DBRS Morningstar Confirms Rating on UBI SPV Lease 2016 S.r.l.

DBRS Ratings GmbH (DBRS Morningstar) confirmed its A (sf) rating on the Class A Notes issued by UBI SPV Lease 2016 S.r.l. (the Issuer).

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:

-- Cash collateralisation of the notes, following the repurchase of the portfolio by UBI Leasing S.p.A. (UBI Leasing) on 27 April 2022 (the Repurchase Date);
-- Exposure to the account bank, given that the cash is deposited at Intesa Sanpaolo S.P.A. (ISP) for more than three months, namely from the Repurchase Date until the payment date of 3 August 2022 (the Final Payment Date).

UBI SPV Lease 2016 S.r.l. is a securitisation of commercial lease receivables granted to corporates, small businesses, and individual enterprises originated by UBI Leasing and serviced by ISP, following its acquisition of Unione di Banche Italiane SpA (UBI), the original servicer for the portfolio. The pool was comprised of real estate, vehicle, and equipment lease receivables while the residual value component of the underlying financial lease contracts is not securitised. The transaction closed in July 2016, when the special-purpose vehicle issued one senior class of floating-rate notes and one junior class of variable-return notes, namely the Class A and Class B Notes.

The transaction had an original 18-month revolving period, which was extended first in April 2018 for an additional 18 months then in September 2019 for an additional 21 months. A third amendment was executed in June 2020 when certain structural features were changed while the scheduled end of the revolving period on the May 2021 payment date was maintained. Please refer to https://www.dbrsmorningstar.com/issuers/22018 for additional information.

Following the end of the revolving period, the notes started amortising on the payment date falling in August 2021.

On 27 April 2022, the outstanding portfolio as of 1 April 2022, was repurchased by UBI Leasing, for an amount of EUR 2,229,830,704. This amount was transferred to the transaction account bank at ISP. The outstanding notes are expected to early redeem and the transaction to unwind on the Final Payment Date.

PORTFOLIO PERFORMANCE
Prior to the Repurchase Date, as of the March 2022 cut-off date, delinquencies were low with loans one to three months in arrears representing 0.9% of the outstanding portfolio balance, up from 0.5% as of the March 2021 cut-off date. Loans more than three months in arrears represented 0.2% of the portfolio, down from 1.3% as of the March 2021 cut-off date. The gross cumulative default ratio was equal to 2.4% of the initial portfolio balance (including additional portfolios), up from 1.8% last year.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar did not conduct a loan-by-loan analysis of the remaining pool of receivables, considering the portfolio has been repurchased on 27 April 2022.

The cash collateralisation of the notes and the exposure of the transaction to the account bank are the main considerations of this rating action.

CREDIT ENHANCEMENT
Overcollateralisation of the outstanding collateral portfolio and the debt service reserve provide credit enhancement. As of the May 2022 payment date, credit enhancement to the Class A Notes was 46.7%, up from 32.5% last year.

The transaction benefits from an amortising debt service reserve, which is available to cover senior fees, expenses, and interest payments on the Class A Notes. The reserve is currently at its target level of EUR 26.1 million, or 2.0% of the Class A Notes outstanding balance, and has no floor.

ISP and BNP Paribas Securities Services SCA/Milan (BNP Milan) act as the transaction’s account bank and payment account bank (together, the Account Banks), respectively. Based on the reference rating of A (low) on the account bank (one notch below DBRS Morningstar’s Long Term Critical Obligation Rating of “A”), the private rating on the payment 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 Banks 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.

Before the repurchase of the portfolio, DBRS Morningstar analysed the transaction structure in Intex DealMaker.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

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/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is the “Master European Structured Finance Surveillance Methodology” (19 May 2022).

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

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.

Given the cash collateralisation of the notes, asset and cash flow analysis were not conducted for this review.

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/381451/global-methodology-for-rating-sovereign-governments.

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: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

The sources of data and information used for this rating include investor reports, and additional information provided by ISP as well as the Repurchase Agreement, Representative of Noteholders Consent Letter, and the Written Resolution provided by Chiomenti Studio Legale.
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 25 June 2021, when DBRS Morningstar confirmed its A (sf) rating on the Class A Notes.

The lead analyst responsibilities for this transaction have been transferred to Pascale Kallas.

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

To assess the impact of changing the transaction parameters on the rating, DBRS Morningstar considered the following stress scenarios:

-- A one-notch downgrade to the account bank.
-- A two-notches downgrade to the account bank.

DBRS Morningstar concludes that a hypothetical downgrade to the account bank rating by one or two notches, ceteris paribus, would not impact the current rating.

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. 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.

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

Lead Analyst: Pascale Kallas, Senior Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 28 July 2016

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The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

-- Legal Criteria for European Structured Finance Transactions (29 July 2021), https://www.dbrsmorningstar.com/research/382171/legal-criteria-for-european-structured-finance-transactions.
-- Master European Structured Finance Surveillance Methodology (19 May 2022), https://www.dbrsmorningstar.com/research/397033/master-european-structured-finance-surveillance-methodology.
-- Operational Risk Assessment for European Structured Finance Servicers (16 September 2021), https://www.dbrsmorningstar.com/research/384513/operational-risk-assessment-for-european-structured-finance-servicers.
-- Rating European Consumer and Commercial Asset-Backed Securitisations (29 October 2021), https://www.dbrsmorningstar.com/research/387042/rating-european-consumer-and-commercial-asset-backed-securitisations.
-- Rating European Structured Finance Transactions Methodology (19 May 2022), https://www.dbrsmorningstar.com/research/397034/rating-european-structured-finance-transactions-methodology.
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2021), https://www.dbrsmorningstar.com/research/384920/interest-rate-stresses-for-european-structured-finance-transactions.
-- Rating CLOs Backed by Loans to European SMEs (2 May 2022), https://www.dbrsmorningstar.com/research/396215/rating-clos-backed-by-loans-to-european-smes.
-- Rating CLOs and CDOs of Large Corporate Credit (26 January 2022), https://www.dbrsmorningstar.com/research/391226/rating-clos-and-cdos-of-large-corporate-credit.
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (17 May 2022), https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

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

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