DBRS Confirms Ratings of Padovana RMBS S.r.l.

DBRS Ratings Limited (“DBRS”) has reviewed Notes issued by Padovana RMBS S.r.l. (the “Issuer”) and confirms the rating of the Class A Notes at A (sf).

Padovana RMBS is a securitisation of Italian prime residential mortgages originated and serviced by Banca Padovana Credito Cooperativo (“Banca Padovana”). The transaction initially closed in July 2012 and the issuer has subsequently used a paid-up amount of EUR 169 million to purchase additional portfolio from a previous transaction named Alta Padovana Finance closed in 2009.

The issuer is exposed to concentration risk as most of the loans are secured by properties located in the Veneto region. Approximately 86 % of the properties securing the loans are in the province of Padova. In the determination of the expected loss for its surveillance purposes, DBRS uses similar methodology and model as per its RMBS methodology. Given the geographic concentration and as a deviation from its RMBS methodology, DBRS has adjusted the market value decline (MVD) assumptions for this transaction in order to account for potentially higher house price declines and distressed sale discounts.

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 30 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 A (sf) rating level.
• Presence of Cassa Centrale Banca Credito Cooperativo del Nord Est S.p.A. acting as a warm Back-Up Servicer in order to mitigate servicing disruption.
• DBRS has adjusted the MVD assumptions to account for the concentration of the mortgage portfolio.

As of the 30 April 2014 payment date, the current 90+ delinquency ratio as a percentage of the current balance of the portfolio (EUR 295.2 million) was 0.51%, while the cumulative default ratio as a percentage of the initial portfolio was 0.96%.

Credit enhancement for the Class A Notes (as a percentage of the collateral balance) consists of subordination of the Class B Notes and a Cash Reserve and currently stands at 25.86%. The Reserve Fund has been initially funded via a subordinated loan with EUR 11.75 million and is composed of two components: a Liquidity Reserve and a Cash Reserve. The initial Cash Reserve amount was EUR 1.789 million with a balance which increases as the Liquidity Reserve component amortises. The Liquidity Reserve required amount is 3.5% of the Class A Notes outstanding balance. As the Liquidity Reserve amortised down to EUR 8.079 million, the Cash Reserve balance is now EUR 3.67 million. The Liquidity Reserve only supports shortfall in senior expenses (EUR 55.6K as last payment date) and/or Class A interests while the Cash Reserve support Principal Losses on the Class A Notes.

BNP Paribas Securities Services SA/Milan (the “Italian Account Bank”) holds the Collections account for the transaction, while BNP Paribas Securities Services SA/London (the “English Account Bank”) holds the Reserve Fund and the Investment accounts. The private rating of the Italian and English Account Banks 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.

Banca Padovana, which is currently the servicer of the transaction, is under special administration from the Bank of Italy as of May 2014. DBRS is monitoring the evolution of the situation, and notes that the transaction benefits from the presence of a warm back-up servicer and a substantial liquidity reserve.

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 payment reports provided by Securitisation Services S.p.A. (the “Calculation Agent”), servicer reports provided by Banca Padovana (the “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 A (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 6.17% and 16.51%, respectively. The corresponding levels at the A (sf) rating level are 18.89% and 38.32%.
• 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 A (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 A (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 A (sf).

Class A Notes 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 A (sf)
• 25% increase in PD and 25% increase in LGD, expected rating of A (sf)
• 25% increase in PD and 50% increase in LGD, expected rating of A (sf)
• 50% increase in PD and 25% increase in LGD, expected rating of A (sf)
• 50% increase in PD and 50% increase in LGD, expected rating of A (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: Kali Sirugudi
Initial Rating Date: 27 July 2012
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
• Unified Interest Rate Model for European Securitisations