Morningstar DBRS Confirms Credit Rating on Credico Finance 16 S.r.l.

DBRS Ratings GmbH (Morningstar DBRS) confirmed its AAA (sf) credit rating on the Class A Notes issued by Credico Finance 16 S.r.l. (CF16, or the Issuer).

The credit rating on the Class A Notes addresses the timely payment of interest and the ultimate repayment of principal by the final maturity date in December 2056.

CREDIT RATING RATIONALE
The confirmation 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 June 2024 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.

CF16 is a securitisation of Italian residential mortgage loans originated and serviced by multiple co-operative and independent Italian banks (Banche di Crédito Cooperativo or BCCs), each belonging to ICCREA Banca S.p.A.'s (ICCREA) network. ICCREA covers the role of operating bank and backup servicer and is responsible for supporting the BCCs' payment services, funding techniques, regulatory activities, and administration activities. Zenith Service S.p.A. covers the role of backup servicer facilitator.

The transaction is structured with several combined waterfalls, one for each BCC, where each portfolio supports a portion of the Class A Notes on the basis of the respective contribution to the aggregate portfolio. Upon a breach of certain conditions (cross-collateral events), the waterfalls will collapse into a unique combined waterfall. There are also other mechanisms in place for the purpose of each portfolio supporting the others, if certain conditions are met (detrimental event and disequilibrium event).

PORTFOLIO PERFORMANCE
The portfolio is performing within Morningstar DBRS' expectations. As of the April 2024 cut-off date, delinquencies are low, with 60- to 90-day and 90+-day arrears ratios at 0.14% and 0.11%, respectively. The gross cumulative default ratios as of the April 2024 cut-off date stands at 0.17%, slightly up from 0.14% as of April 2023.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
Morningstar DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and updated its base case PD and LGD assumptions to 5.3% and 10.4%, respectively.

CREDIT ENHANCEMENT
Overcollateralisation of the outstanding collateral portfolio provides credit enhancement to the Class A Notes. As of the June 2024 payment date, credit enhancement to the Class A Notes was at 60.2%, up from 46.9% as of the latest annual review of the transaction.

The transaction benefits from cash reserves (composed of a single reserve for each BCC) available to cover senior expenses, fees, interest payments on the Class A Notes. Additionally, the reserve is available to provide credit support to the rated notes. The credit support is up to 80% of the cash reserve target amount. The cash reserve is currently at its floor level of EUR 16.9 million.

BNP Paribas Succursale Italia acts as the account bank for the transaction. Based on the private rating of the account bank, the downgrade provisions outlined in the transactions' documents, and structural mitigants inherent in the transaction structures, Morningstar DBRS considers the risk arising from the exposure to the account bank to be consistent with the ratings assigned to the Class A Notes, as described in Morningstar DBRS' "Legal Criteria for European Structured Finance Transactions" methodology.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.
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 rating is "Master European Structured Finance Surveillance Methodology" (7 March 2024), https://dbrs.morningstar.com/research/429051.

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.

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 Credit Ratings on Other Morningstar DBRS Credit Ratings" of the "Global Methodology for Rating Sovereign Governments" at: https://dbrs.morningstar.com/research/436000.

The sources of data and information used for this credit rating include investor reports provided by Accounting Partners S.p.A., servicer reports and additional information provided by ICCREA, and loan-level data provided by the European DataWarehouse GmbH.

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

At the time of the initial credit rating, 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 this credit rating 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.

The last credit rating action on this transaction took place on 26 July 2023 when Morningstar DBRS confirmed its AAA (sf) credit rating on the Class A Notes.

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

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

-- Morningstar DBRS 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 of the current pool of loans for the Issuer are 5.3% and 10.4%, respectively.
-- The Risk Sensitivity overview below illustrates the credit ratings expected if the PD and LGD increase by a certain percentage over the base case assumption.

Class A 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 AAA (sf)
-- 50% increase in PD, expected credit rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of AAA (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: Pascale Kallas, Assistant Vice President
Rating Committee Chair: Rehanna Sameja, Senior Vice President
Initial Rating Date: 14 November 2016

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

-- Master European Structured Finance Surveillance Methodology (7 March 2024),
https://dbrs.morningstar.com/research/429051
-- Legal Criteria for European Structured Finance Transactions (28 June 2024),
https://dbrs.morningstar.com/research/435165
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2023),
https://dbrs.morningstar.com/research/420572
-- European RMBS Insight Methodology (25 March 2024) and European RMBS Insight model v 8.0.0.1,
https://dbrs.morningstar.com/research/430103
-- European RMBS Insight: Italian Addendum (28 June 2024),
https://dbrs.morningstar.com/research/435263
-- Interest Rate Stresses for European Structured Finance Transactions (28 June 2024),
https://dbrs.morningstar.com/research/435278
-- 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 info-DBRS@morningstar.com.