DBRS Takes Rating Actions on Tricolore 2014 SPV S.r.l.

DBRS Ratings Limited (DBRS) has today taken the following rating actions on the Class A and the Class B Notes (the Notes) issued by Tricolore 2014 SPV S.r.l. (the Issuer):

-- Class A Notes confirmed at AA (sf),
-- Class B Notes upgraded to A (high) (sf) from BBB (sf).

Today’s rating actions on the Notes follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance in terms of delinquencies and defaults as of January 2017 payment date.
-- Updated default, recovery and loss assumptions on the remaining portfolio collateral balance.
-- Current available credit enhancement (CE) to the Class A and the Class B Notes to cover the expected losses at AA (sf) and A (high) (sf) ratings levels, respectively.
-- Issuer exposure to Deutsche Bank S.p.A. as the transaction’s Account Bank.

The transaction is a securitisation of Italian mixed-lease receivables originated and serviced by Banca Privata Leasing S.p.A. (BPL), closed in December 2014. As of the January 2017 payment date, the portfolio consisted of 1,582 loans for an aggregate amount of EUR 107 million. The collateral portfolio currently represents a pool of real estate (91.1%), vehicles (5.9%) and equipment (3.0%) lease receivables granted to Italian small and medium-sized enterprises as well as individual entrepreneurs. The portfolio is concentrated in the Italian regions of Emilia Romagna (76.1%) and Lombardy (16.2%). The top five and top ten borrowers account for 8.2% and 14.3% of the outstanding portfolio balance, respectively.

PORTFOLIO PERFORMANCE
The performance of the collateral portfolio is within DBRS’s expectations. As of the January 2017 payment date, loans more than 90 days delinquent as a percentage of the outstanding performing portfolio balance decreased slightly and are now at 0.33%. The cumulative defaulted loans as a percentage of the original portfolio balance at transaction closing increased slightly and remained low at 0.06%.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis on the remaining pool and updated its probability of default (PD) and loss given default (LGD) assumptions (excluding sovereign risk adjustment) on the remaining portfolio collateral balance to 13.33% and 83.19%, respectively.

CREDIT ENHANCEMENT
The CE to the Class A and Class B Notes consisting of subordination has increased since the last annual review. The CE for Class A Notes increased to 72.2% from 44.4% since transaction closing. The CE for Class B Notes increased to 53.5% from 33.3% at transaction closing.

The transactions also benefits from a reserve fund, which is funded at its target level of EUR 1.8 million, and it is available to pay any interest shortfall on the Class A and Class B Notes as well as to cover principal shortfalls at legal final maturity.

COUNTERPARTY RISK
Deutsche Bank S.p.A. is the Account Bank for the transaction. The DBRS private rating on the Account Bank is below the replacement trigger required as per the transaction documentation, given the rating assigned to the Class A Notes, but complies with the DBRS’s Minimum Institution Rating 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 to the rating 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 legal 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” at: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/

The sources of data and information used for this rating include investor and payment reports provided by Zenith Service S.p.A., servicer reports and loan-level data provided by Banca Privata Leasing S.p.A..

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 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 19 February 2016, when DBRS confirmed the Class A and the Class B Notes at AA (sf) and BBB (sf), respectively.

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 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 of receivables are 13.33% and 83.19% (excluding sovereign risk adjustment), 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 AA (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 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 (low) (sf).

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

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

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: Vito Natale, Senior Vice President
Initial Rating Date: 18 December 2014

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

-- 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
-- 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