DBRS Rates CR VOLTERRA 2 SPV S.r.l.

DBRS Ratings Limited (“DBRS”) has today assigned a ‘A’ (sf) rating to the Class A notes issued by CR Volterra 2 SPV S.R.L.

The transaction is a securitisation of prime first and second lien Italian residential mortgage loans originated in the Republic of Italy by Cassa di Risparmio di Volterra S.p.A, (CR Volterra). The transaction has a relatively low LTV at approximately 51% (un-indexed). The original un-indexed loan to value was approximately 58%. CR Volterra was unable to provide, for most of 2nd lien loans (approximately 6.4% by balance) in the portfolio, loan by loan details on the first charge that was secured by the same property. DBRS has made conservative assumptions as to the possible size of the first lien. The loans in the transaction are made exclusively to Bank of Italy SAE code 600, 614 and 615. Approximately 78% of the loans were originated to SAE code 600, which constitutes consumer families. The rest of the pool was originated to artisans.

Credit enhancement for the Class A notes of 18.71% comprises the Class J notes and the reserve fund. The reserve fund stands at €3.984m at the transaction closing date and can amortise to €0.919m. The transaction does not have a back-up servicer, there is, however, a back-up servicing facilitator who is charged on a ‘best efforts’ basis in the event of a servicer disruption in finding a replacement servicer. To mitigate against the risk of payment disruption in the event a default of CR Volterra, the transaction also has a Commingling Reserve sized initially at €4.427m. The Commingling Reserve is not available to cover credit losses and is available to pay fees and Class A interest in the event of a servicer disruption. The transaction does not have an interest rate swap. Consequently there is residual unhedged interest rate risk. The majority of the assets are variable rate loans linked to six-month euribor and the liabilities pay three-month euribor. Of the variable rate loans, 17.33% have a rate of interest that is capped between approximately 4% and 10%. The transaction also has 3.74% of fixed rate loans. DBRS has stressed the risk associated with such loans in a rising interest rate environment to account for the unhedged nature of the transaction.

The transaction is a fully liquidating structure. Following the payment of senior fees, Class A interest and replenishment of the reserve fund, all principal will be used to redeem the Class A notes in the order mentioned above. This allows all available excess spread (if any) to be used to amortise the Class A notes. This allows credit enhancement to build up at a quicker rate than it otherwise would absent of this structural feature.

CR Volterra is the loan servicer and also fulfills the roles of the collection account. Monies are transferred to an account held with BNP Paribas Securities Services, Milan Branch. At the time of issuance, all transaction parties meet the minimum rating requirements for the Class A notes to be rated ‘A’ (sf).

The ratings are based upon DBRS review of the following analytical considerations:
• The transaction’s capital structure and the form and sufficiency of available credit enhancement. Relevant credit enhancement is in the form of subordination.
• The credit quality of the mortgages backing the notes and the ability of the servicer to perform collection activities on the collateral.
• The transaction parties’ capabilities with respect to originations, underwriting, servicing and financial strength.
• The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms of the transaction documents.
• The legal structure and presence of legal opinions addressing the assignment of the assets to the issuer and the consistency with the DBRS Legal Criteria for European Structured Finance Transactions.

Notes:
All figures are in Euro unless otherwise noted.

The principal methodologies applicable are:
• Master European Residential Mortgage-Backed Securities Rating Methodology
• Legal Criteria for European Structured Finance Transactions
• Operational Risk Assessment for European Structured Finance Servicers
• Unified Interest Rate Model Methodology for European Securitisations

These can be found on www.dbrs.com under Methodologies. For a more detailed discussion of sovereign risk impact on Structured Finance ratings, please refer to DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area”.

The sources of information used for this rating include investor reports and documents provided by the issuer. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality. The information upon which DBRS ratings and reports are based, and any other Content displayed on the Site, is obtained by DBRS from sources DBRS believes to be accurate and reliable. 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 final ratings concern newly issued financial instruments.

This is the first DBRS rating on these financial instruments.

For additional information on this rating, please see the linking document located at

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.

Lead Analyst: Alastair Bigley
Rating Committee Chair: Quincy Tang
Initial Rating Date: 26 July 2013
Previous Rating Date: Not applicable as no previous rating date

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