Morningstar DBRS Finalises Provisional Credit Ratings on Alba 14 SPV S.r.l.

DBRS Ratings GmbH (Morningstar DBRS) finalised the following provisional credit ratings on the notes issued by Alba 14 SPV S.r.l. (the Issuer):

-- Class A Notes at AAA (sf)
-- Class B Notes at A (high) (sf)

The credit rating on the Class A Notes addresses the timely payment of interest and the ultimate repayment of principal by the final legal maturity date. The credit rating on the Class B Notes addresses the ultimate payment of interest but the timely payment of scheduled interest when they are the most senior tranche, and the ultimate repayment of principal by the final legal maturity date. The Issuer also issued the Class J Asset-Backed Floating Rate Notes due January 2044, which are not rated by Morningstar DBRS.

The transaction is a cash flow securitisation collateralised by a portfolio of performing financial lease contracts to Italian retail and corporate customers. The loans were granted by Alba Leasing S.p.A. (Alba Leasing; the Originator and the Servicer). The securitised receivables are financial claims toward the payment of regular instalments by lessees. The receivables exclude the final optional instalments that would include the residual value.

The initial valuation date when the economic effect of the portfolio transfer started was 23 March 2024. As of the initial valuation date, the initial portfolio consisted of 9,918 lease contracts extended to 6,556 borrowers, with an aggregate par balance of EUR 833.7 million. The portfolio consisted of 25.5% vehicle leases; 57.7% equipment leases; 15.7% real estate leases; and 1.1% air, naval, and train leases.

The initial portfolio exhibits geographic concentration in the Italian northern regions of Lombardy, Emilia-Romagna, and Campania, accounting for 28.0%, 11.9%, and 9.4% of the portfolio, respectively. The initial portfolio exhibits a low sector concentration as the top three sector exposures, according to Morningstar DBRS' industry classifications, are Industrial Products, Transportation, and Business Services, which represent 14.7%, 12.1%, and 10.1% of the outstanding portfolio balance, respectively. The portfolio has a low borrower group concentration as the largest, top 10, and top 20 largest borrower groups account for 0.8%, 5.0%, and 7.0% of the outstanding portfolio balance, respectively.

The Class A and Class B Notes benefit from total credit enhancement of 34.0% and 13.0%, respectively, which is provided by the overcollateralisation of the portfolio and does not include the cash reserve. The transaction includes a cash reserve, which will be available to cover expenses; senior fees; interest on the Class A Notes; and interest on the Class B Notes if the relevant interest subordination event has not occurred. The target cash reserve is equal to 1.0% of the principal outstanding of the rated notes, subject to a floor of 0.5% of the original balance of the rated notes.

Alba Leasing acts as the Servicer and Banca Finanziaria Internazionale S.p.A. acts as the backup servicer for this transaction. Agenzia Italia S.p.A. and Trebi Generalconsult S.r.l. have also been appointed as sub-backup servicers. In the event that the servicer's appointment is terminated, the Issuer revokes the appointment to the servicer and appoints the backup servicer as a substitute.

CREDIT RATING RATIONALE
Morningstar DBRS determined its credit ratings based on the principal methodology and the following considerations:
-- The transaction's capital structure and the form and sufficiency of available credit enhancement to withstand stressed cash flow assumptions and repay the Issuer's financial obligations according to the terms under which the notes are issued;
-- Alba Leasing's capabilities with respect to originations and underwriting.
-- Alba Leasing's financial situation and its capabilities with respect to servicing.
-- Morningstar DBRS' updated operational risk review of Alba Leasing in March 2024, during which Morningstar DBRS determined it to be an acceptable originator and servicer.
-- The credit quality of the collateral and ability of the Servicer to perform collection activities on the collateral.
-- The sovereign credit rating on the Republic of Italy, currently rated BBB (high) with a Stable trend by Morningstar DBRS.
-- The consistency of the legal structure with Morningstar DBRS' "Legal Criteria for European Structured Finance Transactions" methodology and the presence of legal opinions addressing the assignment of the assets to the Issuer.

PORTFOLIO ASSUMPTIONS
The credit ratings are also based on the following analytical considerations:
-- Morningstar DBRS determined the probability of default (PD) for the portfolio using the historical performance information supplied. Morningstar DBRS assumed an annualised PD of 1.6% for vehicles leases; 1.7% for equipment leases; 1.0% for real estate leases; and 10.1% for air, naval, and train leases. The weighted-average annualised PD of the portfolio was 1.7%.
--The assumed weighted-average life (WAL) of the portfolio was 2.7 years.
-- Morningstar DBRS used the PDs and WAL in its Diversity Model to generate the hurdle rates for the assigned credit ratings.

Morningstar DBRS' credit ratings on the rated notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations for each of the rated notes are the related interest payment amounts and the related class balances.

Morningstar DBRS' credit ratings do not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations.

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

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.
 
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://dbrs.morningstar.com/research/427030.

Morningstar DBRS analysed the transaction structure in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the credit ratings is: Rating European Consumer and Commercial Asset-Backed Securitisations (8 January 2024), https://dbrs.morningstar.com/research/426219.

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

Morningstar DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

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://dbrs.morningstar.com/research/421590.

The sources of data and information used for these credit ratings include performance data relating to the receivables provided by the Originator directly or through the arrangers: Intesa Sanpaolo S.p.A. and Banca Akros S.p.A.

Morningstar DBRS received the following data information, split by vehicles, equipment, real estate, and air/naval/train lease contracts:
-- Static quarterly default data from Q1 2013 to Q4 2023,
-- Static quarterly recovery data from Q1 2015 to Q4 2023,
-- Dynamic quarterly delinquency data from Q1 2014 to Q4 2023,
-- Dynamic quarterly default data from Q1 2015 to Q4 2023, and
-- Dynamic quarterly prepayment data from Q1 2013 to Q4 2023.

In addition, Morningstar DBRS received loan-level characteristics, stratification data, and contractual amortisation profile as at 23 March 2024.

Morningstar DBRS also used dynamic quarterly delinquency data from Q1 2012 to Q4 2013 received in the context of Alba 11 SPV S.r.l.

Morningstar DBRS did not rely upon third-party due diligence in order to conduct its analysis.

Morningstar DBRS was supplied with third-party assessments. However, this did not affect the credit rating analysis.

Morningstar DBRS considers the data and information available to it for the purposes of providing these credit ratings to be of satisfactory quality.

Morningstar DBRS does not audit or independently verify the data or information it receives in connection with the credit rating process.

These credit ratings concern newly issued financial instruments. These are the first Morningstar DBRS credit ratings on these financial instruments.

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

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on https://dbrs.morningstar.com.

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

-- PD Rate Used: Base case annualised PD of 1.6% for vehicles leases, 1.7% for equipment leases, 1.0% for real estate leases, and 10.1% for air, naval, and rail leases. Default rate of 26.4% in the AAA (sf) scenario and 17.8% in the A (high) (sf) scenario, a 25% and 50% increase on the applicable base case PD.
-- Recovery Rate Used: Base case recovery rate of 53.0%.
-- Loss Given Default (LGD) Used: Base case LGD of 47.0%¿63.0% in the AAA (sf) scenario and 57.8% in the A (high) (sf) scenario¿a 25% and 50% increase on the applicable LGD.

Scenario 1: A 25% increase in the expected default.
Scenario 2: A 50% increase in the expected default.
Scenario 3: A 25% increase in the expected LGD.
Scenario 4: A 25% increase in the expected default and 25% increase in the expected LGD.
Scenario 5: A 50% increase in the expected default and 25% increase in the expected LGD.
Scenario 6: A 50% increase in the expected LGD.
Scenario 7: A 25% increase in the expected default and 50% increase in the expected LGD.
Scenario 8: A 50% increase in the expected default and 50% increase in the expected LGD.

Morningstar DBRS concludes that the expected credit ratings under the eight stress scenarios are:
-- Class A Notes: AAA (sf), AAA (sf), AAA (sf), AA (high) (sf), AA (low) (sf), AA (high) (sf), AA (sf), and A (high) (sf).
-- Class B Notes: A (low) (sf), BBB (high) (sf), A (high) (sf), BBB (high) (sf), BBB (sf), BBB (high) (sf), BBB (sf), and BB (high) (sf).

For further information on Morningstar DBRS 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 Morningstar DBRS historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

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

Lead Analyst: Ilaria Maschietto, Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 14 May 2024

DBRS Ratings GmbH
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Tel. +49 (69) 8088 3500
Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

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

-- Rating European Consumer and Commercial Asset-Backed Securitisations (8 January 2024), https://dbrs.morningstar.com/research/426219
-- Rating CLOs Backed by Loans to European SMEs (23 February 2024) and Morningstar DBRS SME Diversity Model 2.6.1.4, https://dbrs.morningstar.com/research/428543
-- Legal Criteria for European Structured Finance Transactions (30 June 2023), https://dbrs.morningstar.com/research/416730
-- Rating European Structured Finance Transactions Methodology (11 December 2023), https://dbrs.morningstar.com/research/425149
-- Interest Rate Stresses for European Structured Finance Transactions (15 September 2023), https://dbrs.morningstar.com/research/420602
-- Operational Risk Assessment for European Structured Finance Originators (7 March 2024), https://dbrs.morningstar.com/research/429054
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2023), https://dbrs.morningstar.com/research/420572
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (23 January 2024), https://dbrs.morningstar.com/research/427030

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

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