DBRS Confirms Rating on Claris ABS 2011 S.r.l.

DBRS Ratings Limited (DBRS) has today confirmed the rating on the Class A Notes issued by Claris ABS 2011 S.r.l. (the Issuer) at AAA (sf).

The rating action reflects an annual review of the transaction and is based on the following analytical considerations, which are described more fully below:
-- The portfolio performance, in terms of delinquencies and defaults, as of the 2 May 2017 payment date.
-- Updated portfolio default rate (PD), loss given default (LGD) and expected loss assumptions for the remaining collateral pool.
-- Current credit enhancement (CE) available to the Class A Notes to cover the expected losses at the AAA (sf) rating level.

The rating of the Class A Notes addresses the timely payment of interest and the ultimate payment of principal on or before the Final Maturity Date in October 2060.

Claris ABS 2011 S.r.l. is a securitisation of Italian residential mortgages originated by three Italian banks: Veneto Banca SpA (VB); Banca Apulia S.p.A.; and Cassa di Risparmio di Fabriano e Cupramontana S.p.A., all part of VB, which also operates as the Servicer of the portfolio. Most of the portfolio consists of first lien loans (91.3%), while the remainder (8.7%) are second lien. The transaction closed on 7 February 2012.

PORTFOLIO PERFORMANCE
As of the May 2017 payment date, 30- to 60-day delinquencies were 1.97% of the outstanding principal balance, 60- to 90-day delinquencies were 0.50% and delinquencies greater than 90 days were 2.34%. The gross cumulative default ratio as a percentage of the original portfolio was 5.06% as of May 2017, of which 18.46% has been recovered.

CREDIT ENHANCEMENT
CE is provided by the subordination of the junior notes and the amortising Cash Reserve. CE for the Class A Notes increased to 56.50% in May 2017 from 27.63% at closing. The Cash Reserve was funded at closing to EUR 68.7 million and provides liquidity support to the Class A Notes. The Cash Reserve has a required balance equal to 3.5% of the Class A Notes outstanding. It has been at its required balance since closing and currently stands at EUR 26.7 million.

Funds from each originator are distributed through separate priority of payments. However, following the occurrence of any Cross Collateral Events defined in the transaction documents, the waterfalls will cross-collateralise. Currently, no Cross Collateral Event has occurred.

There are several swap agreements with J.P. Morgan Securities plc in place to hedge the interest rate mismatch between the Class A Notes, indexed to six-month Euribor, and the collateral portfolio. The private DBRS rating of J.P. Morgan Securities plc is above the First Rating Threshold as described in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology.

The Bank of New York Mellon (Luxembourg) S.A./N.V. Milan Branch (the Agent Bank) holds the Treasury Account for the transaction, and its DBRS private rating complies 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.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating 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 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” on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.

The sources of data and information used for this rating include investor reports provided by The Bank of New York Mellon, servicer reports provided by VB and 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 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 May 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 of PD and LGD of the current pool of mortgages for the Issuer are 11.00% and 32.43%, respectively. At the AAA (sf) rating level, the corresponding PD is 38.09% and the LGD is 51.35%.

-- The risk sensitivity overview below illustrates the ratings expected for the Notes if the PD and LGD increase by a certain percentage over the Base Case assumptions.

For example, if the LGD increases by 50%, the rating for the Class A Notes would be expected to remain at AAA (sf), ceteris paribus. If the PD increases by 50%, the rating for the Class A Notes would be expected to remain at AAA (sf), ceteris paribus. Furthermore, if both the PD and LGD increase by 50%, the rating for the Class A Notes would be expected to remain at AAA (sf), ceteris paribus.

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)
-- 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, 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: Antonio Di Marco, Senior Financial Analyst
Rating Committee Chair: Vito Natale, Senior Vice President
Initial Rating Date: 13 February 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
-- Operational Risk Assessment for European Structured Finance Servicers
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Unified Interest Rate Model for European Securitisations
-- Derivative Criteria for European Structured Finance Transactions

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.