Fitch Affirms Quarzo Srl - Series 2015's Notes at 'A+sf'; Outlook Stable
OREANDA-NEWS. Fitch Ratings has affirmed Quarzo Srl - Series 2015's class A notes (IT0005123788) at 'A+sf' with Stable Outlook.
The transaction is the securitisation of Italian unsecured consumer loans originated by Compass Banca Spa, fully owned by Mediobanca Spa (Mediobanca; BBB+/Stable/F2). The transaction is still in its 3.5-year revolving period, which is scheduled to end on the monthly payment date in January 2019.
The portfolio comprises personal loans (94.2% of the portfolio as at 31 January 2016), new and used auto loans (5%) and loans to finance goods or services other than vehicles (purpose loans, 0.8%)
KEY RATING DRIVERS
Performance in Line With Expectations
The affirmation reflects the transaction's stable performance since closing in July 2015, in line with Fitch's expectations.
As at 31 January 2016, 30+ and 90+ arrears were 1.4% and 0.5%, respectively. The transaction has benefited from healthy gross excess spread to date, averaging 8.2% of the portfolio since closing to the payment date falling in October 2015.
Reported cumulative gross defaults and losses (0.2% as of 31 January 2016) are in line with Fitch's base case expectations for defaults and losses set at closing (both 0.12% at the same point of seasoning). Fitch has therefore maintained its lifetime base case expectations for defaults and recoveries at 8.6% and 12.5%, respectively. Credit enhancement for the class A notes has remained stable at 23% since closing.
Stable Collateral Features
Since closing, the collateral has not showed substantial changes in terms of pool features. Portfolio composition is in line with Fitch's expectations. Concentration risks have remained below the limits in the transaction's documentation and the worst pool composition assumed by Fitch in its initial analysis. As we expected, the percentage of personal loans (uncapped during the revolving period) has slightly increased (to 94.2% as at 31 January 2016 from 93% at closing), gradually trending towards Fitch's worst case pool composition assumption at closing (100% personal loans at the end of the revolving period).
The loans also finance the purchase of insurance policies offered with the loan. The issuer's potential exposure to claims by borrowers if both Compass and an insurer defaulted has remained in line with the level assessed by Fitch at closing.
Counterparty Risk Constrains Rating
The class A notes' rating is capped at 'A+sf'. This is due to the account bank's (Mediobanca) rating as well as replacement language (ie upon loss of 'BBB+' and 'F2') in the documentation, which is not commensurate with ratings higher than the 'Asf' category, according to Fitch's counterparty risk criteria.
The class A notes' rating is resilient to stressful assumptions on future recoveries. For example, if Fitch's lifetime base case recovery rate (currently 12.5%) decreased by 25%, the class A notes would not suffer a downgrade. However, if Fitch's lifetime base case default rate (currently 8.6% ) increased by 10%, the class A notes would be downgraded by one notch and if Fitch's lifetime base case default rate increased by 25%, the class A notes would be downgraded by two notches.
Initial Key Rating Drivers and Rating Sensitivity are further described in the Quarzo Srl - Series 2015 - New Issue report dated 22 July 2015 and available at www.fitchratings.com.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.
Prior to the transaction closing, Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, which indicated no adverse findings material to the rating analysis.
Prior to the transaction closing, Fitch conducted a review of a small targeted sample of the originator's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio.
Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.
SOURCES OF INFORMATION
The information below was used in the analysis.
Servicer reports at 31 October 2015 and at 31 January 2016 provided by Compass Banca S.p.A.
Investor report dated 16 November 2015 provided by Deutsche Bank SpA.