DBRS Confirms Ratings on the Notes Issued by ICCREA SME CART 2016 S.r.l.

DBRS Ratings Limited (DBRS) has today confirmed the ratings on the notes issued by ICCREA SME CART 2016 S.r.l. (ICCREA SME 2016 or the Issuer):
-- Class A1 Notes confirmed at AAA (sf),
-- Class A2 Notes confirmed at AA (low) (sf),
-- Class B Notes confirmed at A (sf), (together, the Notes).

The rating actions on the Notes reflect an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies and defaults, as of the June 2017 payment date.
-- No revolving termination events have occurred;
-- Portfolio default rate (PD), loss given default (LGD) and expected loss assumptions for the outstanding collateral portfolio.
-- Current available credit enhancement (CE) to the Class A1, the Class A2 and the Class B Notes to cover the expected losses at the AAA (sf), AA (low) (sf) and A (sf) rating levels, respectively.

ICCREA SME 2016 is a securitisation of lease receivables originated and serviced by Iccrea BancaImpresa S.p.A. (the Originator). The lessees are corporates, small businesses and individual enterprises with registered offices in Italy. The pool comprises receivables in the form of real estate, auto, industrial vehicles or equipment leases. The residual value of the lease contracts has not been securitised; however, each interest instalment includes the interest accrued on the residual value.

The transaction has a two-year revolving period (the amortisation of the Notes is expected to start on the payment date falling in December 2018, to the extent that certain conditions are not breached before), during which the Originator has the option to sell new receivables, funded through collections, and will be subject to certain conditions and limitations.

PORTFOLIO PERFORMANCE
The portfolio is performing within DBRS’s expectations. As of the June 2017 payment date, the 90+ delinquency ratio has been stable over the year and it is currently at 0.20% of the performing collateral portfolio. The current cumulative default ratio (as a percentage of the aggregate original portfolio balance) stands at 0.07%.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis on the outstanding pool and updated the probability of default (PD) assumptions of the outstanding collateral pool to 20.09% (including sovereign stress) and the loss given default (LGD) assumptions to 84.71% for the Class A1 Notes, 83.90% for the Class A2 Notes and 83.71% for the Class B Notes, respectively.

CREDIT ENHANCEMENT
The current CE available to the Class A1, the Class A2 and Class B Notes consisting of the overcollateralisation provided by the performing pool, stands at 86.27%, 51.09% and 46.33%, respectively, in line with the CE as at Closing. The Reserve Fund (Debt Service Reserve) is available to cover senior fees and any shortfall of interest on the rated Notes and it is currently at its target level of EUR 14.95 million.

Citibank N.A., Milan Branch acts as Account Bank for the transaction. DBRS’s private rating of the Account Bank complies with the minimum institution rating, given the ratings assigned to the 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 these ratings include a settlement report provided by Iccrea BancaImpresa S.p.A., a payments and investors report provided by Accounting Partners S.r.l. 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 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.

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 of the Issuer are 20.09% (including sovereign stress) and 84.71% for the Class A1 Notes, 83.90% for the Class A2 Notes and 83.71% for the Class B Notes, 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 A1 Notes would be expected to be downgraded to AA (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A1 Notes would be expected to be downgraded to A (high) (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A1 Notes would be expected to be downgraded to A (sf).

Class A1 Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD, expected rating of AA (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 (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (sf)

Class A2 Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (sf)
-- 50% increase in LGD, expected rating of A (sf)
-- 25% increase in PD, expected rating of A (low) (sf)
-- 50% increase in PD, expected rating of BBB (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BB (high) (sf)

Class B Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD, expected rating of BBB (high) (sf)
-- 50% increase in PD, expected rating of BB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of B (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of B (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 and US regulations only.

Lead Analyst: Antonio Di Marco, Senior Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 10 August 2016

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

-- 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