DBRS Assigns Final Ratings to BERICA PMI S.r.l.

DBRS Ratings Limited (“DBRS”) has today assigned final ratings to the Notes issued by BERICA PMI S.r.l. (the “Issuer”), as follows:

EUR 980,000,000 Class A1X Asset Backed Floating Rate Notes due May 2057: AA (high) (sf)
EUR 1,000,000 Class A1Y Asset Backed Floating Rate Notes due May 2057: AA (high) (sf)

The Issuer is a limited liability company incorporated under the laws of Italy. The transaction is a cash flow securitisation collateralised by a portfolio of bank loans to Italian Small and Medium Sized Enterprises (“SMEs”), entrepreneurs and artisans. The loans were originated by two banks that are part of the Banca Popolare di Vicenza Group: Banca Popolare di Vicenza S.C.p.A. (“BPVi”) and Banca Nuova S.p.A. (“BN”), with BPVi are collectively referred to as the “Originators”.

The Class A1X and Class A1Y Notes (collectively, the “Senior Notes”) are pro rata and pari passu in both interest and principal payments. The Senior Notes’ aggregate issue amount is EUR 981 million. The rating on the Senior Notes addresses the timely payment of interest and the ultimate payment of principal payable on or before the Final Maturity Date in May 2057. DBRS does not rate the Class B Notes (the “Junior Notes”).

The Portfolio was transferred from the Originators to the Issuer on 1 March 2013 (the “Effective Date”) with an aggregate par balance of EUR 1,569.00 million and consisting of 10,208 loans to 8,537 borrowers and borrower groups. Between 1 March 2013 and 1 June 2013, the Issuer has collected (net of issuance expenses) EUR 84.03 million of interest and principal proceeds which are expected to be used by the Issuer to repay Senior Notes on the first payment date.

As of 1 June 2013, the transaction portfolio consisted of 9,801 loans extended to 8,220 individual borrowers or borrower groups, with a par balance of EUR 1,499.20 million. As of this date, the portfolio contained 41 loans in arrears for 31 days or less with an aggregated balance of EUR 3.25 million or 0.2% of the outstanding portfolio balance.

The ratings of the Senior Notes are based upon DBRS’s review of the following items:
• The transaction structure, the form and sufficiency of available credit enhancement, the portfolio characteristics:
-- The transaction is well diversified by borrower. The exposure to the largest one, ten and twenty borrower groups represent 0.7%, 4.6%, and 8.0%, respectively based on the portfolio balance outstanding as of 1 June 2013. The portfolio exhibits industry concentration to the Construction and Real Estate sectors, which was addressed by applying a higher correlation in the analysis. Loans to entrepreneurs and artisans with no specific NACE industry information represent 23.6% of the portfolio balance. The largest three industries (by NACE industry group excluding entrepreneurs and artisans) are Real Estate, Manufacturing and Wholesale, and Retail Trade, representing 17.8%, 16.9%, and 14.7% of the outstanding portfolio balance, respectively. The top three regions are represented by Veneto (37.5%), Tuscany (18.6%) and Sicily (12.1%).
-- The credit enhancement for the Senior Notes is 43.1% which DBRS considers to be sufficient to support the AA (high) (sf) ratings.
-- A cash-trapping mechanism which will not allow any junior payments until the Senior Notes are redeemed in full and will accelerate the repayment of the Senior Notes.
• The transaction parties’ financial strength and capabilities to perform their respective duties and the quality of origination, underwriting, and servicing practices.
• The transaction benefits from a non-amortising Cash Reserve, totaling EUR 44 million, which is available to cover senior expenses and interest shortfalls on the Class A1X and Class A1Y Notes throughout the life of the transaction. The Cash Reserve will only be available as credit support when the Class A1X and A1Y Notes will be redeemed or at final legal maturity.
• An assessment of the operational capabilities of key transaction participants.
• The ability of the transaction to withstand stressed cash flow assumptions and repay Noteholders according to the approved terms. Interest and principal payments on the Senior Notes will be made quarterly.
• The soundness of the legal structure and the presence of legal opinions which address the true sale of the assets to the trust and the non-consolidation of the special purpose vehicle, as well as consistency with the DBRS “Legal Criteria for European Structured Finance Transactions”.
• Both BPVi and BN will act as the Servicers for their respective portfolios. Additionally, BPVi will act as Master Servicer and Zenith Service S.p.A. will act as Back-up Servicer.
• The swap criteria used by J.P. Morgan Securities plc, acting as Swap Counterparty, is not fully compliant with the DBRS methodology (“Derivative Criteria for European Structured Finance Transactions”, May 2013). There is, therefore, a risk that the transaction is exposed to swap counterparty credit risk. DBRS has applied additional stresses in its analysis to account for this risk.

The principal methodology is “Master European Granular Corporate Securitisations (SME CLOs)”. Other methodologies and criteria referenced in this transaction are listed at the end of this press release.

This can be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies.

The sources of information used for this rating include BERICA PMI S.r.l., Banca Popolare di Vicenza S.C.p.A. and Banca Nuova S.p.A., as supplied via the arrangers (J.P. Morgan Securities plc and Banca Popolare di Vicenza S.C.p.A.).

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance. The extent of any factual investigation or independent verification depends on facts and circumstances.

The vintage performance data provided did not match the definition that DBRS bases its analysis on. The historical performance data was based on loans marked as either in over 270 days past due or “sofferenza”, as opposed to the standard of 90 days as per the Basel II framework. However, DBRS used additional dynamic arrears data provided by the Originators to determine conservative average annual default rate. Aside from the data type issue with regards to the calculation of the average annual default rate, DBRS considers the other information available to it for the purposes of providing this rating was of satisfactory quality.

This rating concerns a newly issued financial instrument. This is the first DBRS rating on this financial instrument.

Further information on DBRS’s analysis of this transaction will be available in a rating report on http://www.dbrs.com, or by contacting us at info@dbrs.com.

To assess the impact of changes in the transaction parameters on the ratings, DBRS considered the following stress scenarios, as compared to the parameters used to determine the ratings (the “Base Case”):
• Probability of Default Rates Used: Base Case PD assumed at 2.80%, a 10% increase of the base case PD, a 20% increase of the base case PD.
• Recovery Rates used: Base case recovery rate of 29.3% at the AA (sf) stress level, a 10% decrease on the base case Recovery Rate, a 20% decrease on the base case recovery rate.

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

For further information on DBRS’s historic default rates published by the European Securities and Markets Administration (“ESMA”) in a central repository see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Initial Lead Analyst: Carlos Silva
Initial Rating Date: 2 July 2013
Initial Rating Committee Chair: Simon Ross

Note:
All figures are in Euros unless otherwise noted.

DBRS Ratings Limited
1 Minster Court, 10th Floor
Mincing Lane
London, EC3R 7AA
United Kingdom

Registered in England and Wales: No. 7139960

The related methodologies and criteria used in the rating of this transaction can be found at: http://www.dbrs.com/about/methodologies

“Master European Granular Corporate Securitisations (SME CLOs)”
“Legal Criteria for European Structured Finance Transactions”
“Derivative Criteria for European Structured Finance Transactions”
“Unified Interest Rate Model for US and European Structured Credit”
“Cash Flow Assumptions for Corporate Credit Securitizations”
“Operational Risk Assessment for European Structured Finance Servicers”