DBRS Confirms Ratings on Tricolore 2014 SPV S.r.l.

DBRS Ratings Limited (DBRS) has today confirmed the ratings on the following Notes (the Notes) issued by Tricolore 2014 SPV S.r.l. (the Issuer). The Notes remain Under Review with Negative Implications.

-- Class A Notes confirmed at AA (sf)
-- Class B Notes confirmed at BBB (sf)

The above-mentioned confirmations are based on the following analytical considerations, as described more fully below:

-- Portfolio performance, in terms of defaults and level of delinquencies, as of 30 September 2015.
-- Actual default rate, recovery rate and expected losses are within DBRS’s expectations.
-- Current available credit enhancement for the Class A and B Notes to cover the expected losses at the AA (sf) and BBB (sf) rating level.
-- The Notes remain Under Review with Negative Implications. Notes were placed Under Review with Negative Implications on 29 May 2015, when DBRS initiated a review of the credit given to systemic support when assigning and monitoring financial institutions ratings in Europe. The review of the systemic support was concluded on 29 September 2015, when DBRS downgraded 31 European banking groups. Certain structured finance ratings still remain Under Review with Negative Implications pending potential remedial actions.

Tricolore 2014 SPV S.r.l. is an Italian securitisation of mixed-lease receivables (vehicles, equipment and real estate) originated and serviced by Banca Privata Leasing S.p.A. (BPL). The transaction has used the proceeds of Class A, Class B and Class C to purchase the EUR 177 million securitisation. The initial amount of the Reserve Fund was equal to EUR 1.80 million which has been fully funded using part of the proceeds of the issuance of Class C Notes. The transaction is static and the residual value of such leases has not been sold to the Issuer.

As of 30 September 2015 the cover pool amounted to EUR 145,776,019 and was composed of 2,666 loans. The Collateral Portfolio represent a pool of vehicles (12.78%), equipment (4.97%) and real estate (82.25%) lease receivables granted by BPL to Italian corporate clients.

The top five and top ten borrowers represent 6.51% and 11.96% of the pool, respectively. The collateral has 72 months weighted-average seasoning and was mostly originated in Northern Italy with some concentrations in the regions of Emilia Romagna and Lombardy with 75.52% and 16.26% of the Portfolio, respectively. Approximately 88% of the lease receivables are tied to floating rates and 12% to fixed rates; 87.74% of lease receivables pay monthly instalments and 12.10% pay quarterly instalments.

The portfolio is performing in line with DBRS’s expectations. The 90+ delinquency ratio as a percentage of the performing balance of the portfolio increased steadily over the year, reaching 0.67% in September 2015. The gross cumulative default ratio as a percentage of the original portfolio is very low, at 0.04%, below DBRS’s base case default rate of 11.78%.

Credit enhancement for the Class A Notes consists of subordination of the Class B Notes and the Class C Notes. The credit enhancement for the Class B Notes consist of the subordination of the Class C Notes. The credit enhancement for the Class A and B Notes (as a percentage of the outstanding performing balance of the portfolio) has increased over the year at 54.88% and 41.16%, respectively. Class C Notes were issued to fund the initial cash reserve of EUR 1.8 million. The cash reserve is available to pay any interest shortfall for the Class A and Class B Notes and can be used to cover principal shortfalls at legal final maturity.

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.

DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

DBRS is undertaking a review and will remove the rating from this status as soon as it is appropriate.

A review of the transaction legal documents was not conducted as the documents have remained unchanged since the most recent rating action.

Other methodologies and criteria referenced in this transaction are listed at the end of this press release.

This may be found on www.dbrs.com at:
http://www.dbrs.com/about/methodologies

For a more detailed discussion of the 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 Zenith Service S.p.A. and data servicer reports from Banca Privata Leasing S.p.A.

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.

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 29 May 2015, when DBRS placed the ratings of the Notes Under Review with Negative Implications.

The lead responsibilities for this transaction have been transferred to Antonio Di Marco.

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 Base Case Probability of Default (PD) and Loss Given Default (LGD) for the pool based on a review of the transaction performance. 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 receivables are 16.56% and 67.33%, respectively.
-- The Risk Sensitivity overview below illustrates the ratings expected for the Class A Notes 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 for the Class A Notes would be expected to remain at AA (sf), all else being equal. If the PD increases by 50% the rating for the Class A Notes would be expected to drop to AA (low) (sf), all else being equal. If both the LGD and PD increase by 50%, the rating of the Class A notes would be expected to drop to A (sf), all else being equal.

Class A Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (sf).
-- 50% increase in LGD, expected rating of AA (sf).
-- 25% increase in PD, expected rating of AA (sf).
-- 50% increase in PD, expected rating of AA (low) (sf).
-- 25% increase in LGD and 25% increase in PD, expected rating of AA (low) (sf).
-- 25% increase in LGD and 50% increase in PD, expected rating of A (sf).
-- 50% increase in LGD and 25% increase in PD, expected rating of AA (low) (sf).
-- 50% increase in LGD and 50% increase in PD, expected rating of A (sf).

Class B Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (sf).
-- 50% increase in LGD, expected rating of BBB (sf).
-- 25% increase in PD, expected rating of BBB (sf).
-- 50% increase in PD, expected rating of BBB (sf).
-- 25% increase in LGD and 25% increase in PD, expected rating of BBB (sf).
-- 25% increase in LGD and 50% increase in PD, expected rating of BBB (sf).
-- 50% increase in LGD and 25% increase in PD, expected rating of BBB (sf).
-- 50% increase in LGD and 50% increase in PD, expected rating of BBB (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: 18 December 2014
Initial Rating Committee Chair: Chuck Weilamann

Lead Surveillance Analyst: Antonio Di Marco
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 and are as follows:

-- 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.
-- Unified Interest Rate Model for European Securitisations.
-- Rating European Consumer and Commercial Asset-Backed Securitisations.

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.