DBRS Upgrades Class A Notes of Vela Consumer S.r.l.

DBRS Ratings Limited (DBRS) has today upgraded to AAA (sf) from AA (sf) the rating on the Class A Notes issued by Vela Consumer S.r.l. (the Issuer).

The rating upgrade is based on the following analytical considerations, as described more fully below:

-- Portfolio performance, in terms of delinquencies and defaults, as of the October 2016 payment date.
-- 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 AAA (sf) rating level.

The rating of the Class A Notes addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date. The Issuer is a limited liability company incorporated in 2015 under the laws of the Republic of Italy.

The Notes are backed by a portfolio of unsecured consumer loans granted to retail clients resident in Italy by Banca Nazionale del Lavoro S.p.A. (BNL or the Originator). The back-up servicer facilitator is Securitisation Services. The portfolio consists of 60,690 loans extended to the same number of borrowers. The portfolio is well distributed across all Italian regions, with higher concentration in the regions of Lazio (21.1%), Campania (9.2%) and Tuscany (7.4%). The collateral is amortising relatively fast, with the pool factor currently standing at 71.1%, one year after closing.

As of the October 2016 payment date, the two-to three-month arrears and the 90+ delinquency ratio were at 0.21% and 0.37% of the performing collateral portfolio, respectively. The current gross cumulative default ratio is at 0.37% of the original collateral portfolio.

As of October 2016, credit enhancement to the Class A Notes was 41.6%, up from 29.4% at closing. Credit enhancement consists of the subordination of the Class J Notes and the Reserve Fund. The Reserve Fund is available to cover any shortfall in senior fees, interest on the Class A Notes and PDL. It is currently at its target level of EUR 16.8 million (2.0% of the original outstanding balance of the Class A Notes).

BNL is the Account Bank of the transaction. The DBRS private rating on the Account Bank complies with the Minimum Institution Rating for the Account Bank given the rating assigned to the Class A Notes, as described in DBRS’s “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”.
DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

A review of the transaction legal documents was not conducted as the document have remained unchanged since the most recent 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 investor and payment reports provided by Securitisation Services S.p.A., servicer reports provided by BNL and data from the European DataWarehouse GmbH.

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.

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, is 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 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 recovery rate of the current pool of receivables are 9.3% and 8.1%, 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 be at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A Notes would be expected to be at AA (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 be at AA (sf).

Class A 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 AA (high) (sf)
-- 50% increase in PD, expected rating of AA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (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 Analyst: Antonio Di Marco, Senior Financial Analyst
Rating Committee Chair: Christian Aufsatz, Senior Vice President
Initial Rating Date: 22 December 2015

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The rating methodologies 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 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