DBRS Confirms Ratings on Credico Finance 14 S.r.l. and Credico Finance 15 S.r.l.

DBRS Ratings Limited (DBRS) has today confirmed the ratings of AA (sf) on the Class A Notes of Credico Finance 14 S.r.l. (CF 14) and AAA (sf) on the Class A2 Notes of Credico Finance 15 S.r.l. (CF 15).

The ratings on the senior notes (Class A Notes) address the timely payment of interest and the ultimate payment of principal on or before the legal final maturity date.

The confirmations follow an annual review of the transactions and are based on the following analytical considerations:

-- Portfolio performance in terms of delinquencies and defaults as of the April 2017 and June 2017 payment dates.
-- Probability of Default (PD) rate for the remaining collateral pools.
-- The Credit Enhancement (CE) available to the rated notes.

Both transactions are a multi-originator cash flow securitisation collateralised by bank loans to Italian small and medium-sized enterprises (SMEs), entrepreneurs, artisans and producer families granted by unrated Italian cooperative banks.

PORTFOLIO PERFORMANCE
The portfolios of both transactions are performing within DBRS’s expectations. For CF 14, the 90+ delinquency ratio was at 0.61% as of April 2017 and the cumulative default ratio was 0.94%. For CF 15, the 90+ delinquency ratio was at 1.02% as of June 2017 and the cumulative default was at 0.36%.

PORTFOLIO ASSUMPTIONS
DBRS has kept the same PD assumptions as of closing on the remaining collateral pools for both transactions. Base-case PD rates used are 2.97% for CF 14 and 5.15% for CF 15.

CREDIT ENHANCEMENT
The CE available to all rated notes has continued to increase as the transactions continue to deleverage. The CE available to each class of rated notes was 76.17% for the CF 14 Class A Notes as of the April 2017 payment date and 95.15% for the CF 15 Class A Notes as of the June 2017 payment date.

BNP Paribas Securities Services SCA/Milan holds the Transaction Account for the transaction. The DBRS private rating of BNP Paribas Securities Services SCA/Milan 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 ratings is: “Rating CLOs Backed by Loans to European SMEs.”

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

A review of the transactions legal documents was not conducted as the documents have remained unchanged since the most recent rating actions.

Other methodologies referenced in these transactions 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 these ratings include reports provided by Accounting Partners Srl 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 ratings of CF 14 and CF 15, 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 these ratings 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 lead analyst responsibilities for this transaction have been transferred to Francesco Amato.

-- The last rating action on CF 14 took place on 1 August 2016 when DBRS upgraded the Class A Notes at AA (sf) from A (high) (sf) and removed the Under Review with Positive Implications.
-- The last rating action on CF 15 took place on 1 August 2016 when DBRS upgraded the Class A2 Notes at AAA (sf) from AA (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):

CF 14
-- PD Rates Used: base case PD of 2.97% a 10% increase of the base case and a 20% increase of the base case PD.
-- Recovery Rates Used: base case recovery rates of 48.16% at the AA (sf) stress level for the Class A Notes, a 10% and 20% decrease in the base case recovery rates. Note that the percentage decreases in the recovery rates are assumed for the other stress recovery rate levels.

DBRS concludes that a hypothetical increase of the base case PD by 20% or a hypothetical decrease of the recovery rate by 20%, ceteris paribus, would lead to a confirmation of the Class A Notes at AA (sf). A scenario combining both an increase in the base case PD by 10% and a decrease in the base case recovery rate by 10%, ceteris paribus, would also lead to a confirmation of the Class A Notes at AA (sf).

CF 15
-- PD Rates Used: base case PD of 5.15% a 10% increase of the base case and a 20% increase of the base case PD.
-- Recovery Rates Used: base case recovery rates of 47.17% at the AAA (sf) stress level for the Class A2 Notes, a 10% and 20% decrease in the base case recovery rates. Note that the percentage decreases in the recovery rates are assumed for the other stress recovery rate levels.

DBRS concludes that a hypothetical increase of the base case PD by 20% or a hypothetical decrease of the recovery rate by 20%, ceteris paribus, would lead to a confirmation of the Class A2 Notes at AAA (sf). A scenario combining both an increase in the base case PD by 10% and a decrease in the base case recovery rate by 10%, ceteris paribus, would also lead to a confirmation of the Class A2 Notes at 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.

CF 14
Lead Analyst: Francesco Amato, Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 21 October 2013

CF 15
Lead Analyst: Francesco Amato, Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 15 December 2014

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

-- Legal Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Rating CLOs Backed by Loans to European SMEs
-- Rating CLOs and CDOs of Large corporate Credit
-- Operational Risk Assessment for European Structured Finance Servicers
-- Unified Interest Rate Model for European Securitisations
-- Cash Flow Assumptions for Corporate Credit 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.