DBRS Confirms Ratings on BPL Mortgages S.r.l., Series V

DBRS Ratings Limited (DBRS) confirmed its ratings on the Class A-2012 Notes and Class A-2016 Notes (together, Class A Notes) issued by BPL Mortgages S.r.l., Series V (the Issuer) at A (high) (sf).

The rating actions follow an annual review of the transaction and are based on the following analytical considerations, as described more fully below:

-- The overall portfolio performance as of the July 2017 payment date, in particular with regard to low levels of cumulative net loss and delinquencies;
-- Probability of default (PD) rate, loss given default (LGD) and expected loss assumptions for the remaining collateral pool;
-- The increased levels of credit enhancement (CE) available to the Notes to cover expected losses assumed in line with the A (high) (sf) rating level for the Class A Notes.

The ratings on the Class A Notes address the timely payment of interest and the ultimate payment of principal payable on or before the Final Legal Maturity Date in October 2058.

BPL Mortgages S.r.l., Series V is a securitisation of Italian residential mortgage receivables, originated by Banco Popolare - Società Cooperativa, which merged with Banca Popolare di Milano S.C.a.r.l. into Banco BPM SpA (BPM) in January 2017. The transaction initially closed in December 2012; however, it was restructured in October 2016. Around EUR 1,072.2 million of portfolio was purchased by the Issuer and EUR 268.5 million of non-performing and EUR 586.1 million of performing receivables were repurchased by the Seller. Additionally, the new Class A-2016 Notes were issued with excess funds used to partially redeem the Class B-2012 Notes.

PORTFOLIO PERFORMANCE
As of the July 2017 payment date, 30-day to 60-day delinquencies were 0.2% of the outstanding principal balance while loans with 60-day to 90-day delinquencies were 0.7% of the outstanding balance. Finally, loans with delinquencies greater than 90 days were 1.1% of the outstanding balance. The gross cumulative defaults as a ratio of the restructured portfolio are 0.3%, of which 0.03% have been recovered so far.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis on the remaining pool and updated its base case PD and LGD assumptions on the outstanding portfolio to 16.3% and 44.0 %, respectively.

CREDIT ENHANCEMENT
CE is provided by the subordination of the Class B-2012 Notes. CE for the Class A Notes increased to 24.3% in July 2017, from 22.0% at the transaction restructuring in October 2016. A non-amortising reserve of EUR 64.0 million was funded at closing and provides liquidity support to the Class A Notes. The reserve fund is currently at the initial and target level of EUR 64.0 million.

BNP Paribas Securities Services, London branch and BPM are the Additional Transaction Bank and Transaction Bank for this transaction, respectively. The Additional Transaction Bank holds the collection and expenses account, while the Transaction Bank holds the cash reserve account. The DBRS ratings of BNP Paribas Securities Services, London branch and BPM, are at least equal to the Minimum Institution Rating, given the rating assigned to the Class A Notes, as described in the DBRS Legal Criteria for European Structured Finance Transactions.

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.

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” at: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.

The sources of data and information used for these ratings include: quarterly investor reports provided by BNP Paribas Securities Services, Milan Branch; quarterly servicer reports from Banco BPM SpA 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 restructuring in October 2016, 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.

The last rating action on this transaction took place on 28 October 2016, when DBRS confirmed its rating of the Class A-2012 Notes at A (high) (sf) and assigned an A (high) (sf) rating to the Class A-2016 Notes.

The lead analyst responsibilities for this transaction have been transferred to Joana Seara da Costa.

Information regarding DBRS ratings, including definitions, policies and methodologies, is available on www.dbrs.com

To assess the impact of the 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 Base Case PD and LGD for the portfolio 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 mortgages are 16.3% and 44.0%, respectively. At the A (high) (sf) rating level, the corresponding PD is 34.6% and the LGD is 55.0%.

For example, if the LGD increases by 50%, the ratings for the Class A Notes would be expected to decrease to BBB (high) (sf), ceteris paribus. If the PD increases by 50%, the ratings for the Class A Notes would be expected to decrease to BBB (low) (sf), ceteris paribus. Furthermore, if both the PD and LGD increase by 50%, the ratings for the Class A Notes would be expected to decrease to BB (sf), ceteris paribus.

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

Ratings assigned: Joana Seara da Costa, Senior Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 24 December 2012

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.

-- Master European Structured Finance Surveillance Methodology
-- Legal Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
--Unified Interest Rate Model for European Securitisations
-- Rating CLOs Backed by Loans to European SMEs

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.