OREANDA-NEWS. Fitch Rating has upgraded Piazza Venezia S.r.l's class A3 notes and affirmed the class A2 notes, as follows:

Class A2 (IT0004936081) affirmed at 'A+sf'; Outlook Stable
Class A3 (IT0004936131) upgraded to 'A+sf' from 'A-'; Outlook Stable

Piazza Venezia is a cash flow securitisation of a static portfolio of mortgage and non-mortgage loans originated by Banca Popolare di Vicenza (BPVi, B+/Evolving/B) and its subsidiary Farbanca S.p.A (Farbanca) and granted to small and medium-sized enterprises (SMEs) and corporates.

As of 1 October 2015, the outstanding portfolio balance was EUR579.65m, 68% of the outstanding balance at last review (30 June 2014).

KEY RATING DRIVERS
Performance in Line with Expectations
The upgrade of the class A3 notes reflects the substantial amortisation of the loan pool and subsequent paydown of the rated notes. The class A1 notes have paid in full since last review receiving EUR119.4m of principal proceeds. The class A2 notes received EUR21.59m during the period. As the transaction's priority of payments applies all excess spread from the portfolio towards the redemption of the rated notes, we expect the class A2 and A3 notes to further deleverage rapidly.

Greater than 90 day delinquencies have fallen to 1.4% from 4.1% of the outstanding balance, which represents a notional fall of EUR25.9m. However, delinquencies appear to have rolled over into the default bucket,with current defaults in the portfolio EUR31.8m higher than at the last review. Total defaults since closing have increased by EUR34m and recoveries have started coming in, with EUR2.3m collected so far.

Counterparty Risk Constrains Ratings
The issuer holds its accounts with Deutsche Bank A.G, London Branch, which Fitch downgraded in May (to A/Negative/F1 from A+/Negative/F1+). Fitch has reviewed contractual replacement provisions for the account bank and the depository bank and found them to be adequate for the notes' ratings of up to 'A+sf' given the 'BBB+' rating trigger.

Commingling risk is high for the transaction as about one-third of BPVi's loans pay semi-annually with peak collections occurring on 30 June and 31 December. As a result, we modelled a substantial commingling risk penalty.

Farbanca's Limited Performance Data
As at 1 October 2015, 25.2% of the portfolio was represented by loans extended to Italian pharmacists by Farbanca. Fitch believes that borrowers in the healthcare industry have a particularly high exposure to the Italian sovereign (BBB+/Stable/F2), as around 50% of their turnover comes from local healthcare units, resulting in close links with the regions and the sovereign.

Fitch was not provided with any historical data on the performance of Farbanca's loan book at closing and only limited performance data on these loans has been made available. In its analysis, the agency has therefore not given any credit to principal future collections from Farbanca-originated loans.

High Obligor Concentration Risk
As the loan portfolio amortises, the obligor concentration in the BPVi's sub-pool continues to increase, with the top 10 and top 20 obligors representing 22.8% and 39.1%, respectively. This impacts the portfolio concentration raising the share of obligors accounting for more than 0.5%.

RATING SENSITIVITIES
The analysis incorporated two stress tests in order to test the ratings sensitivity to a potential change of underlying assumptions. The first test addressed a reduction of the recovery rates by 25%, whereas the second analysed the rating impact of an increase in default rates. Both tests indicated that no rating action would be triggered on the notes.

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 an AUP report conducted on the asset portfolio information The subsequent performance of the transaction over the years is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable.

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
- Investor reports from BPVi dated 31 July 2015
- Pool cut from BPVi dated 01 October 2015