OREANDA-NEWS. Fitch Ratings has assigned Multi Lease AS S.r.l.'s EUR658m class A notes a 'A-sf' rating with a Stable Outlook.

The transaction is a granular cash flow securitisation of a EUR1.01bn static pool of euro-denominated receivables deriving from lease agreements entered into between Italian small and medium sized enterprises and Sardaleasing S.p.A., which is the leasing company of the Banca Popolare dell'Emilia Romagna Soc. Coop. group (BPER, BB/Stable/B). Leased assets include real estate (77.7%), equipment (15.8%), vehicles (4.4%) and naval (2%) assets.

The rating addresses the likelihood of investors receiving interest payments in accordance with the terms of the transaction documentation and full repayment of principal by legal final maturity in July 2047.

The class A notes benefit from initial credit enhancement of 39.3%, of which 33.7% is provided by over-collateralisation via the full subordination of payments on the unrated class B notes, 3.1% by a fully funded amortising cash reserve that also mitigates payment interruption risk, and 2.6% by the collections received since the portfolio's cut-off date (31 December 2015).

KEY RATING DRIVERS
High Default Probability
Based on the originator's internal rating performance data, Fitch determined an annual average probability of default (PD) for the originator's book of 6.5% and for the transaction of 6.1%. This implies a small degree of positive selection of the securitised portfolio compared with the originator's balance sheet. Fitch expects the credit quality of the originator book and securitised portfolio to be slightly worse than the agency's Italian benchmark.

Low Recovery Rate
The originator has transferred all receivables from the sale and/or re-lease of the assets to the SPV, but the ownership of the leased assets was not transferred, nor any security interest was created for the benefit of the issuer on those assets. Therefore, Fitch gave no credit to recoveries from the proceeds of the sale or re-lease of the assets.

Portfolio Concentration
The largest borrower group and the top 10 obligor groups account for 1.5% and 11.4% of the initial portfolio balance respectively. The single obligor concentration is at the higher end of the range in Italian SME transactions rated by Fitch. The largest industry is real estate at 28.3% of the initial portfolio, which is broadly in line with the average industry concentration across Italian SME deals rated by Fitch.

No Residual Value Risk
The noteholders will have no exposure to residual value risk as this component of the receivables will not be securitised; however, interest paid by the lessees and received by the SPV will be computed on the basis of the whole outstanding principal balance (inclusive of the residual value component) as is usually the case in Italian SME leasing deals.

Full Excess Spread Trapping
All interest available funds (regardless of the level of defaults) after replenishment of the cash reserve will be used to accelerate the repayment of principal on the senior notes.

RATING SENSITIVITIES
As part of its analysis, the agency considered the sensitivity of the notes' ratings to the stresses on defaults, recovery rates and correlation to assess the impact on the ratings.

An increase of 25% of the default probabilities of the underlying obligors could result in a downgrade of up to two notches for the rated notes. A decrease of 25% of their assumed recovery rates could result in a one-notch downgrade for the rated notes. Finally combining both stresses plus a doubled country correlation could lead to a four-notch downgrade for the rated notes.

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

DATA ADEQUACY
Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, which indicated errors or missing data related to the leases' outstanding balance, residual value, origination date, last instalment due date, interest rate and interest rate margin. These findings, however, were immaterial to this analysis.

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 asset pool information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.

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 new issue report that will shortly be available at www.fitchratings.com. In addition refer to the special report "Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions" dated 21 January 2016 and available on the Fitch website.

SOURCES OF INFORMATION
The information below was used in the analysis.
-Lease-by-lease data provided by Sardaleasing as at 31 December 2015
-Portfolio amortisation schedule starting from 1 January 2016
-Principal and interest collections actually received by the servicer between 1 January 2016 and 2 February 2016
-Historical static default data provided by Sardaleasing for 3Q05-1Q15
-Historical dynamic delinquency data provided by Sardaleasing for 3Q05-1Q15
-Historical static recovery data provided by Sardaleasing for 3Q05-1Q15
-Historical dynamic prepayment data provided by Sardaleasing for 3Q05-1Q15
-Historical dynamic default data provided by BPER for 3Q07-2Q14
-Historical cure rate data provided by BPER for December 2008 - June 2015