DBRS Assigns Final Ratings to Voba 5 S.r.l.

DBRS Ratings Limited (“DBRS”) has assigned the following final ratings to the Class A1 and Class A2 notes (together, the Class A notes) issued by Voba 5 S.r.l. (“Issuer” “Voba 5”)).

Class A1 - Eur 201,400,000 Residential Mortgage Backed Securities - AAA (sf)
Class A2 - Eur 199,000,000 Residential Mortgage Backed Securities - AAA (sf)

The Issuer is a limited liability company incorporated under the laws of the Republic of Italy. The Class A notes are backed by first lien, fully amortising mortgage loans originated primarily in the regions of Trentino Alto Adige and Veneto. The transaction has a relatively low weighted average loan-to-value (LTV) at approximately 51% (un-indexed). The original weighted average un-indexed LTV was approximately 59%. The portfolio is considered granular with the average loan balance at approximately €115,139.

As of 31 January 2014 (“Transfer date”), the transaction portfolio consisted of 4,164 loans extended to 4,145 borrowers. The loans in the transaction are granted to Bank of Italy SAE code 600, individuals (96.77%), SAE code 614 artisans (0.85%) and SAE code 615, small commercial borrowers (2.38%). The par balance of the loan portfolio at the Transfer date was EUR 479.4 million.

The originator and servicer of the transaction are Banca Popolare dell’Alto Adige S.c.p.a (“Volksbank”). The Back-up servicer is Securitisation Services S.p.a. All transaction parties are suitably rated in accordance with the DBRS methodologies at the time of the initial rating to allow at the Class A notes to be AAA (sf)

Credit enhancement for the Class A1 notes is calculated as 60% provided by the entire outstanding of the Class A2 notes, 16.4% of the Class J notes and 2.1% by the reserve fund. Credit enhancement for the Class A2 notes is calculated as 18.5%. The reserve fund is established through an over issuance of the Class J note at €10 million and can amortise during the life of the transaction to 2.50% of the Class A notes with a floor equal to 0.25% of the Original Outstanding Balance of the Class A Notes. The reserve fund is available to pay the senior fees, the interest on the Class A Notes and at the date in which the Class A notes will be redeem in full to pay the last instalment of the Class A2 note.

The Class A1 note pays interest at Euribor 3m plus a margin of 100 bps while the Class A2 notes pays interest at Euribor 3m capped at 6.00% plus a margin of 100 bps. The portfolio is mainly linked to Euribor 6m (approximately 50%) but also has exposure to Euribor 3m (approximately 22.8%), Euribor 1m (approximately 0.4%), ECB rate (approximately 0.1%) and fixed rate (about 26.7%). 7.01% of the loans have a cap on their interest rate. The portfolio consists of 13.45% the loans that can switch the interest rate every five years, 9.00% from fixed to floating and 4.50% from floating to fixed. DBRS has modeled the interest rate basis risk associated with the mismatch between the interest rates on the assets and interest rate paid on the Notes, and also the risk associated to the optional loans, using its Unified Interest Rate Methodology.

The servicing agreement allows for a limited number of loans to be renegotiated. Loans that are currently paying floating can convert to fixed interest rate, and vice versa. Furthermore, for a limited portion loans in the portfolio are allowed a spread reduction, an interest payment holiday or a maturity extension. DBRS has modeled the possible impact of these renegotiations into its cash flow analysis.

The ratings are based upon DBRS review of the following analytical considerations:

• Transaction capital structure and form and sufficiency of available credit enhancement.
• The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to terms in which they have invested.
• The transaction parties’ capabilities with respect to originations, underwriting, servicing, and financial strength.
• 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.
• Incorporation of a sovereign related stress component in our stress scenario due to the downgrade by DBRS of the Republic of Italy’s to ‘A (low)’ - Negative Trend.

DBRS credit analysis is performed on a loan-level basis and includes a probability of default and loss given default assessment, an originator- and servicer- specific historical performance review, an analysis of loan default data, a Italian housing market and property price trend evaluation
Finally a cash flow modelling is been run based on the following assumption:

• front- and back- loaded default and recoveries
• upward and downward rate scenarios
• prepayment rate assumption at 0% - 5% - 10% - 20%

DBRS assessed the two year probability of default, utilizing Volksbank’s definition of defaults (sofferenze) as defined by the Bank of Italy.

Note:
All figures are in Euro unless otherwise noted.

The principal methodologies applicable are Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda

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

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” on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.

The sources of information used for this rating include working papers and data on the Italian economy and housing market provided by:, ECB, Eurostat, Bank of Italy, Nomisma, Istituto Nazionale di Statistica (ISTAT). DBRS conducted an operational review on the origination and servicing practices of Volksbank. The Originator provided loan-level data and historical performance of mortgage portfolio dating back to 2004. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

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.

This is a newly created financial instrument.

This is the first DBRS rating on this financial instrument.

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.

To assess the impact of a change in the transaction parameters (probability of defaults and/or loss given default) on the rating of Class A1 Notes and Class A2 Notes, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the “Base Case”):
• In respect of Class A1 Notes and a rating category of “AAA (sf)”, the Probability of Default (“PD”) of 28.02%, a 25% and 50% increase on the PD.
• In respect of Class A1 Notes and a rating category of “AAA (sf)”, Loss Given Default (“LGD”) of 31.47%, a 25% and 50% increase on the LGD.
• In respect of Class A2 Notes and a rating category of “AAA (sf)”, the Probability of Default (“PD”) of 28.02%, a 25% and 50% increase on the PD.
• In respect of Class A2 Notes and a rating category of “AAA (sf)”, Loss Given Default (“LGD”) of 31.47%, a 25% and 50% increase on the LGD.

DBRS concludes that for the Class A1 Notes:
• A hypothetical increase of the PD by 25% or a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to maintain the Class A1 Notes to AAA (sf).
• A hypothetical increase of the PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to maintain the Class A1 Notes to AAA (sf).
• A hypothetical increase of the PD by 50% or a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to maintain the Class A1 Notes to AAA (sf).
• A hypothetical increase of the PD by 50% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to maintain the Class A1 Notes to AAA (sf).

DBRS concludes that for the Class A2 Notes:
• A hypothetical increase of the PD by 25% or a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to maintain the Class A1 Notes to AAA (sf).
• A hypothetical increase of the PD by 25% and a hypothetical increase of the LGD by 25%, would lead to a downgrade of the Class A2 Notes to AA(high) (sf).
• A hypothetical increase of the PD by 50%, ceteris paribus, would lead to a downgrade of the Class A2 Notes to AA(high) (sf).
• A hypothetical increase of the LGD by 50%, ceteris paribus, ceteris paribus, would lead to maintain the Class A1 Notes to AAA (sf).
• A hypothetical increase of the PD by 25% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to maintain the Class A1 Notes to AA(sf).
• A hypothetical increase of the PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to maintain the Class A1 Notes to AA(sf).
• A hypothetical increase of the PD by 50% and a hypothetical increase of the LGD by 50%, would lead to a downgrade of the Class A2 Notes to AA (low) (sf).

For further information on DBRS 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: Davide Nesa
Initial Rating Committee Chair: Quincy Tang
Initial Rating Date: 08th April 2014
Initial Lead Surveillance Analyst: Dylan Cissou

Last Rating Date: Not applicable as this is a new rating.

DBRS Ratings Limited
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Registered in England and Wales: No. 7139960

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

Legal Criteria for European Structured Finance Transactions
Derivative Criteria for European Structured Finance Transactions
Operational Risk Assessment for European Structured Finance Servicers
Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
Unified Interest Rate Model for European Securitisations