DBRS Assigns Rating to Annette S.r.l.

DBRS Ratings Limited (DBRS) has today assigned an A (sf) rating to the Class A notes (the rated notes) issued by Annette S.r.l. (the issuer). Class B notes (together with the Class A notes, the notes) are also issued in the context of the transaction but are not rated.

The notes are backed by a pool of receivables related to salary and pension assignment loans as well as payment delegation loans granted by Pitagora S.p.A. (Pitagora or the originator) to Italian employees and pensioners, as the case may be. The receivables are serviced by Pitagora with Zenith Service S.p.A. appointed back-up servicer.

The transaction was established in December 2015 and has a residual ramp-up period of 12 months, ending in June 2018. The portfolio currently backing the notes consists of about EUR 308 million of receivables. During the ramp-up period, principal collections may be used to purchase additional receivables that the originator may also offer on an accretive basis, provided that certain eligibility criteria and concentration limits are met. The purchase of additional receivables is funded with principal collections or with further proceeds of subscription of the notes.

During ramp-up, principal may be repaid under the notes provided that no additional receivables are offered or the eligible receivables are not sufficient to exhaust the principal collection generated by amortisation.

The ratings are based on DBRS’s review of the following analytical considerations:

-- The sufficiency of available credit enhancement in the form of subordination, a cash reserve, and excess spread.
-- The ability of the transaction’s structure and triggers to withstand stressed cash flow assumptions and repay the notes according to the terms of the transaction documents.
-- Pitagora’s capabilities with respect to originations, underwriting and servicing and the presence of a sub-servicer.
-- The legal structure and presence of legal opinions addressing the assignment of the assets to the issuer and the consistency with DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

The transaction was modelled in Intex Deal Maker and the default rates at which the rated notes did not return all specified cash flows in a timely manner

Notes:
All figures are in euros (EUR) unless otherwise noted.

The principal methodology applicable to the rating is: “Rating European Consumer and Commercial AssetBacked Securitisations”.

For a more detailed discussion of the approach to Salary-Backed loans in Structured Finance ratings, please refer to DBRS “Italian Salary-Assignment Loan Securitisations –- Methodology”.
http://dbrs.com/research/310382/italian-salary-assignment-loan-securitisations-methodology.pdf

DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

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 data and information used for this rating include:

-- Static gross loss analysis by quarterly vintages from 2006;
-- Static recovery analysis by quarterly vintages from 2007;
-- Static early settlement analysis by quarterly vintages from 2006.

All information used for these ratings was sourced by Pitagora directly or indirectly through the transaction arranger, Banca IMI S.p.A.

DBRS did not rely upon thirdparty due diligence in order to conduct its analysis.

DBRS was 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.

This is the first DBRS rating on this financial instrument.

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:

Probability of Default Rates Used (PD): 22.2% for ‘A’ scenario, a 25% and 50% increase on PD.
Recovery Rates Used: 42% for ‘A’ scenario.
Loss Given Default (LGD) Rates Used: 58% for ‘A’ scenario, a 25% and 50% increase in LGD.

DBRS concludes that for the Class A Notes:
-- A hypothetical increase of the base case PD or LGD by 25%, ceteris paribus, would maintain the rating of the Class A notes at A (sf).
-- A hypothetical increase of the base case PD by 50%, ceteris paribus, would lead to a downgrade of the Class A notes to A (low) (sf).
-- A hypothetical increase of the base case LGD by 50%, ceteris paribus, would maintain the rating of the Class A notes at A (sf).
-- A hypothetical increase of the base case PD and LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A notes to A (low) (sf).
-- A hypothetical increase of the base case PD by 25% and LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A notes to A (low) (sf).
-- A hypothetical increase of the base case PD by 50% and LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A notes to A (low) (sf).
-- A hypothetical increase of the base case PD and LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A notes to BBB (high).

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: Paolo Conti, Senior Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 7 July 2017

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

-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Italian Salary-Assignment Loan Securitizations –Methodology
-- Legal Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators
-- 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