DBRS Assigns Final Ratings to 2013 Popolare Bari RMBS S.r.l.

DBRS Ratings Limited (“DBRS”) has assigned the following final ratings to notes Class A1 and Class A2 (together, the Class A notes) issued by 2013 Popolare di Bari RMBS (“Issuer”).

Class A1 - Eur 295,900,000 Residential Mortgage Backed Securities - AA(high) (sf)
Class A2 - Eur 93,300,000 Residential Mortgage Backed Securities - AA(high) (sf)

The Issuer is a limited liability company incorporated under the laws of Italy. The Class A notes are backed by mainly first lien, fully amortising mortgage loans originated for the majority in the regions of Puglia, Campania, Umbria, Lazio e Basilicata. The transaction has a relatively low loan to value (LTV) at approximately 55% (un-indexed). The original un-indexed LTV was approximately 63%. The loans in the portfolio are granular with the average loan balance at approximately €88,515. The loans in the transaction are made exclusively to Bank of Italy SAE code 600 (individuals).

The originators and servicers of this transaction are Banca Popolare di Bari S.c.p.a and Cassa di Risparmio di Orvieto S.p.a., both part of Banca Popolare di Bari Group (“BPB”). The Back-up servicer is Zenith Service S.p.a.

Credit enhancement for the Class A notes is calculated as 23.2%, provided by 20% from the Class B notes and 3.2% from the reserve fund. The reserve fund is established through an over issuance of the class B1 an B2 notes at approximately €15.6 million and cannot amortise whilst the Class A notes are outstanding.

The Class A notes and approximately 41.6% of the mortgage loans pay interest linked to Euribor 3m. The rest of the portfolio is linked respectively to Euribor 6m (approximately 18.2%), Euribor 1m (approximately 4.6%), ECB rate (approximately 10.9%), a consistently of fixed rate (about 24.7%) loans. 4.73% of the portfolio has a cap on the interest rate. The Issuer entered into two fixed to floating interest swap agreements with J.P. Morgan Securities Ltd (“Swap Counterparty”) in order to cover the risk between the portion of the portfolio that pays a fixed rate and the coupon of the Class A notes that pays Euribor 3m. DBRS has modeled the interest rate risk associated with the mismatch between the interest rates on the assets (for the unhedged portion) and interest rate paid from the Issuer to the Swap Counterparty 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 for a limited portion of the portfolio is allowed a spread reduction and the schedule 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 BPB’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 BPB. Banca Popolare di Bari provided loan-level data and historical performance of mortgage portfolio dating back to 2004 and Cassa di Risparmio di Orvieto back to 2009 after entering in the BPB Group. 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 A notes and a rating category of “AA(high) (sf)”, the Probability of Default (“PD”) of 32.85%, a 25% and 50% increase on the PD.
• In respect of Class A notes and a rating category of “AA(high) (sf)”, Loss Given Default (“LGD”) of 33.80%, a 25% and 50% increase on the LGD.

DBRS concludes that for the Class A notes:

• A hypothetical increase of the PD by 25% or a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A notes to AA (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 A notes to A(high) (sf).
• A hypothetical increase of the PD by 50%, ceteris paribus, would lead to a downgrade of the Class A notes to A(high) (sf).
• A hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A notes to A(high) (sf).
• A hypothetical increase of the PD by 25% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A notes to A(low)(sf).
• A hypothetical increase of the PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A notes to A(low)(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 A notes to BBB(high) (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: Claire Mezzanotte
Initial Rating Date: 10th April 2014
Initial Lead Surveillance Analyst: Dylan Cissou

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

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

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