DBRS Confirms Ratings of Malatesta Finance S.r.l. - Series 2012

DBRS Ratings Limited (“DBRS”) has reviewed the Series 2012 Notes issued by Malatesta Finance S.r.l. (the “Issuer”) and confirms the rating of the Class A Notes at A (high) (sf).

Malatesta Finance - Series 2012 is a securitisation of Italian prime residential mortgages originated by Cassa di Risparmio di Cesena S.p.A. (“CRC” – 70% of the portfolio) and Banca di Romagna S.p.A. (“BdR – 30% of the portfolio) where CRC also operates as Servicer of the portfolio. The transaction initially closed in May 2012.

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 (high) (sf) rating level.

As of the 30 April 2014 payment date, the current 90+ delinquency ratio as a percentage of the current balance of the portfolio (EUR 175.5 million) was 1.82%, while the cumulative default ratio as a percentage of the initial portfolio was 0.26%.

Credit enhancement for the Class A Notes (as a percentage of the collateral balance) consists of subordination of two Class B Notes, ranked pari passu, and is at 18.47%. Funds from each originator are distributed in accordance with a combined priority of payments where the available funds are cross-collaterised. The transaction also benefits from a Liquidity Reserve available to cover senior expenses and/or Class A interests shortfall. The Liquidity Reserve currently stands at EUR 4.8 million and will continue to amortise in relation to the Class A Notes (at 3.5% of the principal balance).

Bank of New York Mellon (Luxembourg) S.A. Italian Branch (the “Italian Account Bank”) holds the Collections account for the transaction, while Bank of New York Mellon London Branch (the “English Account Bank”) holds the Liquidity Reserve and the Investment accounts. The DBRS public 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.

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 Accounting Partners S.r.l. (the “Computation Agent”), servicer reports provided by CRC (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 (high) (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 6.0% and 1.03%, respectively. The corresponding levels at the A (high) (sf) rating level are 19.48% and 11.52%.
• 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 (high) (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 (high) (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 (high) (sf).

Class A Notes Risk Sensitivity:
• 25% increase in LGD, expected rating of A (high) (sf)
• 50% increase in LGD, expected rating of A (high) (sf)
• 25% increase in PD, expected rating of A (high) (sf)
• 50% increase in PD, expected rating of A (high) (sf)
• 25% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
• 25% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)
• 50% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
• 50% increase in PD and 50% increase in LGD, expected rating of A (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: Alastair Bigley
Initial Rating Date: 25 May 2012
Initial Rating Committee Chair: Claire Mezzanotte

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

DBRS Ratings Limited
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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