DBRS Confirms Rating on UBI SPV Lease 2016 S.r.l.

DBRS Ratings Limited (DBRS) has today confirmed its rating of A (low) (sf) on the Class A Notes issued by UBI SPV Lease 2016 S.r.l. (the Issuer).

The confirmation of the rating on the Class A Notes reflects an annual review of the transaction and is based on the following analytical considerations as described more fully below:

-- Portfolio performance, in terms of delinquencies and defaults, as of the May 2017 payment date.
-- Updated default rate, recovery rate and loss assumptions on the remaining collateral pool.
-- Current available credit enhancement (CE) to the Class A Notes to cover the expected losses at the A (low) (sf) rating level.

UBI SPV Lease 2016 S.r.l. is a securitisation of lease receivables granted to corporates, small business and individual enterprises originated by UBI Leasing S.p.A. (UBI Leasing) and serviced by Unione di Banche Italiane S.p.A. (UBI Banca). The pool comprises real estate leasing receivables, vehicle lease receivables and equipment lease receivables.

The transaction closed in July 2016 and is currently in its 18-month revolving period. There are eligibility criteria, concentration limits and performance triggers in place to mitigate any potential portfolio deterioration.

PORTFOLIO PERFORMANCE
As of the May 2017 payment date, the 90+ delinquency ratio arrears stood at 0.48% of the performing portfolio balance. The current gross cumulative default ratio is currently at 0.20% of the aggregate original portfolio balance. To date, the concentration limits and performance triggers in place because of the revolving period have been satisfied.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis on the outstanding pool of receivables and updated the probability of default (PD) and loss given default (LGD) assumptions on the remaining collateral pool to 23.05% and 71.25% (including sovereign adjustment), respectively.

CREDIT ENHANCEMENT
As of May 2017, due to the revolving period, CE to the Class A Notes remained stable at around 32.6%. The credit enhancement is provided by the collateralisation provided by the performing portfolio, and includes the Debt Reserve Amount and any residual cash.

The transaction benefits from a Reserve Fund (Debt Reserve Amount), currently at its target level of EUR 31.5 million. The Reserve Fund covers senior fees and interest on the Class A Notes and starts to amortise after the end of the revolving period, being equal to 1.50% of the outstanding balance of the Class A Notes.

UBI Banca and BNP Paribas Securities Services, Milan Branch (BNPSS, Milan) are the Account Bank and the Payment Account Bank for the transaction, respectively. Both UBI Banca’s reference rating of A (low), being one notch below the DBRS public Long-Term Critical Obligations Rating (COR) of “A”, and DBRS’s private rating of BNPSS, Milan, comply 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.

An asset and a cash flow analysis were both conducted. Due to the inclusion of a revolving period in the transaction, the analysis continues to be based on the worst-case replenishment criteria set forth in the transaction legal documents.

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, investors and payments reports provided by UBI Banca 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. 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 rating action since the Initial Rating Date.

The lead analyst responsibilities for this transaction have been transferred to Antonio Di Marco.

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 for the Issuer are 23.05% (including sovereign stress) and 71.25%, 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 be downgraded to BB (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A Notes would be expected to be downgraded to BB (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 downgraded to C (sf).

Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (sf).
-- 50% increase in LGD, expected rating of BB (high) (sf).
-- 25% increase in PD, expected rating of BBB (sf).
-- 50% increase in PD, expected rating of BB (sf).
-- 25% increase in PD and 25% increase in LGD, expected rating of BB (low) (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating of B (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of B (low) (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of below B (low) (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: 28 July 2016

DBRS Ratings Limited
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The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies

-- Unified Interest Rate Model for European Securitisations
-- Legal Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Rating CLOs and CDOs of Large Corporate Credit

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