Press Release

DBRS Morningstar Confirms Rating on Credico Finance 18 S.r.l.

Structured Credit
December 03, 2021

DBRS Ratings GmbH (DBRS Morningstar) confirmed its AAA (sf) rating on the Class A2 Notes issued by Credico Finance 18 S.r.l.

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

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 2021 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 A2 Notes to cover the expected losses at the AAA (sf) rating level.
-- Current economic environment and an assessment of sustainable performance, as a result of the Coronavirus Disease (COVID-19) pandemic.

Credico Finance 18 S.r.l. (CF18) is a multi-originator securitisation backed by a portfolio of secured and unsecured loans granted by 14 Italian cooperative and independent banks (BCC, or Banca di Credito Cooperativo) to Italian small and medium-size enterprises (SMEs), entrepreneurs, artisans, and producer families. All the BCCs belong to the ICCREA Banca S.p.A. (ICCREA) network. ICCREA is the operating bank in the transaction and is the entity responsible for supporting the activities of the BCCs in terms of payment services, funding techniques, and regulatory and administrating activities. Each BCC services its sub-portfolio, with Zenith Service S.p.A. acting as the backup servicer.

As of the August 2021 cut-off date, delinquencies were low, with loans two to three months and 90+ days in arrears representing 0.1% and 0.3% of the outstanding portfolio balance, respectively, stable from the August 2020 cut-off date. However, a portion of the portfolio is still in payment holiday, as further detailed in the following paragraphs. Cumulative defaults are insignificant, with only one loan classified as default so far.

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 59.1% and 39.4%, respectively, at the AAA (sf) rating level. The base case one-year PD for the mortgage and nonmortgage loans has been maintained at 5.5% and 3.0%, respectively; however, following adjustments related to the Coronavirus Disease (COVID-19) and considering the updated mortgage/nonmortgage mix, the weighted-average base case one-year PD has been updated to 6.3%.

Overcollateralisation of the outstanding collateral portfolio and the cash reserve (partially) provides credit enhancement to the Class A2 Notes. As of the October 2021 payment date, credit enhancement to the Class A2 Notes was 62.8%, up from 52.7% as of the October 2020 payment date. Following the full amortisation of the Class A1 Notes in January 2021, the Class A2 Notes are now the most senior notes outstanding.

The transaction structure benefits from 14 nonamortising cash reserves (one for each BCC), which provide liquidity support and are available to cover senior fees and interest payments on the Class A2 Notes. Furthermore, if the available funds are not sufficient to cover the scheduled payment, each cash reserve can be used to repay principal on the Class A2 Notes, up to an amount equal to the difference between (1) the actual cash reserve available at the relevant payment date and (2) 3.5% of the initial balance of the Class A1 and A2 Notes (hence the cash reserves provide actual credit enhancement to the rated notes). As of the October 2021 payment date, the aggregate cash reserve was at its target level of EUR 11.6 million, which accounts for 4.0% of the Class A1 and A2 Notes’ initial balance.

BNP Paribas Securities Services, Milan branch acts as the account bank for the transaction. Based on the private rating of the account bank, 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 A2 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 cash flow engine.

The Coronavirus Disease (COVID-19) and the resulting isolation measures have caused an immediate economic contraction, leading in some cases to 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. The ratings are based on additional analysis 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, 34.3% of the outstanding portfolio balance belonged to industries classified in mid-high- and high-risk economic sectors, respectively, which leads to the underlying one-year PDs being multiplied by 1.5 and 2.0, respectively, as per the commentaries mentioned below.

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. As of 30 September 2021, around 17.6% of the current portfolio balance was still under a payment moratorium. The figure shows a notable decrease from 31 August 2020, when 49.3% of the pool was in payment holiday.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. These scenarios were last updated on 8 September 2021. DBRS Morningstar analysis considered impacts consistent with the baseline scenario in the below referenced report. For details, see the following commentaries: and

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

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 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.

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 DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report:

The sources of data and information used for this rating include investor reports provided by Zenith Service S.p.A., servicer reports and additional performance information provided by ICCREA, 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 22 January 2021, when DBRS Morningstar discontinued its AAA (sf) rating on the Class A1 Notes, following their full repayment. Prior to that, on 3 December 2020, DBRS Morningstar confirmed its AAA (sf) rating on the Class A1 and Class A2 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 5.5% for mortgage loans and of 3.0% for nonmortgage loans, a 10% and 20% increase of the base case PD.
-- Recovery Rates Used: Base case recovery rates of 39.4% at the AAA (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%, ceteris paribus, would lead to a confirmation of the Class A2 Notes at AAA (sf). A hypothetical decrease of the recovery rate by 20%, ceteris paribus, would lead to a confirmation of the Class A2 Notes at AAA (sf). A scenario combining both an increase in the PD by 10% and a decrease in the recovery rate by 10% would also lead to a confirmation of the Class A Notes at AAA (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: Daniele Canestrari, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 5 December 2019

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 (8 February 2021),
-- Rating CLOs Backed by Loans to European SMEs (28 June 2021) and SME Diversity Model v2.5.0.0,
-- Rating CLOs and CDOs of Large Corporate Credit (8 February 2021),
-- 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),
-- Legal Criteria for European Structured Finance Transactions (29 July 2021),
-- Operational Risk Assessment for European Structured Finance Servicers (16 September 2021),
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2021),
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (3 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 [email protected].