DBRS Confirms Rating on Class A Notes Issued by Valsabbina SPV 1 S.r.l. (RMBS)

DBRS Limited (DBRS) has today confirmed the rating on the Class A Notes issued by Valsabbina SPV 1 S.r.l. (RMBS) (Valsabbina RMBS) at AAA (sf).

Today’s rating action follows an annual review of the transaction and is based on the following analytical considerations:

-- Portfolio performance in terms of delinquencies, defaults and losses,
-- Probability of default (PD) rate, loss given default (LGD) rate and expected loss assumptions for the remaining collateral pool, and
-- The credit enhancement (CE) available to the Class A Notes to cover the expected losses at the AAA (sf) rating level.

Valsabbina RMBS closed in January 2012 and is a securitisation of first-lien Italian residential mortgages originated by Banca Valsabbina S.C.p.A. (Banca Valsabbina). The transaction was restructured in January 2015 when additional loans were added into the transaction collateral pool and the Class A Notes balance was increased.

PORTFOLIO PERFORMANCE
As of 30 September 2016, loans more than 90 days in arrears as a percentage of the outstanding collateral balance increased to 2.1% from 1.5% 12 months prior. Over the same period, loans more than 120 days in arrears increased to 0.7% from 0.6% 12 months prior. DBRS notes that part of the increase in the arrears percentages is due to the deleveraging of the collateral pool.

Banca Valsabbina continues to actively repurchase loans out of the collateral pool and has repurchased a cumulative 3.9% of the total securitised collateral balance, below the maximum cumulative repurchase allowance of 7.0%. There have been no defaulted receivables since the transaction closing. DBRS has maintained its base case PD and LGD assumptions on the remaining collateral pool at 10.8% and 24.4%, respectively.

CREDIT ENHANCEMENT
The CE available to the Class A Notes has increased as the transaction continues to repay. The sources of credit enhancement are provided through the subordination of the junior notes and the overcollateralisation. The transaction’s priority of payment pays out any net excess spread available in the transaction as principal to the Class A Notes, thereby building up the overcollateralisation. As of the October 2016 payment date, the overcollateralisation was 7.6% of the outstanding collateral balance and the CE available to the Class A Notes has increased to 47.8%.

The Republic of Italy’s sovereign rating is currently Under Review with Negative Implications. In this review, DBRS applied additional sovereign credit stresses in its cash flow analysis assuming a downgrade of the Italian sovereign rating by up to two notches. DBRS concluded that the rating of the Class A Notes would not be negatively affected in this scenario.

BNP Paribas Securities Services, Milan Branch, (BNP Milan) is the Account Bank of the transaction. BNP Milan has a DBRS private rating that meets the Minimum Institution Rating criteria as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology, given the ratings assigned to the Class A Notes.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is “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 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 data and information used for this rating include the investor reports from Securitisation Services, and the loan–by-loan data from European DataWarehouse GmbH.

DBRS did not rely upon third-party due diligence in order to conduct its analysis.

At the time of the initial rating, DBRS was not supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS considers the data and the information available to it for the purposes of providing this rating to be of satisfactory quality.

DBRS does not audit or independently verify the data or information it receives in connection with the rating process.

The last rating action on this transaction took place on 27 January 2016, when DBRS confirmed the Class A Notes at AAA (sf).

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):

-- The base case PD and LGD assumptions for the remaining collateral pool are 10.8% and 24.4%, respectively. At the AAA (sf) rating level, the corresponding PD is 37.7% and the LGD is 55.3%.

-- 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 on 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 on the Class A Notes would be expected to be at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and the LGD increase by 50%, the rating on the Class A Notes would be expected to be at AAA (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 AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AAA (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: Kevin Ma, Assistant Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 31 January 2012

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

-- Master European Structured Finance Surveillance Methodology
-- Legal Criteria for European Structured Finance Transactions
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Operational Risk Assessment for European Structured Finance Servicers
-- 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