Morningstar DBRS Assigns Credit Ratings to Asti Group RMBS IV S.r.l.

DBRS Ratings GmbH (Morningstar DBRS) assigned the following credit ratings to the Class A1 Notes and Class A2 Notes (together, the Rated Notes) issued by Asti Group RMBS IV S.r.l. (the Issuer):

-- Class A1 Notes at AAA (sf)
-- Class A2 Notes at AAA (sf)

The Class A1 Notes are issued for EUR 365,700,000, while the Class A2 Notes are issued for EUR 186,100,000 and the Class J Notes (not rated by Morningstar DBRS) are for EUR 113,195,000.

The credit ratings assigned to the Rated Notes address the timely payment of interest and the ultimate payment of principal on or before the final maturity date in December 2074.

At closing, the Rated Notes benefit from credit enhancement of 17.0% (calculated as a percentage of the portfolio).

The Class A1 Notes and Class A2 Notes are pari passu in the payment of interest and principal, but the Class A2 Notes benefit from a faster amortisation, as 55% of the funds available at any payment date for principal payments will be allocated to their reimbursement, while the remaining part (45%) will be used to amortise the Class A1 Notes.

The transaction structure benefits from a cash reserve, fully funded initially at EUR 11,036,000 through a subordinated loan granted by Cassa di Risparmio di Asti S.p.A. (Asti, the Seller, or the Originator). The cash reserve, which provides liquidity support, is equal to 2.0% of the outstanding balance of the Rated Notes and will have a floor of 1.0% of the initial balance of the Rated Notes. The cash reserve can be used to pay senior fees, expenses, and interest on the Rated Notes.

The portfolio consists of prime Italian residential mortgage loans originated by Asti. Asti is the Servicer of the pool while Banca Valsabbina S.C.p.A. was appointed as the Backup Servicer.

As of 31 August 2024, the portfolio consisted of 7,703 mortgage loans granted to 7,675 borrowers. The current balance of the portfolio is EUR 665 million and the average loan balance (per borrower) is EUR 86,644. The weighted-average (WA) seasoning of the portfolio is 5.3 years with a WA residual maturity of 18.9 years. The portfolio's WA loan-to-value (calculated on the unindexed property value) is 53.9%. The portfolio is mainly distributed in the northern Italian regions of Piedmont (59.3% by loan balance) and Lombardy (34.3%).

The portfolio is split amongst floating-rate-for-life loans (23.2% of the pool balance), fixed-rate-for-life loans (12.3%), and optional loans (64.5%). The optional loans, which currently comprise 44.5% fixed-rate loans and 20.1% floating-rate loans, can each switch to a different interest rate type at future reset dates. The majority of the floating-rate loans (98.2% of the floating-rate pool) are indexed to six-month Euribor.

An interest rate swap transaction has been entered into between the Issuer and UniCredit Bank GmbH (Unicredit) to hedge against the interest rate risk arising from the mismatch between assets (currently bearing a fixed rate for 56.8% of the pool) and liabilities (the Rated Notes pay a floating-rate coupon, indexed to three-month Euribor).

The transaction account bank is BNP Paribas, Italian Branch. Based on Morningstar DBRS' private credit rating on the account bank and the replacement provisions included in the transaction documents, Morningstar DBRS considers the risk of such counterparty to be consistent with the credit ratings assigned, in accordance with its "Legal Criteria for European Structured Finance Transactions".

Morningstar DBRS based its credit ratings primarily on the following analytical considerations:
-- The transaction capital structure, including the form and sufficiency of available credit enhancement and liquidity provisions.
-- The credit quality of the mortgage portfolio and the ability of the Servicer to perform collection and resolution activities. Morningstar DBRS calculated probability of default (PD), loss given default (LGD), and expected loss outputs on the mortgage portfolio, which Morningstar DBRS uses as inputs into its cash flow tool. Morningstar DBRS analysed the mortgage portfolio in accordance with its "European RMBS Insight Methodology" and "European RMBS Insight: Italian Addendum".
-- The transaction's ability to withstand stressed cash flow assumptions and repay investors in accordance with the terms and conditions of the notes. Morningstar DBRS analysed the transaction structure using Intex Dealmaker.
-- The consistency of the transaction's 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.
-- The sovereign credit rating on the Republic of Italy, rated BBB (high) with a Positive trend by Morningstar DBRS, as of the date of this press release.

Morningstar DBRS also ran additional cash flow sensitivity scenarios to test a shorter default timing distribution to assign its credit ratings.

Morningstar DBRS' credit ratings on the Class A1 and Class A2 Notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the related interest payment amounts and the related principal amount.

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 Factors in Credit Ratings at https://dbrs.morningstar.com/research/437781.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the credit ratings is the "European RMBS Insight Methodology" (18 September 2024), https://dbrs.morningstar.com/research/439573.

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 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 historical performance (static pool defaults and recoveries data from 2013 to 2023, dynamic delinquencies data from 2009 to 2023, and dynamic prepayments data from 2015 to 2023) and loan-level data as at 31 August 2024 provided by Unicredit on the Originator's behalf.

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.

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):

In respect of the Rated Notes, the PD and LGD at the AAA (sf) stress scenario of 30.87% and 34.99%, respectively, were stressed assuming a 25% and 50% increase in both the PD and LGD.

Morningstar DBRS concludes the following impact on the Class A1 Notes:
-- 25% increase of the PD, ceteris paribus, would lead to a downgrade to AA (low) (sf);
-- 50% increase of the PD, ceteris paribus, would lead to a downgrade to A (high) (sf);
-- 25% increase of the LGD, ceteris paribus, would lead to a downgrade to AA (high) (sf);
-- 50% increase of the LGD, ceteris paribus, would lead to a downgrade to AA (high) (sf);
-- 25% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to AA (low) (sf);
-- 50% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to A (sf);
-- 25% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to A (high) (sf);
-- 50% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to A (low) (sf).

Morningstar DBRS concludes the following impact on the Class A2 Notes:
-- 25% increase of the PD, ceteris paribus, would lead to a downgrade to AA (high) (sf);
-- 50% increase of the PD, ceteris paribus, would lead to a downgrade to AA (low) (sf);
-- 25% increase of the LGD, ceteris paribus, would not lead to a credit rating change;
-- 50% increase of the LGD, ceteris paribus, would not lead to a credit rating change;
-- 25% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to AA (high) (sf);
-- 50% increase of the PD and 25% increase of the LGD, ceteris paribus, would lead to a downgrade to AA (low) (sf);
-- 25% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to AA (high) (sf);
-- 50% increase of the PD and 50% increase of the LGD, ceteris paribus, would lead to a downgrade to A (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: Antonio Laudani, Vice President
Rating Committee Chair: Rehanna Sameja, Senior Vice President
Initial Rating Date: 13 November 2024

DBRS Ratings GmbH, Sucursal en España
Paseo de la Castellana 81, Plantas 26 & 27
28046 Madrid, Spain
Tel. +34 (91) 903 6500

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

-- European RMBS Insight Methodology (18 September 2024) and European RMBS Insight Model v. 10.0.0.0, https://dbrs.morningstar.com/research/439573
-- European RMBS Insight: Italian Addendum (30 September 2024),
https://dbrs.morningstar.com/research/440245
-- Legal Criteria for European Structured Finance Transactions (28 June 2024),
https://dbrs.morningstar.com/research/435165
-- Derivative Criteria for European Structured Finance Transactions (6 September 2024), https://dbrs.morningstar.com/research/439043
-- Operational Risk Assessment for European Structured Finance Originators and Servicers (18 September 2024), https://dbrs.morningstar.com/research/439571
-- 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/439604.

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.