MOODY'S ASSIGNS PROSPECTIVE RATINGS TO THE NOTES TO BE ISSUED BY CREDITI SANITARI REGIONE SICILIA - SOCIETA PER LA CARTOLARIZZAZIONE
Moody's Investors Service has assigned prospective ratings of (P)A2 to the Euro 650,000,000 Asset Backed Fixed Rate Notes due 2011 to be issued by the Italian law 130/99 SPV Crediti Sanitari Regione Sicilia - Società per la Cartolarizzazione a r.l.
The (P)A2 rating on the Notes is primarily based on: (1) The fact that the receivables represent unsecured, direct obligations of the Region of Sicily; (2) The A2 issuer rating (negative outlook) of the Region of Sicily; (3) The fact that unlike the direct debt obligation of the Region of Sicily, that is rated A1 (negative outlook) by Moody's, the issuer rating does not benefit from delegazione di pagamento ("payment delegation"); (4) The credit quality of the fixed expense undertaking and fixed expense roll adopted by the Region of Sicily and the various laws, recognising decrees and administrative steps passed in order to facilitate the transaction; and (5) The legal and structural integrity of the transaction.
Moody's emphasised that these preliminary ratings address its opinion regarding the timely payment of interest and the ultimate payment of principal of the Rated notes on or before the final maturity date (2011) and not on any expected maturity date.
Moody's issues prospective ratings in advance of the final sale of securities, and these ratings only reflect Moody's preliminary credit opinions regarding the transaction. Upon a conclusive review of the final documentation, Moody's will endeavour to assign a definitive rating to the Notes. A final rating, if any, may differ from a prospective rating.
The Region of Sicily (Regione Siciliana) has an outstanding debt with nine Local Health Enterprises (Aziende Unità Sanitarie Locali) and 16 Hospital Enterprises (Aziende Ospedaliere), which make up unpaid receivables arisen in years 1995, 1997 and 1998. The transaction is structured as to refinance the sale of these receivables by the 25 Sicilian Health Enterprises to the Issuer, Crediti Sanitari Regione Sicilia Società per la Cartolarizzazione a r.l. ("CSRS") an Italian law 130 special-purpose vehicle. As a result, the transaction is dependent on the Region of Sicily as sole obligor.
By specific regional laws and recognising decrees, the Region of Sicily has agreed to pay these receivables directly to CSRS. In order to facilitate the process and payments of such an obligation, a fixed expense undertaking and fixed expense roll, as well as additional administrative steps have also been adopted by the region. This is a critical part of the transaction as it reinforces the legal and binding obligation on behalf of the Region. The Region of Sicily will therefore record in its budget the amount of the relevant instalment payable in such year as indicated in the Fixed Expense Undertaking. Failure to do so would be contrary to, and constitute a breach of, the legislation of the Region of Sicily.
In order to fund the purchase of the receivables, CSRS will issue a rated bond. The amount of the rated bond issuance will be the total future cash flows to be received by CSRS from the region, discounted mainly by the future fixed interest rate coupon and senior fees. These payments by the Region of Sicily will occur in nine annual equal instalments of approximately Euro 87 million, maturing on the 30 June of each year, commencing in 2003 and ending in 2011.
Although there are no cross default clauses that would immediately tie a default of this obligation with that of other bond obligations, Moody's believes that the expense undertaking and the fixed expense roll do represent an unsecured, direct obligation of the Region of Sicily and is to be viewed in conjunction with the issuer rating of the Region of Sicily. Hence, the rating of the notes is primarily based on the Region of Sicily's issuer rating and the fixed expense undertaking mechanism. Investors should note that any modifications to the issuer rating of the Region of Sicily or to the legal nature of the fixed expense undertaking will likely have a direct impact on the rating of the CSRS notes.
Moody's has assigned an issuer rating of A2 (negative outlook) to the Region of Sicily. Unlike Sicily's senior unsecured debt that is rated A1 (negative outlook) by Moody's, the issuer rating does not benefit from the delegation of payment mechanism.
The pledge provided under the transaction does not benefit from the delegation of payment mechanism.
Structurally, as there is no credit enhancement in the transaction, the total assets to be received by CSRS of Euro 785,384,947 will need to be discounted to incorporate all the senior fees and interest expenses in the transaction.
This is the first transaction in Italy involving the sale of health care receivables by multiple originators. However, this represents the third securitisation in which the Region of Sicily is sole obligor, after the Conca D'oro Funding S.r.l. (public) and the Levante S.r.l. (private) issuances.
Sicily, which has 5 million inhabitants, is the largest region in Italy in terms of geography. It accounted for 6% of Italy's GDP in 2000 and it ranks 18th among the 20 regions by GDP per capita at 67% of the national average. Sicily's direct debt burden has grown over recent years, and the region is currently facing significant budgetary challenges. Rising healthcare expenditures over the last two years and other adverse developments have led to significant financial pressures.
Moody's will monitor this transaction on an on-going basis. For updated monitoring information please contact email@example.com.
To reserve a copy of Moody's forthcoming report for this transaction, please contact Consuelo Vidale in Milan at +39 02 58 215 580, Client Service Desk in London at +44 20 7772 5454 or visit our website at www.moodys.com. For additional information on Moody's Italia or Moody's Europe, visit our web sites at www.moodys.it or www.moodyseurope.com.
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