DBRS Assigns an A (sf) Rating to Diaz Securitisation S.r.l.

DBRS Ratings Limited (DBRS) assigned an A (sf) rating to the Class A notes (the rated notes) issued by Diaz Securitisation S.r.l. (Diaz; the Issuer).

The Class A notes combine with the Class B notes to form the securitisation transaction established under Italian securitisation law (the Transaction). However, the Class B notes are not rated.

The notes are backed by a pool of receivables related to salary, pension assignment loans and payment delegation loans. The initial portfolio comprises loans from the Arianna SPV S.r.l. transaction (the Arianna portfolio), which was rated by DBRS in December 2013 and discontinued on 24 April 2017 following the full repayment of the rated notes. More details on the Arianna SPV S.r.l. transaction can be found on www.dbrs.com.

Only performing receivables were assigned to Diaz from the Arianna portfolio. The Arianna portfolio is serviced by Zenith Service S.p.A. (Zenith). Zenith will continue to delegate activity, such as the collection of borrower payments made under some receivables, to the sub-servicers appointed in the context of the Arianna transaction.

The transaction was established in April 2017 and initially consisted of about EUR 171.5 million receivables. As of 30 August 2017, the portfolio had amortised to roughly EUR 110.6 million.

The rating is assigned by DBRS following some amendments that envisage some structural changes, including the introduction of a one-year revolving period ending in October 2018, during which time additional receivables may be purchased by the Issuer with principal collections from Lake Securitisation S.r.l. (Lake). Lake is a bankruptcy-remote special-purpose vehicle sponsored by Banca Progetto S.p.A. (Banca Progetto) to acquire receivables originated by Sigla S.p.A. (Sigla) and Pitagora S.p.A. (Pitagora and with Sigla, the New Originators). Lake is serviced by Securitisation Services S.p.A. that delegates some activities to the New Originators. Lake can offer receivables to Diaz that will purchase them subject to some provisions of the transaction documents, including concentration limits and eligibility criteria. Diaz benefits from the same representation and warranties rendered by the New Originators to Lake upon assignment.

The rating of the Class A notes addresses the timely payment of interest and ultimate repayment of principal before the final maturity date. The ratings are based on DBRS’s review of the following analytical considerations:

-- The available credit enhancement in the form of subordination, reserves and excess spread;
-- The ability of the transaction’s structure and triggers to withstand stressed cash flow assumptions in order to timely pay interest and ultimately repay the principal under the notes before the legal maturity date according to the terms of the transaction documents;
-- The observed historical performance and underlying analysis of the Arianna portfolio;
-- Zenith Services S.p.A.’s capabilities with respect to servicing;
-- Sigla and Pitagora’s financial situation and its capabilities with respect to originations, underwriting and servicing;
-- The presence of an appointed back-up servicer and its capabilities in that respect;
-- The credit quality of the collateral as deduced from the available information and the ability of the servicer to perform collection activities on the collateral;
-- The sovereign rating of the Republic of Italy, which is currently rated by DBRS at BBB (high); and
-- The legal structure and legal opinions that address the assignment of the assets to the Issuer and other features, and, more generally are consistent with DBRS’s methodology: “Legal Criteria for European Structured Finance Transactions”.

The transaction was modelled in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is: Rating European Consumer and Commercial Asset-Backed Securitisations.

For a more detailed discussion of the approach to salary-backed loans in Structured Finance ratings, please refer to DBRS’s “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 sources of data and information used for this rating include: static gross loss analysis by quarterly vintages for the new originators and observed performance of the Arianna portfolio.

All information used for this rating was sourced by Banca Progetto, the Servicer, and the new originators directly or indirectly through the transaction arranger, Banca IMI S.p.A.

DBRS did not rely upon third-party due diligence in order to conduct its analysis.

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.

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): 22.7% for an A (high) scenario, a 25% and 50% increase on PD.
Recovery Rates Used: 30.5% for an A (high) scenario.
Loss Given Default (LGD) Rates Used: 69.5% for an A (high) 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 lead to a downgrade of the Class A notes to A (low) (sf).
-- A hypothetical increase of the base case PD by 50%, ceteris paribus, would lead to a downgrade of the Class A notes to BBB (high) (sf).
-- A hypothetical increase of the base case LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A notes to BBB (high) (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 BBB (high) (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 BBB (high) (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 BBB (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 (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 and US regulations only.

Lead Analyst: Paolo Conti, Senior Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 28 September 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 Securitisations – 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.