Press Release

DBRS Morningstar Confirms Rating of Valsabbina SME 3 SPV S.r.l.

Structured Credit
July 29, 2022

DBRS Ratings GmbH (DBRS Morningstar) confirmed its A (high) (sf) rating of the Class A Notes issued by Valsabbina SME 3 SPV S.r.l. (the Issuer).

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 rating confirmation follows an annual review of the transaction and is based on the following analytical considerations:
-- The portfolio performance, in terms of delinquencies, defaults, and losses, as of the April 2022 payment date;
-- The one-year base case probability of default (PD), and default and recovery rates based on the revolving pool of receivables;
-- The current available credit enhancement to the Class A Notes to cover the expected losses at their A (high) (sf) rating level;
-- No revolving termination event have occurred so far; and
-- The 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., which was merged into Banca Valsabbina in 2012.

The transaction includes a 24-month revolving period, scheduled to end in July 2023 (included), during which time Banca Valsabbina may sell new receivables (i.e., further portfolios) to the Issuer subject to certain conditions and limitations. During the revolving period, the purchase of new receivables is funded through principal collections. The revolving period will end prematurely if certain events occur, including the cumulative gross default rate exceeding 2.0%, the inability to fully replenish the cash reserve, and the insolvency of Banca Valsabbina.

As of the April 2022 payment date, loans two to three months in arrears represented 0.01% of the outstanding portfolio balance, up from 0.00% at closing in July 2021. The 90+ delinquency ratio was 0.03% and the cumulative default ratio remained at 0.00% in the same period.

DBRS Morningstar conducted a loan-by-loan analysis of the revolving pool of receivables and maintained its base case PD of 6.5% and 2.7% for mortgage and nonmortgage loans, respectively, following Coronavirus Disease (COVID-19) adjustments.

The Class A Notes benefit from credit enhancement of 30.3%, provided by the subordination of the Class B Notes and the cash reserve. The credit enhancement remains 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 1.41% of the outstanding balance of the Class A Notes, up to a floor of 0.5% of the initial amount of the Class A Notes. As of the April 2022 payment date, the cash reserve was at its target level of EUR 12.5 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.

The coronavirus and the resulting isolation measures had 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 rating is 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 on receivables granted to obligors operating in certain industries based on their perceived exposure to the adverse disruptions of the coronavirus. As per DBRS Morningstar’s assessment, 25% of the outstanding portfolio balance represented industries classified in the high-risk economic sectors. This led the underlying one-year PDs to be multiplied by 1.5 times. DBRS Morningstar also conducted an additional sensitivity analysis to determine that the transaction benefits from sufficient liquidity support to withstand high levels of payment holidays in the portfolio.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. These scenarios were last updated on 29 June 2022. DBRS Morningstar analysis considered impacts consistent with the baseline scenario in the below referenced report. For details, see the following commentaries: and

On 10 February 2022, DBRS Morningstar updated its 18 May 2020 commentary outlining the impact of the Coronavirus Disease (COVID-19) crisis on the performance of DBRS Morningstar-rated structured credit transactions in Europe almost two years on. For more details, please see: and

Social (S) Factors
DBRS Morningstar considered that the presence of loans backed by the FCG Guarantee was a social factor (Social Impact of Product & Services) as outlined within the DBRS Morningstar Criteria – “DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings”. DBRS Morningstar assumed reduced loss severity for the loans which are backed by FCG Guarantee. This is credit positive and impacts the rating, given the reduced loss expectations for guaranteed loans.

There were no Environmental/Governance factor(s) 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:

DBRS Morningstar analysed the transaction structure in its proprietary Excel-based cashflow engine.

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” (10 June 2022).

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.

An asset and a cash flow analysis were both conducted. Due to the inclusion of a revolving period in the transaction, the analysis continues to consider potential portfolio migration based on replenishment criteria set forth in the transaction legal documents.

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 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.

This is the first rating action since the Initial Rating Date.

The lead analyst responsibilities for this transaction have been transferred to Shalva Beshia.

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available at

Sensitivity analysis: 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: one-year base case PD of 4.12%, a 10% and 20% increase on the base case PD.
-- Recovery rates used: base case recovery rate of 45.3% at the A (high) (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 downgrade of the Class A Notes to A (sf), and a hypothetical decrease of the recovery rate by 20%, ceteris paribus, would lead to a downgrade of the Class A Notes to A (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 also lead to a downgrade of the Class A Notes to A (low) (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: 29 July 2021

DBRS Ratings GmbH
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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:

-- Rating CLOs Backed by Loans to European SMEs (10 June 2022) and SME Diversity Model,
-- Rating CLOs and CDOs of Large Corporate Credit (26 January 2022),
-- European RMBS Insight Methodology (28 March 2022),
-- European RMBS Insight: Spanish Addendum (26 April 2022),
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2021),
-- Cash Flow Assumptions for Corporate Credit Securitizations (26 January 2022),
-- Legal Criteria for European Structured Finance Transactions (22 July 2022),
-- Master European Structured Finance Surveillance Methodology (19 May 2022),
-- Operational Risk Assessment for European Structured Finance Servicers (16 September 2021),
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (17 May 2022),

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