DBRS Confirms Ratings on IBL Finance S.r.l. (IBL CQS 2015)

DBRS Ratings Limited (DBRS) has today confirmed its rating of A (low) (sf) on the Class A Notes issued by IBL Finance S.r.l. (the Issuer).

The rating action is based on the following analytical considerations, as described more fully below:
-- Portfolio performance, in terms of delinquencies and defaults, as of the April 2016 payment date.
-- Actual default rate, recovery rate and expected losses are within DBRS’s expectations.
-- Current available credit enhancement for the Class A Notes to cover the expected losses at the A (low) (sf) rating level.

This is a securitisation of salary assignment loans and delegation of payments loans extended to pensioners and individuals working in the public sector, originated and serviced by IBL – Istituto Bancario del Lavoro S.p.A. (IBL). The transaction benefits from a ramp-up period up to and including the payment date falling in November 2016.

The pool comprises salary assignment loans (40.37%), pension assignment loans (41.65%) and delegation of payment loans (17.98%). Employers are represented mainly by pensioners (42.12%) and public entities (51.27%).

As of the April 2016 payment date the 90+ delinquency ratio is at 0.32% of performing balance and the cumulative gross default ratio (calculated on the initial collateral balance) reached 0.42%.

The Class A Notes are supported by subordination of the Class B Notes. The credit enhancement for the Class A Notes (as a percentage of the target amount of the Class B Notes) is 10%. The transaction benefits from an amortising cash reserve, originally equal to €3.20 million, and currently at €11.77 million (1.64% of the paid-up amount of the Class A Notes). The cash reserve provides liquidity support during the life of the transaction and will be available to cover any principal payments at maturity of the notes.

The Bank of New York Mellon (Luxembourg) S.A., Italian branch and The Bank of New York Mellon, London branch are the Italian and English Account Bank for the transaction, respectively. The DBRS public ratings of The Bank of New York Mellon (Luxembourg) S.A., Italian branch and The Bank of New York Mellon, London branch comply with the Minimum Institution Rating given the rating assigned to the Class A Notes, as described in the DBRS “Legal Criteria for European Structured Finance Transactions” methodology.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is the “Master European Structured Finance Surveillance Methodology”.

This 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.

An asset and a cash flow analysis were both conducted. However, due to the inclusion of a revolving period in the transaction, and no change in assumptions, the initial analysis based on worst-case replenishment criteria set forth in the transaction legal documents was assumed.

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

For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to the DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” found at http://www.dbrs.com/industries/bucket/id/10036/name/commentaries.

The sources of information used for this rating include investor and servicing reports provided by IBL.

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.

This is the first rating action since the Initial Rating Date. 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 8.15% and 49.45%, 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 fall at BB (sf), all else being equal. If the PD increases by 50% the rating for the Class A Notes would be expected to drop to BB (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 CCC (sf), all else being equal.

Class A Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (sf).
-- 50% increase in LGD, expected rating of BB (sf).
-- 25% increase in PD, expected rating of BBB (sf).
-- 50% increase in PD, expected rating of BB (sf).
-- 25% increase in LGD and 25% increase in PD, expected rating of BB (sf).
-- 25% increase in LGD and 50% increase in PD, expected rating of B (sf).
-- 50% increase in LGD and 25% increase in PD, expected rating of B (sf).
-- 50% increase in LGD and 50% increase in PD, expected rating of CCC (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: 22 May 2015
Initial Rating Committee Chair: Erin Stafford

Lead Surveillance Analyst: Antonio Di Marco, Senior Financial Analyst
Rating Committee Chair: Diana Turner, Senior Vice President

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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 Originators
-- Operational Risk Assessment for European Structured Finance Servicers
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Unified Interest Rate Model for European 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.