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Rocky 2021-1 SPV S.r.l. -- Moody's assigns definitive rating to Rocky 2021-1 SPV S.r.l. consumer ABS

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Rating Action: Moody's assigns definitive rating to Rocky 2021-1 SPV S.r.l. consumer ABSGlobal Credit Research - 30 Apr 2021EUR 3.96 billion ABS Notes rated, relating to a portfolio of Italian consumer loansParis, April 30, 2021 -- Moody's Investors Service ("Moody's") has assigned the following definitive rating to Notes issued by Rocky 2021-1 SPV S.r.l.:....EUR 3,959.2M Class A Asset Backed Fixed Rate Notes due April 2041, Assigned A1 (sf)Moody's has not assigned any rating to the EUR 782.3M Class B Asset Backed Fixed Rate and Variable Return Notes due April 2041.RATINGS RATIONALERocky 2021-1 SPV S.r.l. is an up to 36 months revolving securitization of unsecured consumer loans granted to private obligors resident in Italy by Deutsche Bank S.p.A. (unrated), a subsidiary of Deutsche Bank AG (A3/P-2 Bank Deposit; A3(cr)/P-2(cr)). The portfolio will not replenish until the principal amount outstanding of the Class A notes will have amortized to EUR 3,500M. During this initial amortization period the transaction will amortize sequentially and the Class A will build up credit enhancement. Deutsche Bank S.p.A. is acting as originator and servicer of the loans. This represents the first issuance of the program.As of 17th of April 2021, the EUR 4.74bn portfolio included 642,348 consumer loans granted to private obligors located in Italy. All loans are fixed rate loans. The weighted average seasoning of the portfolio is 22.5 months and its weighted average remaining term is 52.8 months (4.4 years). Around 48.6% of the outstanding portfolio are loans without specific loan purpose, 21.8% and 16.1% are loans to finance the purchase of new and used vehicles respectively, while 13.5% are loans to finance specific consumer expenditures. Geographically, the largest geographic concentration is in the North of Italy (49.2%).Moody's analysis focused, amongst other factors, on: (i) an evaluation of the underlying portfolio of loans at closing and incremental risk due to loans being added during the up to 36 months revolving period; (ii) the historical performance information of the total book and past ABS transactions; (iii) the credit enhancement provided by the subordination, and the reserve fund; (iv) the reserve fund covering 3 months of senior fees and interest on Class A notes; and (v) the overall legal and structural integrity of the transaction.According to Moody's, the transaction benefits from various credit strengths such as a granular portfolio, the extensive historical data provide provided. However, Moody's notes that the transaction features some credit weaknesses such as the pool is revolving for up to 36 months, which could lead to an asset quality drift although this is mitigated to some extent by the portfolio concentration limits.Moody's determined the portfolio lifetime expected defaults of 6.5%, expected recoveries of 10.0% and a portfolio credit enhancement ("PCE") of 19.0% related to borrower receivables. The expected defaults and recoveries capture our expectations of performance considering the current economic outlook, while the PCE captures the loss we expect the portfolio to suffer in the event of a severe recession scenario. Expected defaults and PCE are parameters used by Moody's to calibrate its lognormal portfolio loss distribution curve and to associate a probability with each potential future loss scenario in the ABSROM cash flow model to rate Consumer ABS.Portfolio expected defaults of 6.5% are higher than the EMEA Consumer Loan ABS average and are based on Moody's assessment of the lifetime expectation for the pool taking into account: (i) historic performance of the loan book of the originator; (ii) benchmark transactions; and (iii) other qualitative considerations, such as the 36 months revolving period and related revolving criteria.Portfolio expected recoveries of 10% are in line with the EMEA Consumer Loan ABS average and are based on Moody's assessment of the lifetime expectation for the pool taking into account: (i) historic performance of the loan book of the originator; (ii) benchmark transactions; and (iii) other qualitative considerations.PCE of 19% is in lower than the EMEA Consumer Loan ABS average and is based on Moody's assessment of the pool which is mainly driven by: (i) evaluation of the underlying portfolio, complemented by the historical performance information as provided by the originator; (ii) the relative ranking to originator peers in the EMEA Consumer loan market; and (iii) length of the revolving period. The PCE level of 19% results in an implied coefficient of variation ("CoV") of 44%.CURRENT ECONOMIC UNCERTAINTY:The coronavirus pandemic has had a significant impact on economic activity. Although global economies have shown a remarkable degree of resilience to date and are returning to growth, the uneven effects on individual businesses, sectors and regions will continue throughout 2021 and will endure as a challenge to the world's economies well beyond the end of the year. While persistent virus fears remain the main risk for a recovery in demand, the economy will recover faster if vaccines and further fiscal and monetary policy responses bring forward a normalization of activity. As a result, there is a heightened degree of uncertainty around our forecasts. Our analysis has considered the effect on the performance of consumer assets from a gradual and unbalanced recovery in Italian economic activity.We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety.The principal methodology used in this rating was "Moody's Approach to Rating Consumer Loan-Backed ABS" published in July 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1230138. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING:Factors that may cause an upgrade of the rating include: (i) a significantly better than expected performance of the pool; (ii) an increase in credit enhancement of the notes; or (iii) an upgrade of Italy´s local country currency (LCC) rating.Factors that may cause a downgrade of the rating include: (i) a decline in the overall performance of the pool; (ii) increased counterparty risk leading to potential risk of servicing or cash management interruptions; or (iii) a downgrade of Italy´s local country currency (LCC) rating.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.The analysis relies on an assessment of collateral characteristics to determine the collateral loss distribution, that is, the function that correlates to an assumption about the likelihood of occurrence to each level of possible losses in the collateral. As a second step, Moody's evaluates each possible collateral loss scenario using a model that replicates the relevant structural features to derive payments and therefore the ultimate potential losses for each rated instrument. The loss a rated instrument incurs in each collateral loss scenario, weighted by assumptions about the likelihood of events in that scenario occurring, results in the expected loss of the rated instrument.Moody's quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows. Moody's weights the impact on the rated instruments based on its assumptions of the likelihood of the events in such scenarios occurring.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The rating has been disclosed to the rated entity or its designated agent (s) and issued with no amendment resulting from that disclosure.This rating is solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1263068.At least one ESG consideration was material to the credit rating action(s) announced and described above.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Vincent Verdier Asst Vice President - Analyst Structured Finance Group Moody's France SAS 96 Boulevard Haussmann Paris 75008 France JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 Armin Krapf VP - Senior Credit Officer Structured Finance Group JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 Releasing Office: Moody's France SAS 96 Boulevard Haussmann Paris 75008 France JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 © 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. 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