DBRS Confirms the Ratings on Marche M6 S.r.l.

DBRS Ratings Limited (“DBRS”) has today reviewed Marche M6 S.r.l. (the “Issuer”) and has confirmed the following ratings:
• Class A1 at AAA (sf)
• Class A2 at AAA (sf)
• Class A3 at AAA (sf)

The confirmation of the ratings for the Class A1, Class A2 and Class A3 Notes is based upon the following analytical considerations, as described more fully below:

• Portfolio performance, in terms of delinquencies and defaults, as of the April 2014 payment date.
• Updated portfolio default rate, loss given default and expected loss assumptions for the remaining collateral pool.
• 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 A1, Class A2 and Class A3 Notes to cover the expected losses at the AAA (sf) rating level.

Marche M6 S.r.l. is a static securitisation of a portfolio of first lien mortgage loans extended to obligors located in Italy. Banca delle Marche S.p.A. is the originator and servicer for the transaction.

On 25 October 2013 Bank of Italy placed Banca delle Marche under special administration regime. The transaction benefits from a fully funded cash reserve and a back-up servicer arrangement with Italfondiario. These mitigants coupled with the commitment of Banca delle Marche to transfer collections within the same business day on which the relevant amount has been collected, are considered to adequately mitigate any risk arising from a potential servicing disruption.

The portfolio has good seasoning (4.16 years), approximately 98.53% of the current pool pays monthly instalments and 63.02% of the loans have been originated between 2010 and 2013. Additionally, the portfolio is geographically concentrated in the Marche region (approximately 50%), which is the area of the originator’s origin.
The 90+ delinquency ratio reached 0.54% in April 2014, down from 0.90% in January 2014. The current cumulative default ratio (as a percentage of the original portfolio) has been increasing since the transaction closed in July 2013, but it is still relatively low at 0.49%.

The Class A1, Class A2 and Class A3 Notes are supported by subordination of the Class J Notes. Credit enhancement for the Class A1, Class A2 and Class A3 Notes (as a percentage of the performing portfolio) increased slightly to 21.58% from 20.09% at transaction close in July 2013.

The transaction benefits from a cash reserve fully funded with the proceeds (of part) of the Class J Notes. The cash reserve is available to cover senior payments (including net swap payments due and payable by the Issuer and interest under the senior notes) during the life of the transaction. The cash reserve amortises with the balance of the senior notes and will be reduced to zero on the payment date in which the senior notes will be redeemed in full. The reserve fund is at the current target level of EUR 64.47 million (approximately 4.10% of the outstanding balance of the senior notes).

BNP Paribas Securities Services, Milan branch and BNP Paribas Securities Services, London branch are the Italian and English Account Bank for the transaction. The DBRS private ratings of each BNP Paribas Securities Services, Milan branch and BNP Paribas Securities Services, London branch are at least equal to the Minimum Institution Rating given the rating assigned to the Class A1 Notes, as described in the DBRS Legal Criteria for European Structured Finance. Additionally, J.P. Morgan Securities plc acts as swap counterparty for the transaction. The DBRS private rating of J.P. Morgan Securities plc complies with the DBRS Derivative Criteria for European Structured Finance Transactions given the rating assigned to the senior most notes.

Notes:
All figures are in Euro unless otherwise noted.
The principal methodology applicable is 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. and servicer reports provided by Banca delle Marche S.p.A. as well as 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 16 July 2013, when DBRS assigned the ratings of AAA (sf) to the Class A1, Class A2 and Class A3 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 assets. 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 6.61% and 5.11%, respectively. At the AAA (sf) rating level, the corresponding PD is 28.86% and the LGD is 27.98%.
• 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 the Class A1 Notes would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A1 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 A1 Notes would be expected to remain at AAA (sf).

Class A1 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)

Class A2 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)

Class A3 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: Alastair Bigley
Initial Rating Date: 16 July 2013
Initial Rating Committee Chair: Quincy Tang

Lead Surveillance Analyst: Elisa Scalco
Rating Committee Chair: Mary Jane Potthoff

DBRS Ratings Limited
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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
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
Unified Interest Rate Model for European Securitisations