OREANDA-NEWS. Fitch Ratings has affirmed UBI Lease Finance 5 S.r.l.'s (UBI Lease 5) class A notes (IT0004433253) at 'A+sf' with a Stable Outlook

UBI Lease 5 is a securitisation of leases originated by UBI Leasing spa, a subsidiary of UBI Banca (BBB/Stable/F3). The servicer is UBI Banca (effective date 1 November 2015). The transaction includes different kinds of leased assets (equipment, real estate and autos). As at 30 September 2015, 93.4% of the pool comprised leases to finance the purchase of real estate assets and equipment and auto sub pools accounted for 6.2% and 0.3% of the portfolio, respectively.

KEY RATING DRIVERS
Strong Credit Enhancement (CE)
The affirmation reflects the strong available CE, which had increased to 76.2% in September 2015 from 64.6% in September 2014.

Commingling and Payment Interruption Risk
The servicer's commingling risk is mitigated by the available CE. Payment interruption is sufficiently mitigated by a EUR8.3m debt reserve. Since the end of the revolving period, the debt reserve has been amortising at its target of 1.5% of the class A notes' balance and the released funds have been used to accelerate the notes' amortisation.

The reserve is held at the Bank of New York Mellon (AA/Stable/F1+) but can be invested in eligible investments with a minimum rating of 'BBB+'/'F2'.

Counterparty Risk Constrains Rating
In February 2012, the transaction's definition of eligible investments was amended to allow investments of all the issuer available funds (including the debt reserve) between payment dates in assets maturing within 30 days with a minimum rating of 'BBB+'/'F2'. This is consistent with a maximum rating of 'A+sf' on the notes, according to Fitch's counterparty criteria.

Stable Deal Performance
Arrears and defaults have been fairly stable over the past year. As of 30 September 2015, 30+ and 90+ days past due loans accounted for 4.9% and 3.7%, respectively, of the performing and delinquent outstanding portfolio (versus 6.5% and 3.7% respectively, one year earlier).

The average annualised quarterly default rate during 4Q14-3Q15 was 4.4%, which compares with 4.1% from 4Q13 to 3Q14 Fitch has therefore maintained its annual five-year annual average probability of default expectation for the portfolio unchanged at 5%. This corresponds to a remaining base case default expectation of 25% on the outstanding performing and delinquent portfolio as of 30 September 2015.

As the transaction's cumulative defaults (11% as of 30 September 2015) are currently below Fitch's lifetime expectations for the same point in seasoning (18%), the agency has revised its lifetime default expectation down to 19% from 26%.

Recoveries have been gradually increasing, leading Fitch to maintain its base case recovery expectation unchanged at 15%.

As of 30 September 2015, cumulative recoveries were 10.9% of cumulative defaults (up from 7.6% one year earlier).

Obligor Concentration Risk Still Moderate
Despite the amortisation of the portfolio and its concentration on real estate leases, the top 20 borrowers still accounted for only 9.8% of the collateral portfolio as of 30 September 2015 (up from 8.8% as of 30 September 2014). Fitch believes that the strong and increasing CE for the class A notes provides adequate support for the rating to offset a future increase in obligor concentration.

No Residual Value Risk
There is no residual value risk, as this component of the securitised financial lease contracts was not transferred to the issuer.

RATING SENSITIVITIES
The class A notes are able to withstand a 25% increase to the probability of default of each obligor in the pool or a 25% reduction in the loan-level recovery rates without the rating being affected. This is because the current CE makes the notes resilient to more adverse default or recovery assumptions.

Initial Key Rating Drivers and Rating Sensitivity are further described in the New Issue report published on 9 March 2011 at www.fitchratings.com

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

DATA ADEQUACY
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 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.
- Loan-by-loan data as at 30 June 2015 sourced from the European Data Warehouse (Edwin)
- Servicer report provided by UBI Leasing S.p.a as at 30 September 2015
- Payment report provided by Bank of New York Mellon (The) as at 30 October 2015