DBRS Assigns Ratings to Brisca Securitisation S.R.L.

DBRS Ratings Limited (DBRS) has today assigned the following ratings to the Class A and Class B Notes (the Notes) issued by Brisca Securitisation S.R.L. (the Issuer):

-- EUR 267,400,000 Class A at BBB (high) (sf)
-- EUR 30,500,000 Class B at B (low) (sf)

The Notes are backed by a portfolio of secured and unsecured non-performing loans originated by Banca Carige S.p.A., Banca Cesare Ponti S.p.A. and Banca del Monte di Lucca S.p.A. The majority of loans in the portfolio defaulted between 2007 and 2015 and are in various stages of the resolution process. The portfolio will be serviced by Prelios Credit Servicing S.p.A. (Prelios). Securitisation Services S.p.A. has been appointed as the back-up servicer at closing and will step in as the master servicer, should the master servicing agreement be terminated.

As of the cut-off date (31 August 2016), the portfolio consisted of 5,001 loans to 2,069 borrowers with a total gross book value of EUR 938.3 million. The Prelios business plan assumes that all loans will be disposed through a legal foreclosure process and the collections received will be the principal source of payment under the Notes. According to the Prelios business plan, gross disposition proceeds (GDP) totalling EUR 393.0 million are expected to be collected. The collateral primarily consists of secured loans backed by residential real estate (63.6% of the expected Prelios GDP) and secured loans backed by commercial real estate (30.4% of the expected Prelios GDP). Unsecured loans only account for 6.0% of the expected Prelios GDP. The collateral is primarily located in the northern regions of Italy, which is viewed as a comparable strength of the transaction.

The Class A Notes are eligible to benefit from the GACS guarantee provided by the Italian Ministry of Finance. However, DBRS’s ratings do not give credit to this guarantee and thus do not address potential payments under the GACS guarantee to the noteholders. DBRS did account for the GACS expenses in its cash flow modelling analysis as these payments rank senior to principal and interest payments on the Notes. The transaction benefits from an amortising cash reserve that was fully funded at closing through collections received between the cut-off date and the transfer date. The intial cash reserve amount is equal to EUR 11.9 million with a target reserve amount equal to the maximum between (1) 4.0% of the outstanding balalnce of the Class A Notes and Class B Notes and (2) zero. The cash reserve may be used to pay interest due on the Class A Notes and any senior fees and expenses. The transaction is fully sequential and the Class B Notes, which represent mezzanine debt, will not be repaid until the Class A Notes are repaid in full.

Given the nature of the collateral and the defaulted status of all loans included in the portfolio, the collections received will be the primary source of payment under the Notes. As a result, there is a significant reliance on Prelios’s ability and performance as a servicer in executing its business plan. DBRS positively views the granularity of the portfolio, the cash reserve and the experience of Prelios as a servicer as mitigating factors for this risk.

The ratings are based on DBRS’s analysis of the projected recoveries of the underlying collateral, the historical performance and expertise of the Prelios as servicer, the availability of liquidity to fund interest shortfalls and special-purpose vehicle expenses, the cap agreement with Banca IMI S.p.A.and the transaction’s legal and structural features. In its analysis, DBRS assumed that all loans are disposed through an auction process, which generally has the longest resolution timeline. Both the DBRS timing and value stresses are based on the historical repossessions data of the servicer, Prelios. DBRS’s BBB (high) and B (low) ratings assume a haircut of 18.7% and of 5.5%, respectively, to Prelios’s business plan for the portfolio.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is: Rating European Non-Performing Loans Securitisations.
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 Prelios Credit Servicing S.p.A, Banca IMI S.p.A and Banca Carige Group.

DBRS did not rely upon third-party due diligence in order to conduct its analysis. 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 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 rating concerns a newly issued financial instrument. 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 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”):

-- Recovery Rates Used: Cumulative Base Case Recovery Amount of EUR 319.7 million at the BBB (high) stress level, a 5% and 10% decrease of the Cumulative Base Case Recovery Rate.
-- Recovery Rates Used: Cumulative Base Case Recovery Amount of EUR 371.4 million at the B (low) stress level, a 5% and 10% decrease of the Cumulative Base Case Recovery Rate.

-- DBRS concludes that a hypothetical decrease of the Recovery Rate by 5%, ceteris paribus, would lead to a downgrade of the Class A notes to BB (high) (sf).
-- DBRS concludes that a hypothetical decrease of the Recovery Rate by 10%, ceteris paribus, would lead to a downgrade of the Class A Notes to BB (sf).
-- DBRS concludes that a hypothetical decrease of the Recovery Rate by 5%, ceteris paribus, would lead to a downgrade of the Class B Notes to CCC (sf).
-- DBRS concludes that a hypothetical decrease of the Recovery Rate by 10%, ceteris paribus, would each lead to a downgrade of the transaction to CCC (sf) for the Class B Notes.

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.

Lead Analyst: Elizabeth Lovett, Assistant Vice President
Rating Committee Chair: Quincy Tang, Managing Director
Initial Rating Date: 05 June 2017

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

Rating European Non-Performing Loans Securitisations
Rating European Consumer and Commercial Asset-Backed Securitisations
Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
European CMBS Rating and Surveillance Methodology
Operational Risk Assessment for European Structured Finance Servicers
Legal Criteria 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