DBRS Confirms Ratings on MARCHE M6 S.r.l.

DBRS Ratings Limited (DBRS) confirmed its ratings on the Class A2 notes and Class A3 notes (the Class A notes) issued by MARCHE M6 S.r.l. (MM6 or the Issuer) at AAA (sf).

The confirmations follow a review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies and defaults, as of the January 2018 payment date;
-- The inclusion of an amendment (the Amendment) to the servicing agreement into the cash flow analysis;
-- Probability of default rate (PD), loss given default rate (LGD) and expected loss (EL) assumptions for the outstanding collateral pool; and
-- Current available credit enhancement (CE) to the Class A notes to cover the EL at the AAA (sf) rating level.

The ratings on the Class A notes address the timely payment of interest and ultimate repayment of principal payable on or before the Final Maturity Date in January 2064.

MM6 is a securitisation of first-lien residential mortgage loans originated in Italy by Nuova Banca delle Marche S.p.A. (NBDM), the former Banca delle Marche S.p.A. In May 2017, NBDM was acquired by Unione di Banche Italiane S.p.A. (UBI). UBI has been servicing the portfolio since NBDM fully merged with UBI in October 2017. The process of transferring the servicing activities was smooth and did not negatively impact the transaction.

The Amendment to the servicing agreement provides more flexibility for the servicer to manage the portfolio. The limit of the spread reduction renegotiations granted to borrowers is now set at 15% of the original balance of the portfolio, up from 5% prior to the Amendment, with a minimum allowed spread of 1.25%. That minimum also applies to loans switching from a fixed rate to a floating rate.

Furthermore, the servicer can repurchase performing loans up to an overall cumulative limit of 20% of the original balance of the portfolio, and up to 8% per calendar year (compared to 5% and 2% respectively, before the Amendment). As of December 2017, the cumulative repurchases of performing loans stood at 4.9%.

As of December 2017, the portfolio consisted of 14,690 loans totalling approximately EUR 1.2 billion. The portfolio is highly concentrated in the Italian central regions of Marche and Lazio.

PORTFOLIO PERFORMANCE
The portfolio is performing well and within DBRS’s expectations. As of December 2017, loans more than 90 days delinquent accounted for 0.8% of the outstanding collateral portfolio balance, up from 0.7% in March 2017. Cumulative defaulted loans as a percentage of the initial portfolio balance stood at 3.5%, up from 2.9% in March 2017.

PORTFOLIO ASSUMPTIONS
DBRS conducted a loan-by-loan analysis on the outstanding pool of receivables and updated the base-case PD and LGD assumptions on the outstanding collateral portfolio to 4.8% and 1.4%, respectively.

CREDIT ENHANCEMENT
CE to the Class A notes is provided by the overcollateralization of the outstanding collateral portfolio balance and includes the reserve fund. As of January 2018, CE to the Class A notes was 40.9%, up from 36.7%, as of April 2017. The reserve fund, which is currently at its target level of EUR 34.0 million, is available to pay senior fees, expenses and missed interest on the Class A notes.

BNP Paribas Securities Services, Milan Branch and London Branch respectively serve as the Italian and English Account Bank for the transaction. The DBRS private Long-Term Issuer ratings of the Account Banks 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.

J.P. Morgan Securities plc is the Swap Counterparty to the transaction and its DBRS private rating complies with the First Rating Threshold defined in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology. Its obligations under the swap agreement are guaranteed by J.P. Morgan Chase Bank N.A.

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.

DBRS has conducted a review of the transaction’s legal document provided in the context of the aforementioned Amendment. A review of any other transaction’s legal documents was not conducted as the 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 “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Rating Sovereign Governments” methodology at: http://dbrs.com/research/319564/rating-sovereign-governments.pdf.

The sources of data and information used for this rating include the amendment agreement and servicer reports provided by UBI, payments and investors reports provided by Securitisation Services S.p.A. and loan-by-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 rating, 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.

The last rating action on this transaction took place on 9 June 2017, when DBRS confirmed the Class A1, Class A2, Class A3 notes at AAA (sf). The rating on the Class A1 notes was discontinued on 1 February 2018.

The lead analyst responsibilities for this transaction have been transferred to Ilaria Maschietto.

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 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 pool of mortgages for the Issuer are 4.8% and 1.4%, respectively. At the AAA (sf) rating level, the corresponding PD is 27.5% and the LGD is 19.3%.

-- 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 increased by 50%, the rating of the Class A2 notes would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increased by 50%, the rating for the Class A2 notes would be expected to remain at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increased by 50%, the rating of the Class A2 notes would be expected to remain at AAA (sf).

Class A2 Notes risk sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AAA (sf)

Class A3 Notes risk sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of 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 and US regulations only.

Lead Analyst: Ilaria Maschietto, Senior Financial Analyst
Rating Committee Chair: Vito Natale, Senior Vice President
Initial Rating Date: 16 July 2013

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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
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Operational Risk Assessment for European Structured Finance Servicers
-- Interest Rate Stresses for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions

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.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.