DBRS Confirms Rating on MondoMutui Cariparma S.r.l. - Series 2009

DBRS Ratings Limited (DBRS) has today confirmed its AAA (sf) rating on the Class A Notes issued by MondoMutui Cariparma S.r.l. - Series 2009 (the Issuer) following an annual review of the transaction.

The confirmation is based on the following analytical considerations:
-- The portfolio performance, in terms of level of delinquencies and defaults, as of the January 2017 payment date;
-- Updated portfolio default rate, loss given default (LGD) and expected loss assumptions for the remaining collateral pool;
-- The current available credit enhancement to the Class A Notes to cover expected losses assumed in line with the AAA (sf) rating level.

The rating on the Class A Notes addresses the timely payment of interest and ultimate payment of principal payable on or before the Final Maturity Date in January 2058.

The Issuer is an Italian securitisation collateralised by a portfolio of residential mortgage loans granted by Crédit Agricole Cariparma S.p.A. (Cariparma), formerly Cassa di Risparmio di Parma e Piacenza S.p.A. The transaction follows the standard structure under the Italian securitisation law and closed in November 2009. DBRS assigned a rating to the Class A Notes on 15 June 2015.

As of 31 January 2017, the balance of the Class A Notes was EUR 1,276.6 million and the balance of the Class J Notes was EUR 390.3 million. The EUR 1,666.9 million securitised portfolio (excluding defaulted receivables) consists of first-ranking loans over residential properties mainly located in the North and Centre of Italy, in particular in the Emilia-Romagna and Lombardy regions (representing 72.5% of the current portfolio). 51.5% of the current portfolio was originated between 2008 and 2010, coinciding with the peak of the Italian residential housing market. Therefore, the current loan-to-value (LTV) distribution, based on the most recent property valuations, is more concentrated in the higher buckets, when compared with the distribution of the current LTV, calculated with the original property valuations.

PORTFOLIO PERFORMANCE
As of the January 2017 payment date, total delinquencies were 3.0% of the outstanding principal balance of the portfolio. Gross cumulative defaults, as a percentage of the original portfolio balance, stood at 3.9%, with cumulative recoveries of 65.2%.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis on the remaining pool and updated its base case probability of default (PD) and LGD assumptions on the outstanding portfolio to 5.0% and 23.9%, respectively. The base case PD has deteriorated since the last annual review in June 2016 reflecting DBRS’s downgrade of the Republic of Italy’s Long-Term Foreign Currency rating to BBB (high) with a Stable trend on 13 January 2017 (see DBRS press release entitled, “DBRS Downgrades Italy to BBB (high), Stable Trend”).

CREDIT ENHANCEMENT
As of January 2017, credit enhancement to the Class A Notes was 23.4%, up from 20.1% in January 2016. Credit enhancement to the Class A Notes is provided by the subordination of the Class J Notes.

The transaction benefits from a Liquidity Line to cover senior expenses shortfalls and missed interest payments on the Class A Notes. This facility amortises up to a maximum aggregate amount of 3.2% of the outstanding balance of Class A Notes and EUR 49.8 million is currently available.

A swap structure is in place to hedge the interest rate mismatch between the issued notes, indexed to six-month Euribor, and the interest rate payments from the collateral portfolio, composed of both fixed-rate loans and floating-rate loans with different indexes. Cariparma is the Counterparty of the Hedging Agreement.

Cariparma also acts as Account Bank for this transaction. The DBRS private rating of Cariparma 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: “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 servicer and investor reports provided by Cariparma and loan-by-loan data from the 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 supplied with third-party assessments dated from 2009. 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 15 June 2016, when DBRS confirmed the rating on 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 ratings, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the Base Case):

-- DBRS expected a base case PD and LGD for the portfolio 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 5.0% and 23.9%, respectively. At the AAA (sf) rating level, the corresponding PD is 27.6% and the LGD 43.2%.

-- The Risk Sensitivity below illustrates the ratings expected for the Class A 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 of the Class A Notes would be expected to remain at AAA (sf), all else being equal. If the PD increases by 50%, the rating of the Class A Notes would be expected to remain at AAA (sf), all else being equal. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected to remain at AAA (sf), all else being equal.

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: Joana Seara da Costa, Senior Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 15 June 2015

DBRS Ratings Limited
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United Kingdom
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
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Legal Criteria for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions
-- Unified Interest Rate Model for European Securitisations
-- Operational Risk Assessment for European Structured Finance Servicers

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.