MOODY'S ASSIGNED Aaa RATINGS TO THE NOTES ISSUED BY SOCIETA DI CARTOLARIZZAZIONE DEI CREDITI INPS
Moody's Investors Service assigned a rating of Aaa to the Series 1 Asset-Backed Floating Rate Notes due 2002, the Series 2 Asset-Backed Floating Rate Notes due 2004, and the Series 3 Asset-Backed Floating Rate Notes due 2008 issued by Società di Cartolarizzazione dei Crediti INPS (S.C.C.I. S.pA.). Each series of Notes has an initial principal outstanding of EUR 1.550 bn. This is the first transaction realised by INPS, Istituto Nazionale della Previdenza Sociale, the main Italian Social Security institution, providing pensions and other benefits to the Italian population.
The collateral of S.C.C.I. S.p.A. consists of almost all INPS'social security contributions in arrears, for an approximative amount of more than EUR 40 bn as of the end of October 1999 (nominal value, penalties and interest). These contributions in arrears are due by three types of debtors : companies, self-employed persons and owner-managed businesses, farm owners and agricultural workers.
Moody's said that the ratings are based on (i) the strong over-collateralisation provided to the notes by the underlying portfolio of contributions in arrears, (ii) the expected stability of certain sources of cash flows (particularly the contributions in arrears rescheduled into condoni), (iii) the quality of the cash-flow structure of the transaction, (iv) the obligations of the London Branch of UBS AG (Aa1 / P-1) and Morgan Stanley Capital Services Inc. guaranteed by Morgan Stanley Dean Witter & Co. (Aa3 / P-1), acting as hedging counterparties, and (v) the obligations of the Tesoria Centrale dello Stato (Aa3) with which S.C.C.I. S.p.A. opened an account.
Investors in the different series of notes are protected against losses on the underlying portfolio of contributions in arrears by a strong over-collateralisation, even after taking into account the fact that only a part of these contributions will be recovered and after considering the uncertainty of the future recoveries from the different types of contributions in arrears. Moody's sees potential uncertainty in the future level of recoveries as some social security contributions in arrears will be serviced for the first time by the concessionari (the Italian network of private companies in charge of collecting the taxes in arrears due to the Italian State and to other public entities). Moody's is of the view that the ratings of the notes are linked to the performance of INPS and the concessionari acting as servicers of the portfolio of underlying assets.
Principal payments under the notes will be subordinated to interest payments. Series 1 and 2 are expected to have a bullet repayment profile, Series 3 a controlled amortisation profile. The respective expected maturity dates of the notes are January 2001, January 2002 and July 2003. Principal payments under the notes should be made sequentially. However should the collections under the underlying contributions be lower than a predetermined threshold or should the notes be not fully redeemed on their respective final maturity dates (January 2002, January 2004, January 2008), redemption of all then outstanding notes would be made pari passu. A Debt Service Reserve will be used to accumulate collections from the portfolio and will be drawn to redeem the notes. This Debt Service Reserve will be funded initially at approximately EUR 500 mio out of the net proceeds of the issue of the notes.
Moody's emphasized that these ratings address its opinion regarding the payment of interest on due date and principal on or before the final legal maturity date of the notes (January 2015) and not on their expected maturity date (respectively January 2001, January 2002 and July 2003) or their final maturity dates (respectively January 2002, 2004, 2008). However, should the legal maturity date have been the longest final maturity date, Moody's ratings of the notes would have remained unchanged.
S.C.CI. S.p.A. is a special purpose company incorporated in Italy, benefiting from specific legal provisions, for the purpose of acquiring the portfolio of INPS's contributions in arrears. The S.C.C.I. S.p.A. transaction was arranged by Warburg Dillon Read, Morgan Stanley Dean Witter and Banca d'Intermediazione Mobiliare IMI. The lead underwriters are Caboto Holding Sim, Paribas and Merrill Lynch International.
To reserve a copy of the Moody's forthcoming report for this transaction, please contact Linda Bourgine in Paris at (33 1) 53 30 10 22.
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