OREANDA-NEWS. Fitch Ratings has assigned Berica PMI 2 S.R.L.'s Class A notes a rating as follows:

EUR640m Class A notes: 'A+sf'; Outlook Stable
EUR531.3m Class J notes: not rated

The transaction is a cash flow securitisation of a EUR1,042m static pool of loans (as of 29 February 2016) granted to small and medium-sized enterprises (SME) and corporates located in Italy. The underlying loans were originated by BANCA POPOLARE DI VICENZA S.C.P.A. (BPV) and its subsidiary BANCA NUOVA S.P.A. (BN).

KEY RATING DRIVERS

Portfolio Reflective of Loan Book
Fitch determined an annual average probability of default (PD) benchmark for the originators' book of 7% on a 90 day arrears basis. This resulted in a five-year forward-looking average expected PD for the transaction's portfolio of 7.2%, assuming an expected lifetime default rate of 30.4%.

Corporate and Concentration Risk
The portfolio also includes loans to corporates with a yearly turnover above EUR50m which may not be deemed SME exposures according to the European Commission's definition. The corporates are unrated and were assumed to perform no worse than SMEs. These loans significantly increase the concentration of the pool as the 10 largest obligors accounted for approximately 23.4% of the loan balance as of 29 February 2016.

Full Excess Spread Trapping
All available interest, 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.

Long Recovery Lag
Fitch assumed a long recovery timing of 15 years based on the historical recovery data for defaulted loans in the originators' loan book. The data falls short of providing any indication on the percentage of closed positions to those currently in the 'work-out' phase of recovery.

Limited Interest Rate Risk
No hedging agreement has been entered into by the issuer. However, interest rate risk is not deemed material as the notes, and 97.6% of the portfolio, pay a floating rate coupon based on Euribor.

Counterparty Arrangements
The capital structure of this transaction does not allow for an upgrade of the senior notes due to certain counterparty arrangements and qualified investment provisions in the transaction documents.

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.

A 25% increase in the expected obligor default probability would lead to a downgrade of three notches for the rated notes whereas a 25% reduction in expected recovery rates would lead to a downgrade of two notches for the rated notes. A 100% increase in the base correlation would lead to a downgrade of three notches for the rated notes and a joint stress combining the above mentioned stresses could lead to a five-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 loans' origination date and the mortgaged property value information. These findings were immaterial to this analysis, and are set out more fully in the new issue report.

Fitch conducted a review of a small targeted sample of the originators' origination files 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, 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 and enforcement mechanisms to those typical for the asset class is available by accessing the appendix that accompanies this rating action commentary and the new issue report that will be shortly available at www.fitchratings.com. In addition refer to the special report "Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions" dated 2 March 2016 and available on the Fitch website.

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

SOURCES OF INFORMATION
- Loan-by-loan data provided by the originators as at 29 February 2016
- Historical performance data provided by the originators and covering 31 March 2005 to 30
September 2015
- Performance data on the existing Fitch-rated SME transactions from the BPV group,
including Berica PMI S.r.l. which closed in July 2013 and Piazza Venezia S.r.l. which closed in June 2013 and was rated in December 2013.