OREANDA-NEWS. July 14, 2015. Fitch Ratings has assigned Berica ABS 4 S.r.l's floating-rate notes final ratings as follows:

EUR728.9m Class A, due in March 2065: 'AA+sf'; Outlook Stable
EUR75.7m Class B, due in March 2065: 'Asf'; Outlook Stable
EUR47.3m Class C, due in March 2065: 'BBBsf'; Outlook Stable

The transaction is a securitisation of residential mortgage loans originated and serviced by Banca Popolare di Vicenza S.c.p.A. (BPVi, BB/Stable/B) and Banca Nuova S.p.A. (BN), its southern Italy subsidiary.

KEY RATING DRIVERS

High-LTV Loans and Higher-Risk Borrowers
The portfolio comprises 19.3% of loans with an original loan-to-value ratio (LTV) between 80% and 100%. The concentration of such loans in Berica ABS 4 is greater than that in Berica ABS 3, where they accounted for 3.4% at closing. The Berica ABS 4 pool has a weighted-average original LTV of 69%, above the Italian market average. The proportions of self-employed (23.5%) and foreign borrowers (5.6%), who are typically weaker borrower types, are also above the Italian average.

Un-capped Floating-rate Loans
Floating-rate loans originated after 2008, under a low interest rate environment, account for 60.5% of the portfolio. The agency has applied more conservative default assumptions to these loans to account for the potential performance volatility associated with rising interest rates.

Slow Recovery Performance
Recovery data from these originators revealed that the enforcement procedure had been completed for approximately 70% of the defaulted claims after 10 years, with the remainder still lying unresolved. As a result, the agency has distributed its expected recoveries over a time horizon of 13 years.

Permitted Variations
The structure is resilient to both loan margin reductions (permitted for up to 30% of the initial portfolio balance) and maturity extensions (permitted on up to 10% of the initial portfolio).

Fully Hedged Portfolio
The portfolio is hedged under five different swap confirmations. Overall, the hedging is effective in limiting the transaction exposure to interest rate, basis and reset risks.

Deferrable Interest
The payment of class B and C interest will be deferred if the gross cumulative default ratio exceeds 16% and 12% of the initial pool, respectively. For these classes, Fitch's ratings address ultimate payment of interest by legal maturity date.

Sovereign Country Ceiling
The rating of the class A notes is the highest achievable for Italian transactions, six notches above Italy's sovereign Issuer Default Rating (BBB+/Stable/F2).

RATING SENSITIVITIES
Unexpected increases in the default rate and loss severity on defaulted loans could produce loss levels higher than Fitch's assumptions and could result in negative rating actions on the rated notes. Fitch evaluated the sensitivity of the ratings to increased credit losses over the life of the transaction. In particular, Fitch's analysis found that an increase of 30% in the default probabilities of the underlying obligors in combination with a 30% decrease in the assumed recovery rates could result in a downgrade of four notches for the class A notes and two notches for the class B and C notes.

As the rating of the class A notes is constrained at Italy's Country Ceiling, changes to the Country Ceiling may lead to changes to the rating of the class A notes.

Key Rating Drivers and Rating Sensitivities are further described in the new issue report, which will soon be available at www.fitchratings.com.

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.

DATA ADEQUACY

A third party assessment conducted on the asset portfolio informationindicated errors or missing data related to the property value, mortgage amount and appraisal date information. These findings were immaterial to our analysis.

Fitch conducted a review of a small targeted sample of the originators' origination files during the course of its analysis of Berica ABS 3 and found the information contained in the reviewed files to be adequately consistent with the originators' policies and practices and the other information provided to the agency about the asset portfolio.

Overall and together with the assumptions referred to above, Fitch's assessment of the asset pool 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.
-Loan-by-loan data provided by BPVi and BN as at 30 April 2015
-Historical data provided by BPVi and BN up to end-2014
-Loan enforcement details provided by BPVi and BN up to end-2014
-Discussions with BPVi and BN as of end-March 2015

MODELS

The models below were used in the analysis. Click on the link for a description of the model.


ResiEMEA.
EMEA
Cash Flow Model.

REPRESENTATIONS AND WARRANTIES

A comparison of the transaction's Representations, Warranties & Enforcement Mechanisms to those typical for the asset class is available by accessing the appendix that accompanies the initial new issue report that will be available soon at www.fitchratings.com. In addition refer to the special report "Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions" dated 12 June 2015 available on the Fitch website.