DBRS Confirms Ratings of Cassa Centrale Finance 3 S.r.l.

DBRS Ratings Limited (“DBRS”) has reviewed Cassa Centrale Finance 3 S.r.l. (the “Issuer”) and confirms the rating of the Class A Notes at AAA (sf).

Cassa Centrale Finance 3 S.r.l is a securitisation of Italian residential mortgages (77% of the portfolio) and agrarian loans (23% of the portfolio) originated by fourteen cooperative Italian banks: Mediocredito Trentino A.A., BCC Cherasco, Cassa Rurale di Aldeno e Cadine, Cassa Rurale Lavis Valle di Cembra, Cassa Rurale di Pergine, BCC Centromarca, Cassa Rurale Alto Garda, Cassa Rurale Pinetana Fornace e Seregnano, Cassa Rurale Adamello–Brenta, Cassa Rurale di Rovereto, Banca Alto Vicentino Credito Cooperativo Schio, Cassa Rurale Centrofiemme Cavalese, Banca di Cavola e Sassuolo, Cassa Rurale di Folgaria which also operates as Servicer of their portfolio. The transaction is coordinated by Cassa Centrale Banca Credito Cooperativo del Nord Est S.p.A. and initially closed in December 2009.

Confirmation of the ratings for the Class A Notes is based upon the following analytical considerations, as described more fully below:

• Portfolio performance, in terms of the level of delinquencies and defaults, as of the 29 April 2014 payment date.
• Updated Portfolio Defaults, Loss Given Defaults and Expected Losses estimates for the remaining pool.
• Current available credit enhancement to Class A Notes to cover the Expected Losses at the AAA (sf) rating level.

As of the 29 April 2014 payment date, the current 30+ delinquency ratio as a percentage of the current balance of the portfolio (EUR 267.6 million) was 3.30%. The cumulative default amount has remained at zero since the close of the transaction. This is due to the sellers repurchasing all loans which are going to become defaulted, resulting in a cumulative defaults percentage of zero. Since the transaction closing date, the sellers have repurchased 0.33% of the original collateral balance and this is subject to a limit of 5% of the initial portfolio.

Credit enhancement for the Class A Notes (as a percentage of the collateral balance) consists of subordination of fourteen Class B Notes, ranked pari passu, and is at 22.09%. Funds from each originator are distributed in accordance with a single priority of payments, however the waterfall could combine and available funds will cross-collaterise if a performance trigger is breached. The transaction also benefits from a Liquidity Reserve available to cover senior expenses shortfall. The Liquidity Reserve has been funded by each originator (except Mediocredito Trentino A.A.) and currently stands at EUR 25.65 million.

Deutsche Bank S.p.A. (the “Account Bank”) holds the Treasury Account for the transaction. The DBRS private rating of the Account Bank complies with the threshold for the Account Bank given the rating assigned to the Class A Notes, as described in the DBRS Legal Criteria for European Structured Finance Transactions.

Mediocredito Trentino A.A. (“Mediocredito”) is the fixed-to-floating swap counterparty for the transaction in order to hedge the interest risk raising from the fixed rates loans of the agrarian portfolio given the floating coupon paid on the notes. Mediocredito is in breach of the Second Trigger Required Ratings as defined in the swap documentation. The Issuer has informed DBRS that it is currently posting collateral as per the swap documentation but the issuer was not able to find a guarantor for the Mediocredito obligations. As a result, DBRS did not give any benefit to the hedge in the underlying cash flow analysis.

Notes:
All figures are in EUR 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 Deutsche Bank S.p.A. (the “Italian Paying Agent”), servicer reports provided by Cassa Centrale Banca Credito Cooperativo del Nord Est S.p.A (the “The Operating Bank and the Back-up Servicer”) and data from the European DataWarehouse. 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 04 April 2013, when DBRS confirmed the rating of AAA (sf) on the Class A Notes.

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 lifetime base case Probability of Default (PD) and Loss Given Default (LGD) for the pool based on a review of the current receivables. 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 mortgages for the Issuer are 6.02% and 1.95%, respectively. The corresponding levels at the AAA (sf) rating level are 28.67% and 19.88%.
• The Risk Sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base case assumption. For example, if the LGD increases by 50%, the rating of Class A Notes would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A Notes would be expected to remain at AAA (sf), assuming no change in the LGD. Furthermore, if both PD and LGD increase by 50%, the rating of the Class A Notes would be expected at remain at AAA (sf).

Class A Notes Risk Sensitivity:
• 25% increase in LGD, expected rating of AAA (sf)
• 50% increase in LGD, expected rating of AAA (sf)
• 25% increase in PD, expected rating of AAA (sf)
• 50% increase in PD, expected rating of AAA (sf)
• 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
• 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
• 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
• 50% increase in PD and 50% increase in LGD, expected rating of AAA (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: Alessio Pignataro
Initial Rating Date: 05 May 2011
Initial Rating Committee Chair: Claire Mezzanotte

Lead Surveillance Analyst: Dylan Cissou
Rating Committee Chair: Diana Turner

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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
• Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
• Master European Structured Finance Surveillance Methodology
• Derivative Criteria for European Structured Finance Transactions
• Unified Interest Rate Model for European Securitisations