DBRS Morningstar Upgrades Credit Ratings on Asti Group RMBS III S.r.l.

DBRS Ratings GmbH (DBRS Morningstar) upgraded its credit ratings on the Class A1 and Class A2 Notes (together, the Class A Notes) issued by Asti Group RMBS III S.r.l. (the Issuer) to AAA (sf) from AA (sf).

The credit ratings on the Class A Notes address the timely payment of interest and the ultimate payment of principal on or before the final maturity date in December 2082.

The upgrades follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults, and losses, as of the September 2023 payment date;
-- Portfolio default rate (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables; and
-- Current available credit enhancement to the Class A Notes to cover the expected losses at the AAA (sf) credit rating level.

The transaction is a securitisation of Italian residential mortgages originated and serviced by Cassa di Risparmio di Asti S.p.A. (CR Asti), which originated 85.4% of the initial mortgage pool, and Cassa di Risparmio di Biella e Vercelli S.p.A. (BiverBanca), a previously wholly owned subsidiary of CR Asti, which originated 14.6% of the initial pool. Effective from November 2021, Biverbanca was merged by incorporation into CR Asti.

The transaction closed in December 2021 with an initial portfolio balance of EUR 611.8 million and included a 28-month ramp-up period, which was scheduled to end in March 2024 but was terminated early on the September 2023 payment date. During the ramp-up period, the Issuer purchased additional receivables from CR Asti totalling EUR 496.5 million using principal collections and proceeds from the further issuance of Class A2 and Class J Notes. As of the September 2023 payment date, the outstanding collateral portfolio balance was equal to EUR 942.5 million.

PORTFOLIO PERFORMANCE
As of September 2023, loans that were 0 to 30 days, 30 to 60 days, and 60 to 90 days delinquent represented 0.02%, 0.5%, and 0.5% of the outstanding principal balance, respectively, while loans more than 90 days delinquent represented 0.4%. Cumulative defaulted loans amounted to 0.1% of the aggregate initial portfolio balance to date.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of receivables and updated its base case PD and LGD assumptions to 7.6% and 21.8% from 9.2% and 28.5%, respectively, based on the actual portfolio composition following the end of the ramp-up period, which prompted the credit rating upgrade.

CREDIT ENHANCEMENT
The subordination of the junior obligations, as well as excess spread available in the structure, provide credit enhancement to the Class A Notes. As of the September 2023 payment date, credit enhancement to the Class A Notes increased to 18.1% from 16.6% at the time of the previous annual review 12 months ago, owing primarily to the availability of excess spread in the structure to repay principal on the Class A Notes.

The transaction benefits from a cash reserve, funded at closing at EUR 7.8 million using a subordinated loan granted by CR Asti. The reserve provides liquidity support and is available to cover senior expenses and interest payments on the Class A Notes. The reserve is amortising with a target balance equal to 1.5% of the outstanding balance of the Class A Notes, subject to a floor of EUR 6.95 million. As of the September 2023 payment date, the reserve was at its target of EUR 12.0 million.

BNP Paribas Succursale Italia (BNP Paribas Italy) acts as the account bank for the transaction. Based on DBRS Morningstar’s private credit rating on BNP Paribas Italy, 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 credit ratings assigned to the Class A Notes in the transaction, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

DBRS Morningstar’s credit ratings on the rated notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents.

DBRS Morningstar’s credit ratings do not address non-payment risk associated with contractual payment obligations contemplated in the applicable transactions documents that are not financial obligations.

DBRS Morningstar’s long-term credit ratings provide opinions on risk of default. DBRS Morningstar considers risk of defaults to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the term under which a long-term obligation has been issued.

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/416784/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

DBRS Morningstar analysed the transaction structure in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the credit rating is the “Master European Structured Finance Surveillance Methodology” (22 October 2023), https://www.dbrsmorningstar.com/research/422281/master-european-structured-finance-surveillance-methodology.

Other methodologies referenced in this transaction are listed at the end of this press release.

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 credit rating action.

For a more detailed discussion of the sovereign risk impact on Structured Finance credit 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/421590/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 these credit ratings include investor reports provided by KPMG Fides Servizi di Amministrazione S.p.A., servicer reports provided by CR Asti, 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 credit ratings, 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 purpose of providing these credit ratings 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 credit rating action on this transaction took place on 2 December 2022, when DBRS Morningstar upgraded its credit ratings on the Class A Notes to AA (sf) from AA (low) (sf).

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

Sensitivity Analysis: To assess the impact of changing the transaction parameters on the credit ratings, DBRS Morningstar considered the following stress scenarios as compared with the parameters used to determine the credit ratings (the base case):

-- DBRS Morningstar expected a lifetime base case PD and LGD for the pool based on a review of the current assets. Adverse changes to asset performance may cause stresses to base case assumptions and therefore have a negative effect on credit ratings.
-- The base case PD and LGD assumptions for the remaining collateral pool are 7.6% and 21.8%, respectively.

Class A1 Notes Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD, expected credit rating of AA (sf)
-- 50% increase in PD, expected credit rating of A (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of AA (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of A (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of A (sf)

Class A2 Notes Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD, expected credit rating of AA (sf)
-- 50% increase in PD, expected credit rating of A (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of AA (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of A (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of A (sf)

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on DBRS Morningstar historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

These credit ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Daniel Rakhamimov, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 2 December 2021

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

-- Master European Structured Finance Surveillance Methodology (22 October 2023), https://www.dbrsmorningstar.com/research/422281/master-european-structured-finance-surveillance-methodology.
-- European RMBS Insight Methodology (27 March 2023) and European RMBS Insight Model v6.0.1.0,
https://www.dbrsmorningstar.com/research/411634/european-rmbs-insight-methodology.
-- European RMBS Insight: Italian Addendum (2 October 2023), https://www.dbrsmorningstar.com/research/421317/european-rmbs-insight-italian-addendum.
-- Legal Criteria for European Structured Finance Transactions (30 June 2023), https://www.dbrsmorningstar.com/research/416730/legal-criteria-for-european-structured-finance-transactions.
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2023), https://www.dbrsmorningstar.com/research/420572/operational-risk-assessment-for-european-structured-finance-servicers.
-- Operational Risk Assessment for European Structured Finance Originators (15 September 2023), https://www.dbrsmorningstar.com/research/420573/operational-risk-assessment-for-european-structured-finance-originators.
-- Interest Rate Stresses for European Structured Finance Transactions (15 September 2023), https://www.dbrsmorningstar.com/research/420602/interest-rate-stresses-for-european-structured-finance-transactions.
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (4 July 2023), https://www.dbrsmorningstar.com/research/416784/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].