Morningstar DBRS Confirms Credit Ratings on Civitas SPV S.r.l. - Series 2017-1

DBRS Ratings GmbH (Morningstar DBRS) confirmed its AAA (sf) credit ratings on the Class A1, Class A2, and Class B Notes (collectively, the senior notes) issued by Civitas SPV S.r.l. - Series 2017-1 (the Issuer).

The credit ratings on the Class A1, Class A2, and Class B Notes address the timely payment of interest and the ultimate repayment of principal by the legal maturity date in October 2070.

CREDIT RATING RATIONALE
The confirmations are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults, and losses, as of the July 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 senior notes to cover the expected losses at the AAA (sf) credit rating levels.

The transaction is a securitisation of first-lien Italian residential mortgages originated and serviced by Banca di Cividale S.p.A. The transaction closed in July 2017 and incorporated a three-year ramp-up period, which ended in April 2020 when the notes were drawn up to the maximum amount permitted by the transaction. Since then, the Class A1 and Class A2 Notes have amortised on a pro rata basis and stood at a class factor of 0.40 as of the July 2024 payment date. Following the amendment to the transaction on 12 October 2022, the Class B Notes have also started to amortise on a pro rata basis and stood at a class factor of 0.76 as of the July 2024 payment date.

PORTFOLIO PERFORMANCE
As of the July 2024 payment date, loans that were one to two and two to three months delinquent represented 0.2% and 0.3%, respectively, of the outstanding portfolio balance, while loans more than three months delinquent represented 0.3%. As of the July 2024 payment date, the gross cumulative default ratio was 1.0%.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
Morningstar DBRS conducted a loan-by-loan analysis of the current portfolio of receivables and updated its PD and LGD assumptions to 12.5% and 14.3%, respectively.

CREDIT ENHANCEMENT
Following the amendment and the ranking of the Class B Notes pro rata and pari passu with the Class A1 and A2 Notes, credit enhancement is provided only by the subordination of the Class C notes. As of the July 2024 payment date, credit enhancement to the Class A1, Class A2, and Class B Notes was 27.4% up from 24.4% at the time of the last annual review of the transaction 12 months ago.

The transaction benefits from an amortising cash reserve, which is available to cover senior fees, expenses, and interest due on the senior notes. The cash reserve has a target equal to 2.5% of the aggregate senior notes' balance. As of the July 2024 payment date, the cash reserve stood at its target of EUR 8.9 million.

BNP Paribas Succursale Italia (BNP Italy) acts as the account bank for the transaction. Based on Morningstar DBRS' private credit rating on BNP Italy, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, Morningstar DBRS considers the risk arising from the exposure to the account bank to be consistent with the credit ratings assigned to the senior 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, 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 Factors in Credit Ratings" at https://dbrs.morningstar.com/research/437781.

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 the "Master European Structured Finance Surveillance Methodology" (6 August 2024), https://dbrs.morningstar.com/research/437540.

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 these credit ratings include investor reports provided by Securitisation Services S.p.A. 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 ratings, Morningstar DBRS was supplied with third-party assessments. However, this did not impact 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.

The last credit rating action on this transaction took place on 11 October 2023, when Morningstar DBRS confirmed its credit ratings on the Class A1, Class A2 and Class B Notes at AAA (sf).

The lead analyst responsibilities for this transaction have been transferred to Stefano Pruni.

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):
-- 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 12.5% and 14.3%, respectively.

Senior 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 AA (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.

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

Lead Analyst: Stefano Pruni, Senior Analyst
Rating Committee Chair: Alfonso Candelas, Associate Managing Director
Initial Rating Date: 19 July 2017

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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.

-- Legal Criteria for European Structured Finance Transactions (28 June 2024), https://dbrs.morningstar.com/research/435165.
-- Master European Structured Finance Surveillance Methodology (6 August 2024), https://dbrs.morningstar.com/research/437540.
-- Operational Risk Assessment for European Structured Finance Originator and Servicers (18 September 2024), https://dbrs.morningstar.com/research/439571.
-- European RMBS Insight Methodology (18 September 2024) and European RMBS Insight Model v10.0.0.0, https://dbrs.morningstar.com/research/439573.
-- European RMBS Insight: Italian Addendum (30 September 2024), https://dbrs.morningstar.com/research/440245.
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2024), https://dbrs.morningstar.com/research/439913.
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August 2024), https://dbrs.morningstar.com/research/437781.

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 https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.