DBRS Downgrades Rating on Class A Notes Issued by 24-7 Finance S.r.l.

DBRS Ratings Limited (DBRS) has today downgraded the rating on the Class A Notes issued by 24-7 Finance S.r.l. (the Issuer) to A (high) (sf) from AA (low) (sf) following an amendment to the transaction signed on 23 June 2017.

Today’s rating action reflects an annual review of the transaction and is based on the following analytical considerations:
-- An amendment to the Intercreditor Agreement, the Conditions and to the Cash Administration and Agency Agreement (the Amendment) executed on 23 June 2017.
-- Portfolio performance, in terms of delinquencies and defaults, as of the May 2017 payment date.
-- Updated portfolio default rate, loss given default (LGD) and expected loss assumptions for the remaining collateral pool.
-- Current available credit enhancement for the Class A Notes to cover the expected losses at the A (high) (sf) rating level.

24-7 Finance S.r.l. is a residential mortgage-backed securities transaction originated and serviced by Banca 24-7 S.p.A. and closed in June 2008. In July 2012, Banca 24-7 S.p.A. merged with Unione di Banche Italiane S.p.A. (UBI Banca or the Servicer) and was replaced under all its roles in the transaction.

TRANSACTION AMENDMENT
The Issuer has appointed UBI Banca as an additional account bank.

The Issuer has also directed the The Bank of New York, London Branch (BNY London, the previous account bank and now the backup account bank) to move the cash deposited on the transaction accounts (Expenses Account, Collection Account, Cash Reserve Account, Liquidity Reserve Account, Investment Account, Securities Account) to the corresponding additional transaction accounts (New Expenses Account, New Collection Account, New Cash Reserve Account, New Liquidity Reserve Account, New Investment Account, New Securities Account) now held by UBI Banca.

Following the transfer, the transaction accounts held by BNY London will be kept opened. If UBI Banca ceases to be an eligible institution in accordance with the DBRS downgrade language introduced in the Amendment, UBI Banca will proceed to transfer back to the transaction accounts held by BNY London all the cash deposited on the additional transaction account within 30 days. Should UBI Banca become an eligible institution again, all the amounts standing to the transaction accounts will be transferred back to the additional transaction accounts within 30 days.

The downgrade of the Class A Notes to A (high) (sf) is consistent with the combination of the current rating of UBI Banca and the provision and downgrade language introduced following the replacement of UBI Banca as the main transaction account bank, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

PORTFOLIO PERFORMANCE
As of 31 March 2017, the loans more than 90 days in arrears were at 3.08% of the outstanding performing portfolio collateral balance. Defaults are defined as loans in arrears for more than 12 months; the current cumulative defaults are at 11.85% of the initial portfolio collateral balance.

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 on the remaining portfolio collateral pool to 35.89% and 23.31% at the current rating level, respectively.

CREDIT ENHANCEMENT
The Class A Notes are supported by the subordination of the Class B. As of the May 2017 payment date, credit enhancement (CE) for the Class A Notes as a percentage of the performing collateral balance was at 23.09%. The transaction also benefits from a Reserve Fund, which is currently at the target level (EUR 35.1 million) and covers interest payment shortfall on the Class A Notes.

UBI Banca acts as Account Bank for this transaction. The account bank reference rating of A (low) – being one notch below the DBRS public Long-Term Critical Obligations Rating of UBI Banca of “A” – 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.

J.P. Morgan Securities plc is the Swap Counterparty for this transaction and the DBRS private rating is above the First Rating Threshold as described in DBRS’s “Derivative 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.

DBRS reviewed the aforementioned legal documents received in the context of the Amendment. A review of any other transaction legal documents was not conducted as they 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 payment reports provided by The Bank of New York Mellon, servicer reports provided by UBI Banca, information and legal documents provided in the context of the Amendment by the appointed legal counsel and loan-level 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 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 15 September 2016, when DBRS upgraded the Class A Notes to AA (low) (sf) from A (high) (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):
-- 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 assumptions for the remaining portfolio collateral are 15.04% and 8.68%, respectively. At the A (high) (sf) rating level, the corresponding PD is 35.89% and the LGD is 23.31%.
-- 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 A (high) (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 A (high) (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 A (high) (sf).

Class A 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) (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 (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (high) (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: 27 July 2011

DBRS Ratings Limited
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United Kingdom
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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
-- Operational Risk Assessment for European Structured Finance Servicers
-- Derivative Criteria for European Structured Finance Transactions
-- 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.