DBRS Confirms Rating on Class A Notes Issued by Indigo Lease S.r.l. Following Restructure

DBRS Ratings Limited (DBRS) has today confirmed the rating on the Class A Notes issued by Indigo Lease S.r.l. (the Issuer) at AA (sf). The rating addresses the timely payment of interest and ultimate payment of principal by the legal final maturity date.

The rating action on the Class A Notes is based on the following analytical considerations as described more fully below:
-- A structural amendment to the transaction signed on 21 July 2017 and effective as of the interest payment date on 25 July 2017.
-- Portfolio performance in terms of delinquencies, defaults and losses.
-- Updated default, recovery and loss assumptions on the remaining receivables.
-- Current available credit enhancement to the Class A Notes to cover the expected loss at the AA (sf) rating level.

Indigo Lease S.r.l. is a securitisation of lease receivables related to financial lease contracts granted by IFIS Leasing S.p.A. (formerly GE Capital Servizi Finanziari S.p.A.) to corporates, small businesses and individualswith registered offices in Italy. The portfolio is serviced by IFIS Leasing S.p.A., with Securitisation Services S.p.A. acting as back-up servicer.

STRUCTURAL AMENDMENT
-- Purchase of an additional collateral portfolio funded via an additional issuance of Class A and Class B Notes. The principal outstanding of the Class A and Class B Notes has increased to €377,636,014 and €169,700,000, respectively.
-- The addition of a two-year revolving period ending in July 2019. DBRS has stressed the portfolio in accordance with the eligibility requirements specified in the transaction documentation in order to assess the “worst case” that the portfolio characteristics can migrate to.
-- Reduction of the floor on the Class A Euribor reference rate to -0.80% from -0.35%.

PORTFOLIO ASSUMPTIONS
DBRS has increased its cumulative net loss (CNL) assumption on the collateral pool to 7.97% from 6.46% at the DBRS initial rating. The increased loss assumption is driven by an assessment of the “worst-case” portfolio composition given the addition of the revolving period, and the increased sovereign stress applied in Italian securitisation transactions following DBRS’s downgrade of the Republic of Italy’s Long-Term Foreign and Local Currency Issuer Ratings to BBB (high) from A (low) on 13 January 2017.

CREDIT ENHANCEMENT
Post-amendment, credit enhancement to the Class A Notes has decreased to 31.0% from 37.8% at the June interest payment date. Credit enhancement to the Class A Notes consists of subordination of the Class B Notes. At the DBRS initial rating, credit enhancement to the Class A Notes was 27.4%.

BNP Paribas Securities Services, Milan Branch (BNP Paribas) acts as the account bank for the transaction. The DBRS private rating of BNP Paribas complies 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.

Citibank N.A., London Branch (Citibank) acts as the cap counterparty for the transaction. The DBRS private rating of Citibank is above the First Rating Threshold as described in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is the “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 amended transaction legal documents has been conducted.

Other methodologies referenced in these transactions 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 this rating includes data provided by FISG S.r.l. (the Restructuring Arranger).

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 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 rating action since the Initial Rating Date.

The lead analyst responsibilities for this transaction have been transferred to Andrew Lynch.

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

To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios as compared with the parameters used to determine the rating (the Base Case):

-- DBRS expected a lifetime base-case probability of default (PD) and loss given default (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 loans for the Issuer are 10.16% and 78.50%, 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 A Notes would be expected to fall to A (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A Notes would be expected to fall to A (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected to fall to BBB (low) (sf).

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

For further information on DBRS historic 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: Andrew Lynch, Assistant Vice President
Rating Committee Chair: Vito Natale, Senior Vice President
Initial Rating Date: 15 December 2016

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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
-- Derivative Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Originators
-- Operational Risk Assessment for European Structured Finance Servicers
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Rating CLOs and CDOs of Large Corporate Credit
-- 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