Press Release

DBRS Morningstar Maintains Under Review with Negative Implications Status on Popolare Bari NPLS 2017 S.r.l.

Nonperforming Loans

March 18, 2021

DBRS Ratings GmbH (DBRS Morningstar) maintained the Under Review with Negative Implications status on the B (high) (sf) and CCC (sf) ratings of the Class A and Class B notes, respectively, issued by Popolare Bari NPLS 2017 S.r.l.

The maintenance of the Under Review with Negative Implications status is based on the following analytical considerations:
-- Transaction performance: as reported in the most recent quarterly servicer report, the actual cumulative gross collections (GDPs) as of 31 December 2020 were EUR 25.9 million, whereas the initial business plan prepared by the servicer assumed cumulative gross collections of EUR 45.8 million for the same period. Therefore, the transaction is underperforming by 43.5% compared with the servicer’s initial expectations.
-- Performance ratios and underperformance events: as per the most recent October 2020 investor report, the cumulative collection ratio was 63.6% and the present value (PV) cumulative profitability ratio was 96.8%. A subordination event has not occurred as it would occur upon the PV cumulative profitability ratio being under 90% or upon Class A interest shortfalls.
-- Special servicer’s updated business plan: in December 2020, DBRS Morningstar received an updated portfolio business plan, which assumed recoveries 19.9% lower compared with the servicer´s initial expectations. In March 2021, pursuant to the requirements set out in the receivable servicing agreement, the servicer is required to submit a new updated business plan (2021 Updated Business Plan). Following its receipt, DBRS Morningstar will assess the changes from previous expectations in detail and may change its stressed assumptions as a result.

-- Coronavirus Disease (COVID-19) considerations: The coronavirus and the resulting isolation measures have resulted in a sharp economic contraction, increased unemployment rates, and reduced investment activities. DBRS Morningstar anticipates that collections in European nonperforming loan (NPL) securitisations will continue to be disrupted in the coming months and that the deteriorating macroeconomic conditions could negatively affect recoveries from NPLs and the related real estate collateral.

Following the receipt of the 2021 Updated Business Plan, DBRS Morningstar endeavours to resolve the status of ratings Under Review with Negative Implications as soon as appropriate. If continued heightened market uncertainty and volatility persist, DBRS Morningstar may extend the Under Review status for a longer period of time.

On 16 April 2020, DBRS Morningstar published a set of macroeconomic scenarios for the 2020-22 period in select economies. These scenarios were last updated on 17 March 2021. For details, see the following commentaries: https://www.dbrsmorningstar.com/research/375376/global-macroeconomic-scenarios-march-2021-update and https://www.dbrsmorningstar.com/research/359903/global-macroeconomic-scenarios-application-to-credit-ratings. The DBRS Morningstar analysis considered impacts consistent with the moderate scenario in the referenced reports.

For more information on DBRS Morningstar considerations for European NPL transactions and Coronavirus Disease (COVID-19), please see the following commentaries: https://www.dbrsmorningstar.com/research/362326 and https://www.dbrsmorningstar.com/research/360393.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at: https://www.dbrsmorningstar.com/research/373262.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is: “Master European Structured Finance Surveillance Methodology” (8 February 2021).

DBRS Morningstar is undertaking a review and will remove the ratings from this status as soon as it is appropriate.

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found at: https://www.dbrsmorningstar.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 Morningstar Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrsmorningstar.com/research/364527/global-methodology-for-rating-sovereign-governments.

The sources of data and information used for these ratings include the servicer, Prelios Credit Servicing S.p.A., and the corporate services provider, Banca Finanziaria Internazionale S.p.A. (former Securitisation Services S.p.A.), which comprise the latest semiannual investor report dated 30 October 2020; the latest quarterly servicer report as of 31 December 2020; the latest payment report dated 30 October 2020; and an updated business plan prepared by the servicer and received in December 2020.

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

At the time of the initial ratings, DBRS Morningstar was supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS Morningstar considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.

DBRS Morningstar 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 18 December 2020, when DBRS Morningstar downgraded its ratings on the Class A notes to B (high) (sf) from BBB (low) (sf) and the Class B notes to CCC (sf) from B (low) (sf) and maintained the Under Review with Negative Implications status on the Class A and Class B notes.

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

These ratings are Under Review with Negative Implications. Generally, the conditions that lead to the assignment of reviews are resolved within a 90-day period. If continued heightened market uncertainty and volatility persist, DBRS Morningstar may extend the Under Review status for a longer period of time.

The stress scenarios sensitivities do not apply to ratings Under Review with Negative Implications.

For further information on DBRS Morningstar 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. DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage: https://www.fca.org.uk/firms/credit-rating-agencies.

This rating is endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Sebastiano Romano, Assistant Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 5 December 2017

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

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrsmorningstar.com/research/278375.

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

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.

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