DBRS Confirms Ratings on Arianna SPV S.r.l. and Maintains UR-Negative

DBRS Ratings Limited (DBRS) has today taken the following rating actions on the bonds issued by Arianna SPV S.r.l. (the Issuer):

-- Class A notes confirmed at A (sf) and maintained Under Review with Negative Implications (UR-Neg.)
-- Class B notes confirmed at BBB (sf) and maintained UR-Neg.

The confirmation of the ratings reflects an annual review of the transaction and are based on the following analytical considerations:

-- Portfolio performance, in terms of delinquencies and defaults, as of October 2016.
-- Default rate, loss given default (LGD) and expected losses are within DBRS’s expectations.
-- Current available credit enhancement to the Class A and Class B notes (the Notes) to cover the expected losses at their current rating levels.

The Notes were placed UR-Neg. on 23 August 2016 following the Republic of Italy (Italy) Long-Term Foreign Currency – Issuer Rating (the Sovereign Rating) being placed UR-Neg. on 5 August 2016. On 22 November 2016, the UR-Neg. status was extended following the extension of the UR-Neg. Italy Sovereign Rating on 3 November 2016.

The Issuer is a securitisation of salary assignment loans, pension assignment loans and delegations of payment loans granted to individuals residing in Italy by Consum.it S.p.A. directly, or through specialised dealers (Mandataries). The portfolio is serviced by Zenith Service S.p.A.

As of October 2016, two- to three-month arrears are at 2.09%, up from 0.62% the previous year. The 90+ delinquency ratio is at 1.84%, up from 0.81% the previous year. The current gross cumulative default ratio is 2.44%, up from 1.84% one year ago

As of October 2016, credit enhancement to the Class A notes is 55.82%, up from 33.57% the previous year, and consists of subordination of the Class B notes and part of the Class C notes. Credit enhancement to the Class B notes is 32.40%, up from 18.74% the previous year, and consists of subordination of part of the Class C notes.

The transaction benefits from a cash reserve, funded from part of the proceeds of the Class C notes. The cash reserve is currently at its target level of EUR 7,717,811.92 and covers senior fees and Class A and Class B interest.

BNP Paribas Securities Services S.A., Milan Branch and BNP Paribas Securities Services S.A., London Branch are the Italian and English account bank for the transaction, respectively. The DBRS private ratings comply with the Minimum Institution Rating given the rating assigned to the Class A notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

DBRS amended this press release on 13 October 2017 as the previous version mistakenly identified a material methodology deviation.

Notes:
All figures are in euros unless otherwise noted.

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

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

These 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 reports provided by Zenith Service 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 to be 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 22 November 2016 when DBRS extended the UR-Neg. status on the Notes, following the extension of the UR-Neg. status on the Republic of Italy Sovereign Rating.

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

The ratings are UR-Neg. Generally, the conditions that lead to the assignment of reviews are resolved within a 90-day period. The current UR-Neg. status on the Notes will be resolved upon further analysis of the transaction, to be conducted once the UR-Neg. status of the sovereign rating has been resolved. DBRS reviews and ratings are under regular surveillance.

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 ratings (the base case):
-- DBRS expected a lifetime base case probability of default (PD) and 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 are 7.97% and 45.61%, respectively.
-- 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 A (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 A (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A notes would be expected to remain at A (sf).

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

Class B Notes 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 PD and 25% increase in LGD, expected rating of BBB (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (low) (sf).

For further information on DBRS historical default rates published by the European Securities and Markets Authority (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.

Lead Surveillance Analyst: Andrew Lynch, Senior Financial Analyst
Rating Committee Chair: Christian Aufsatz, Senior Vice President
Initial Rating Date: 23 December 2013

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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
-- Master European Structured Finance Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Servicers
-- 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.