DBRS Confirms Ratings for Moda 2014 S.r.l.

DBRS Ratings Limited (DBRS) has today confirmed the ratings on the following classes of Commercial Mortgage-Backed Floating-Rate Notes Due August 2026 issued by Moda 2014 S.r.l.:

-- Class A at A (high) (sf)
-- Class B at A (sf)
-- Class C at BBB (sf)
-- Class D at BBB (sf)
-- Class E at BB (sf)

The Class X1 and Class X2 Notes are not rated by DBRS. All trends are Stable.

Moda 2014 S.r.l. was a securitisation of two floating-rate loans: the Franciacorta loan and the Vanguard loan. At issuance the two loans had an aggregated balance of EUR 198.2 million.

The Franciacorta loan totalled 39.3% of the transaction and was secured by a single property outlet village in Brescia, Northern Italy. The Vanguard loan totalled 60.6% of the transaction and consisted of an outlet village in Northern Italy and three shopping centres across Central and Southern Italy.

In May 2016, the Franciacorta loan was repaid in full leaving only the Vanguard loan outstanding in the transaction. Therefore, the transaction balance dropped to EUR 118,0 million, or a 40.3% reduction since issuance. The prepayment proceeds of the Franciacorta loan were allocated modified pro rata to the CMBS notes.

Although the Vanguard loan does have exposure to the economically weaker Southern Italy, which has a lower gross domestic product per capita and higher unemployment than Italy as a whole, approximately 70.59% of the loan’s collateral is in the economically stronger regions of Northern and Central Italy and only 28.41% of the collateral lies in Southern Italy.

The four properties in the Vanguard loan showed a mixed performance since issuance. The two largest properties, Valdichiana Outlet Village and Le Colonne Shopping Centre, representing 62.4% and 16.1%, respectively, of the loan’s net income have shown an increase in vacancy rates since issuance. However, as per the May 2016 investor report, the Valdichiana Outlet Village has experienced continued improvements in sales during the most recent quarters which was followed by a decrease in vacancy to 7.0% from 8.9% since last reviewed in August 2015.

As per the May 2016 investor report, the current aggregate net operating income of all four properties securing the Vanguard loan is EUR 12.9 million, which represents a 6.7% decrease since the prior year but is in line with the DBRS underwritten cash flows of EUR 12.3 million determined at issuance.

The latest reported market value of the property portfolio is EUR 192.5 million, or 3.0% higher than the EUR 186.9 million figure reported in May 2015.

The rating confirmations follow the somewhat increased credit enhancement levels following the Franciacorta loan prepayments and the stabilising performance of the Vanguard loan. The final legal maturity date of the transaction is in August 2026, seven years beyond the maturity of the sole remaining loan in August 2019. In DBRS’s view, this would allow for sufficient time to enforce and repay bondholders, if needed.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is: European CMBS Surveillance.

The applicable methodologies are: European CMBS Surveillance, European CMBS Rating Methodology, Legal Criteria for European Structured Finance Transactions, Derivative Criteria for European Structured Finance Transactions and Unified Interest Rate Model for European Securitisations, which can be found on www.dbrs.com under Methodologies.

Other methodologies 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 the Servicer, Securitisation Services 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 17 August 2015, when DBRS confirmed all its ratings on the classes of this transaction.

The lead responsibilities for this transaction have been transferred to Jorge Lopez Herguido.

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):

A decrease of 10% and 20% in the DBRS Net Cash Flow (NCF), derived by looking at comparable properties, market rents, market occupancies in addition to expenses ratios, capital expenditures and re-tenanting costs, would lead to a downgrade in the transaction, as noted below:

Class A Notes Risk Sensitivity:
-- 10% decline in DBRS NCF, expected rating of Class A at A (low) (sf)
-- 20% decline in DBRS NCF, expected rating of Class A at BB (high) (sf)

Class B Notes Risk Sensitivity:
-- 10% decline in DBRS NCF, expected rating of Class B at BBB (sf)
-- 20% decline in DBRS NCF, expected rating of Class B at BB (high) (sf)

Class C Notes Risk Sensitivity:
-- 10% decline in DBRS NCF, expected rating of Class C at BB (sf)
-- 20% decline in DBRS NCF, expected rating of Class C at B (high) (sf)

Class D Notes Risk Sensitivity:
-- 10% decline in DBRS NCF, expected rating of Class D at BB (sf)
-- 20% decline in DBRS NCF, expected rating of Class D at B (high) (sf)

Class E Notes Risk Sensitivity:
-- 10% decline in DBRS NCF, expected rating of Class E at BB (low) (sf)
-- 20% decline in DBRS NCF, expected rating of Class E at 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: Elizabeth Lovett, Assistant Vice President, Global CMBS
Initial Rating Date: 3 July 2014
Initial Rating Committee Chair: Erin Stafford, Managing Director, Global CMBS

Lead Surveillance Analyst: Jorge Lopez Herguido, Financial Analyst, Global Structured Finance
Rating Committee Chair: Mary Jane Potthoff, Managing Director, Global CMBS

DBRS Ratings Limited
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Registered in England and Wales: No. 7139960

The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies

-- European CMBS Surveillance
-- European CMBS Rating Methodology
-- Legal Criteria for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions
-- Unified Interest Rate Model for European Securitisations

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