Morningstar DBRS Confirms Credit Rating on Asti Group PMI S.r.l.

DBRS Ratings GmbH (Morningstar DBRS) confirmed its AA (sf) credit rating on the Class A Notes issued by Asti Group PMI S.r.l. (the Issuer).

The credit rating on the Class A Notes addresses the timely payment of interest and the ultimate repayment of principal payable on or before the maturity date in October 2092.

The credit rating confirmation follows an annual review of the transaction and is based on the following analytical considerations:

-- The portfolio performance, in terms of the level of delinquencies and defaults, as of the October 2024 payment date;
-- The one-year base case probability of default (PD), as well as the lifetime default and recovery assumptions on the revolving pool of receivables;
-- The current available credit enhancement to the Class A Notes to cover the expected losses at AA (sf) credit rating levels, and
-- No purchase termination events.

The transaction is a securitisation collateralised by a portfolio of secured and unsecured loans to Italian small and medium-size enterprises (SMEs), entrepreneurs, artisans, and producer families originally granted by Cassa di Risparmio di Asti S.p.A. and Cassa di Risparmio di Biella e Vercelli S.p.A.. CR Asti and BiverBanca also acted as the servicers of their respective portfolios.

BiverBanca has been part of the CR Asti banking group since 2012. Following its merger into CR Asti on 6 November 2021, BiverBanca's rights and obligations, including the ownership of the portfolios, were assumed by CR Asti. Since then, CR Asti (the originator) has acted as sole servicer of the overall portfolio.

The transaction closed in March 2017 with the revolving period scheduled to end in October 2026, following the latest amendment of the transaction. During this period, the originator may sell new receivables to the Issuer subject to certain conditions and limitations. The revolving period will end prematurely upon the occurrence of a purchase termination event, which includes gross cumulative defaults exceeding certain thresholds, the Issuer's inability to fully replenish the cash reserve, and the originator's insolvency.

Additionally, if the Issuer terminates the appointment of the originator as the servicer or if the bank does not fulfil its own obligations under the transaction documents, the revolving period will end prematurely. The purchase of new receivables is funded through principal collections as well as excess spread to make up for any defaulted loans. To date, a purchase termination event has not occurred.

PORTFOLIO PERFORMANCE
The delinquency ratio, defined as the ratio between the outstanding balance of loans in arrears by more than 60 days (excluding defaulted loans) and the outstanding balance of the portfolio as of the end of the previous collection period (including defaulted loans), was 1.85%. The cumulative default ratio was 0.23% of the initial portfolio.

PORTFOLIO ASSUMPTIONS
Morningstar DBRS maintained its one-year base case PD assumption at 4.9%.
Morningstar DBRS' analysis assumed the worst-case portfolio allowed by the eligibility criteria and portfolio limits. At the AA (sf) credit rating level, Morningstar DBRS applied portfolio default and recovery assumptions of 61.7% and 36.4%, respectively, in its analysis.

CREDIT ENHANCEMENT
Credit enhancement for the Class A Notes (42.1%) is provided by the subordination of the junior obligations and the cash reserve account.

A cash reserve account, funded at closing with EUR 14.0 million through the proceeds of the subordinated loan granted by the originator, is available to cover senior expenses and missed interest payments on the Class A Notes. The required level for the cash reserve is set at 2.0% of the Class A Notes balance, subject to a EUR 7.0 million floor. On the payment date on which the Class A Notes will be redeemed in full, the cash reserve target amount will be reduced to EUR 0.

Additionally, another cash reserve is also available during the revolving period to cover senior expenses, missed interest payments on the Class A Notes, and the acquisition of additional receivables.

The structure also benefits from a set-off reserve account, funded at closing with EUR 17.8 million (1.5% of the initial portfolio balance), which will be available immediately following the occurrence of an insolvency event in respect of the originator. The target set-off reserve amount is EUR 17.8 million during the revolving period and 1.5% of the portfolio balance afterward.

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

Morningstar DBRS' credit rating on the Notes addresses 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 Factors in Credit Ratings at: https://dbrs.morningstar.com/research/437781.

Morningstar DBRS analysed the transaction structure in its proprietary Excel-based cash flow engine.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the credit rating is: "Rating CLOs Backed by Loans to European SMEs" (19 November 2024), https://dbrs.morningstar.com/research/443198.
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.

An asset and a cash flow analysis were both conducted. Due to the inclusion of a revolving period in the transaction, the analysis continues to consider potential portfolio migration based on replenishment criteria set forth in the transaction legal documents.

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 servicer and investor reports provided by the originator and BNP Italy and loan-by-loan data from the European DataWarehouse GmbH. Morningstar DBRS also considered information on repurchased loans provided by the originator.

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 impact 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 21 December 2023, when Morningstar DBRS upgraded its credit rating on the Class A Notes to AA (sf) from AA (low) (sf), following transaction amendment.

The lead analyst responsibilities for this transaction have been transferred to Shalva Beshia.

Information regarding Morningstar DBRS ratings, including definitions, policies, and methodologies, is available on www.dbrsmorningstar.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):

-- PD Rates Used: base case PD of 4.9%, a 10% and 20% increase on the base case PD.
-- Recovery Rates Used: base case recovery rate of 36.4% at the AA (sf) credit rating level, and a 10% and 20% decrease in the base case recovery rate. Note that the percentage decreases in the recovery rates are assumed for the other stress recovery rate levels.

Morningstar DBRS concludes that a hypothetical increase of base case PD by 20% or a hypothetical decrease of the base case recovery rate by 20%, ceteris paribus, would lead to a downgrade of the Class A Notes to AA (low) (sf) and A (high) (sf), respectively. A scenario combining both an increase in the base case PD by 10% and a decrease in the base case Recovery Rate by 10%, ceteris paribus, would likewise lead to a downgrade of the Class A Notes 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.

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

Lead Analyst: Shalva Beshia, Assistant Vice President
Rating Committee Chair: Carlos Silva, Senior Vice President
Initial Rating Date: 16 March 2017

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

-- Rating CLOs Backed by Loans to European SMEs (19 November 2024) and SME Diversity Model 2.7.1.5,
https://dbrs.morningstar.com/research/443198
-- Global Methodology for Rating CLOs and Corporate CDOs (19 November 2024),
https://dbrs.morningstar.com/research/443207
-- Master European Structured Finance Surveillance Methodology (19 November 2024),
https://dbrs.morningstar.com/research/443204
-- Legal and Derivative Criteria for European Structured Finance Transactions (19 November 2024),
https://dbrs.morningstar.com/research/443196
-- 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 dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.