DBRS Confirms Ratings on Berica ABS S.r.l.

DBRS Ratings Limited (DBRS) has today confirmed its ratings of the Class A1 and Class A2 Notes of Berica ABS S.r.l. (the Issuer) at AAA (sf).

The confirmation of the rating of the Class A1 and Class A2 Notes is based upon the following analytical considerations:
-- Portfolio performance, in terms of delinquencies and defaults, as of the December 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 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 enhancements for the Class A1 and Class A2 Notes to cover the expected losses at the AAA (sf) rating level.

Berica ABS S.r.l. is a securitisation of a portfolio of Italian first lien mortgage loans originated and serviced by Banca Popolare di Vicenza S.c.p.a. and Banca Nuova S.p.A. Banca Popolare di Vicenza also acts as Master Servicer for the deal. The transaction follows the standard structure under the Italian Securitisation Law and closed in December 2011.

The mortgage pool is well-seasoned (over five years), homogeneously distributed across Italy and only 7.18% of the current portfolio is exposed to loans originated in the 2006 and 2007 vintages.

The portfolio is performing in line with DBRS’s expectations. As per the December 2014 payment date, the 90+ delinquency ratio (excluding defaulted loans) as a percentage of the performing balance of the portfolio was 2.78%. The gross cumulative default ratio (as a percentage of the original balance of the portfolio) increased over the year reaching 1.40% in December 2014, but it is still below DBRS’s base case portfolio default rate of 7.76%.

The Class A1 Notes are supported by subordination of the Class A2 Notes and the Class B Notes, while the Class A2 Notes are supported by subordination of the Class B Notes. Credit enhancements (as a percentage of the performing portfolio) for the Class A1 and Class A2 Notes increased over the year reaching 49.61% and 38.41% in December 2014, respectively. This has been the result of the amortisation of the Class A1 Notes.

The transaction benefits from an amortising cash reserve which provides liquidity support to the Class A1 and Class A2 Notes. The cash reserve amortises at 3.50% of the Class A Notes balance and is currently at the target level of EUR 22.39 million.

Deutsche Bank AG, London branch is the account bank for this transaction. The DBRS private rating of Deutsche Bank AG, London branch is at least equal to the Minimum Institution Rating given the rating assigned to the Class A1 and Class A2 Notes, as described in the DBRS Legal Criteria for European Structured Finance. In addition, 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 applicable DBRS Derivative Criteria. JPMorgan Chase Bank N.A. is the guarantor for the obligations of JPMorgan Securities plc under the hedging agreement.

Notes:
All figures are in euros 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’s “The Effect of Sovereign Risk on Securitisations in the Euro Area” commentary 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. 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 11 April 2014, when DBRS confirmed the ratings of the Class A1 and Class A2 Notes at AAA (sf).

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

To assess the impact of 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 7.76% and 9.78%, respectively. At the AAA (sf) rating level, the corresponding PD is 31.01% and the LGD is 34.63%.
-- 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 A 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 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 for the Class A 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)

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: 20 February 2012
Initial Rating Committee Chair: Claire Mezzanotte

Lead Surveillance Analyst: Elisa Scalco
Rating Committee Chair: Erin Stafford

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
-- 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