DBRS Confirms Rating on Salina Leasing S.r.l.

DBRS Ratings Limited (“DBRS”) has reviewed Salina Leasing S.r.l. (“the Issuer”) and confirms the rating on the Class A Notes at ‘A’ (sf).

The confirmation of the rating on the Class A Notes is based upon the following analytical considerations:
• Portfolio performance, in terms of defaults and delinquencies, as of the January 2014 payment date.
• Updated default, recovery and loss assumptions on the remaining balance of the collateral portfolio.
• Incorporation of a sovereign related stress component in the rating analysis to address the impact of macroeconomic variables on collateral performance given the long-term foreign and local currency rating of ‘A’ (low) for the Republic of Italy.
• Current available credit enhancement to the Class A Notes to cover the expected losses at the ‘A’ (sf) rating level.

Salina Leasing S.r.l. is a securitisation of lease receivables extended to small and medium entities in Italy. The portfolio was originated and is serviced by Hypo Alpe-Adria-Bank S.p.A. The transaction follows the standard structure under the Italian Securitisation Law and closed in July 2012.

The original pool was granular and borrowers were mostly located in Northern Italy (mainly in Lombardy and Veneto regions, which are considered two of three richest regions in Italy). The portfolio is static and the residual value was not securitised.
The portfolio is performing within DBRS initial expectations in terms of delinquencies and defaults. The current 90+ delinquency rate is 8.29%. The cumulative default rate showed an increasing trend over the life reaching a maximum amount of 4.22% in October 2013. As of the January 2014 payment date, the rate has decreased to 3.57%. The decrease of the cumulative default rate is due to the originator option to repurchase and renegotiate receivables subject to a limit of 10% of the original portfolio balance, currently at 7.11%. Cumulative recoveries to date are low, but in line with DBRS assumptions from its initial rating analysis.

The Class A Notes is supported by subordination of the Class B Notes. The current credit enhancement for the Class A Notes (as a percentage of the outstanding performing balance of the portfolio) is 70.79%, up from 35.00% at the initial rating in July 2012. A non-amortising cash reserve of EUR 10.83 million was set up at transaction close and provides liquidity support to the Class A Notes. The cash reserve is currently at the initial and target level.

BNP Paribas Securities Services, Milan branch is the account bank for the transaction. The DBRS private rating of BNP Paribas Securities Services, Milan branch is at least equal to the Minimum Institution Rating given the rating assigned to the Class A Notes, as described in the DBRS Legal Criteria for European Structured Finance.

Notes:
All figures are in Euro unless otherwise noted.
The principal methodology applicable is the Master European Structured Finance Surveillance Methodology. 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 investor reports provided by Securitisation Services S.p.A. and servicer reports provided by Hypo Alpe-Adria-Bank S.p.A. 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.

The last rating action on this transaction took place on 11 April 2013, when DBRS confirmed the rating on the Class A Notes at ‘A’ (sf) and removed the rating from Under Review with Negative Implications.

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

To assess the impact of the changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the “Base Case”):
• DBRS expected a Base Case Probability of Default (PD) and Loss Given Default (LGD) for the pool based on a review of the transaction performance. Adverse changes to asset performance may cause stresses to base case assumptions and therefore have a negative effect on credit ratings.
• The Base Case PD and LGD of the current pool of receivables are 38.20% and 90.00%, respectively.
• The Risk Sensitivity overview below illustrates the ratings expected for the Class A Notes if the PD and LGD increase by a certain percentage over the Base Case assumption. For example, if the LGD increase by 50% the rating for the Class A Notes would be expected to be ‘A’ (sf), all else being equal. If the PD increases by 50% the rating for the Class A Notes would be expected to fall to BBB (sf), all else being equal. If both the LGD and PD increase by 50%, the rating of the Class A Notes would be expected to fall to BB (sf), all else being equal.
• Base case default perceived as unusually severe. With reference to the Rating European Consumer and Commercial Asset-Backed Securitisations Methodology, non-standard multiples have been applied to assess the rating scenarios (ranging from standard base to 2.5 at the AAA rating level).

Class A Risk Sensitivity:

• 25% increase in LGD, expected rating of ‘A’ (sf).
• 50% increase in LGD, expected rating of ‘A’ (sf).
• 25% increase in PD, expected rating of ‘A’ (sf).
• 50% increase in PD, expected rating of BBB (sf).
• 25% increase in LGD and 25% increase in PD, expected rating of BBB (high) (sf).
• 25% increase in LGD and 50% increase in PD, expected rating of BB (sf).
• 50% increase in LGD and 25% increase in PD, expected rating of BBB (high) (sf).
• 50% increase in LGD and 50% increase in PD, expected rating of BB (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: Paolo Conti
Initial Rating Date: 26 July 2012
Initial Rating Committee Chair: Claire Mezzanotte

Last Rating Date: 11 April 2013

Lead Surveillance Analyst: Elisa Scalco
Rating Committee Chair: Chuck Weilamann

DBRS Ratings Limited
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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.
• Master European Structured Finance Surveillance Methodology.
• Operational Risk Assessment for European Structured Finance Servicers.
• Unified Interest Rate Model for European Securitisations.
• Rating European Consumer and Commercial Asset-Backed Securitisations.