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

DBRS Ratings Limited (DBRS) has today taken the following rating actions on the bond issued by Marche M6 S.r.l. (the Issuer):

-- Class A1 Notes confirmed at AAA (sf)
-- Class A2 Notes confirmed at AAA (sf)
-- Class A3 Notes confirmed at AAA (sf)

The confirmation of the ratings on the Class A1, Class A2 and Class A3 Notes are based on the following analytical considerations, as described more fully below:
-- Portfolio performance, in terms of delinquencies and defaults, as of the April 2015 payment date.
-- Updated portfolio default rate, loss given default and expected loss assumptions for the remaining collateral pool.
-- Current available credit enhancement to the Class A 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 mortgages loans extended to obligors located in Italy. Banca delle Marche S.p.A. is the originator and servicer for the transaction. The transaction closed in July 2013.

In October 2013, Bank of Italy placed Banca delle Marche S.p.A. under a special administration regime. On 1 June 2015, DBRS issued a commentary to explain that there is no impact on Marche M5 and Marche M6 from the non-repayment of the EUR 1.8 billion Credito Fondiario loan by Banca delle Marche S.p.A. Banca delle Marche S.p.A. has been able to continue its role as a Collection Account Bank and Servicer without any noticed disruption. The transaction benefits from a fully funded cash reserve and a backup servicer arrangement with Italfondiario. These mitigants, together with the commitment of Banca delle Marche S.p.A. 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. Nevertheless, DBRS will keep monitoring this situation.

As of the April 2015 payment date, one- to two-month arrears are at 1.60% and current two- to three-month arrears are at 0.27%. The 90+ delinquency ratio has been quite stable over the year and it is currently at 0.51%, down from 0.54% in April 2014. The current cumulative default ratio (as a percentage of the original portfolio) increased over the year and it is currently at 1.27%, up from 0.49% as of April 2014.

The Class A1, Class A2 and Class A3 Notes are supported by the 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 to 24.2% from 21.58% in April 2014.

The transaction benefits from a cash reserve which is available to cover senior payments 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 on which the senior notes will be redeemed in full. The reserve fund is at the current target level of EUR 57.44 million.

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, Class A2 and Class A3 Notes, as described in the DBRS Legal Criteria for European Structured Finance Transactions. 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 euros unless otherwise noted.

The principal methodology applicable is the Master European Structured Finance Surveillance Methodology, which can be found on www.dbrs.com at http://www.dbrs.com/about/methodologies. Other methodologies and criteria referenced in this transaction are listed at the end of this press release.

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 payment and investor 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 rely upon third-party due diligence in order to conduct its analysis; DBRS was not supplied with third-party assessments. However, this did not impact the rating analysis. Data checks were performed and DBRS did not apply additional cash flow stresses in its scenarios.

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 July 2014, when DBRS confirmed the rating on the Class A1, Class A2 and Class A3 Notes at AAA (sf).

Information regarding DBRS ratings, including definitions, policies and methodologies is available at www.dbrs.com.

To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios as compared with 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 the 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 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: Vito Natale
Rating Committee Chair: Diana Turner

DBRS Ratings Limited
1 Minster Court, 10th Floor
Mincing Lane
London
EC3R 7AA
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 (December 2014)
-- Master European Structured Finance Surveillance Methodology (April 2015)
-- Operational Risk Assessment for European Structured Finance Servicers (January 2015)
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda (January 2015)
-- Unified Interest Rate Model for European Securitisations (January 2013)

A description of how DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375.