rating is endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Shalva Beshia, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 19 July 2019

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Tel. +49 (69) 8088 3500

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

-- Rating CLOs Backed by Loans to European SMEs (28 June 2021) and SME Diversity Model v.,
-- Rating CLOs and CDOs of Large Corporate Credit (8 February 2021),
-- Legal Criteria for European Structured Finance Transactions (6 April 2021),
-- Master European Structured Finance Surveillance Methodology (8 February 2021),
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (3 February 2021),
-- Operational Risk Assessment for European Structured Finance Servicers (19 November 2020),
-- Interest Rate Stresses for European Structured Finance Transactions (28 September 2020),
-- European RMBS Insight Methodology (3 June 2021),
-- European RMBS Insight: Italian Addendum (21 December 2020),
-- Cash Flow Assumptions for Corporate Credit Securitizations (8 February 2021),

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