Press Release

DBRS Morningstar Upgrades Rating on Magnolia BTV S.r.l

Structured Credit
March 01, 2023

DBRS Ratings GmbH (DBRS Morningstar) upgraded its rating on the Class A Notes issued by Magnolia BTV S.r.l. (the Issuer) to AA (high) (sf) from A (high) (sf).

The rating on the Class A Notes addresses the timely payment of interest and the ultimate payment of principal on or before the maturity date in July 2045.

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 January 2023 payment date;
-- The one-year base case probability of default (PD) and default and recovery rates on the receivables; and
-- The current available credit enhancement to the Class A Notes to cover the expected losses at the AA (high) (sf) rating level.

The transaction is a static securitisation collateralised by a portfolio of secured and unsecured loans to Italian small and medium-size enterprises (SMEs), entrepreneurs, artisans, and producer families granted and serviced by Cherry Bank S.p.A. (formerly Banco delle Tre Venezie S.p.A.).

Around 44.8% of the current portfolio balance (down from 45.6% in September 2021) is assisted by the Fondo Centrale di Garanzia (FCG) guarantee, a state guarantee that covers up to 100% of the loan balance. The weighted-average coverage for the current portfolio is equal to 96.9%. DBRS Morningstar adjusted the recovery rates to account for the FCG guarantee.

As of the 31 December 2022 portfolio cut-off date, delinquencies were low, with 90+-day arrears representing 0.1% of the outstanding portfolio balance, up from 0.0% as at 31 December 2021. The gross cumulative default ratio stood at 2.0% of the initial portfolio, unchanged from the last annual review.

The base case one-year PDs for secured and unsecured loans remain at 4.2% and 3.7%, respectively.

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 48.5% and 45.6%, respectively, at the AA (high) (sf) rating level.

Overcollateralisation of the outstanding collateral portfolio and the cash reserve provides credit enhancement to the Class A Notes. As of the January 2023 payment date, credit enhancement to the Class A Notes was 43.4%, up from 31.6% as of the January 2022 payment date. The increase in credit enhancement prompted the rating upgrade.

The transaction benefits from an amortising cash reserve, available to cover expenses, senior fees, and interest payments on the Class A Notes. The target cash reserve is equal to 1.5% of the principal outstanding on the Class A Notes, with a floor at EUR 714,500. As of the January 2023 payment date, the cash reserve was at its target of EUR 1.7 million.

BNP Paribas Succursale Italia acts as the account bank for the transaction. Based on DBRS Morningstar’s private rating on the account bank, the downgrade provisions outlined in the transaction documents, and the 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 A Notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

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

The Social factor has changed from the prior credit rating disclosure and no longer affects the rating, as the lifetime assumptions of the portfolio have improved compared with the previous annual review, making the rating output less sensitive to the effect of the FCG guarantee.

There were no Environmental/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

DBRS Morningstar analysed the transaction structure in its proprietary Excel-based cash flow 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.

A review of the transaction’s 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 Banca Finanziaria Internazionale S.p.A., servicer reports by Cherry Bank 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 both the initial rating and the transaction’s amendment in February 2021, 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 1 March 2022, when DBRS Morningstar upgraded its rating on the Class A Notes to A (high) (sf) from A (sf).

The lead analyst responsibilities for this transaction have been transferred to Baran Cetin.

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: Base case PD of 4.2% for secured loans and of 3.7% for unsecured loans, a 10% and 20% increase of the base case PD.
-- Recovery Rates Used: Base case recovery rates of 45.6% at the AA (high) (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%, or a hypothetical decrease of the recovery rate by 20%, ceteris paribus, would lead to a rating confirmation on the Class A Notes of AA (high) (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 rating confirmation on the Class A Notes of AA (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: Baran Cetin, Senior Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 31 July 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 (7 February 2023),
-- Rating CLOs Backed by Loans to European SMEs (10 June 2022) and SME Diversity Model v2.6.0.2.,
-- Rating CLOs and CDOs of Large Corporate Credit (7 February 2023),
--European RMBS Insight Methodology (28 March 2022),
-- European RMBS Insight: Italian Addendum (29 September 2022),
-- Cash Flow Assumptions for Corporate Credit Securitizations (7 February 2023),
-- Legal Criteria for European Structured Finance Transactions (22 July 2022),
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2022),
-- Interest Rate Stresses for European Structured Finance Transactions (22 September 2022),
-- 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