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Rating Action:

Moody's: Approx. EUR 1,178 million of German SME ABS rated

05 Jul 2010

Frankfurt, July 05, 2010 -- Moody's Investors Service has assigned the following definitive ratings to one class of asset-backed notes issued by RUEGEN EINS GmbH

- Aaa to the EUR 1,177,500,000 Class A Floating Rate Asset Backed Notes due 21 December 2039.

The EUR 392,500,000 Class B Floating Rate Asset Backed Notes due 21 December 2039 were not rated by Moody's.

This securitisation transaction is sponsored by Commerzbank AG (Aa3 / P-1) and was launched on 9 October 2009. Since then the notes have been outstanding. Moody's was asked to assign ratings to the Class A notes in 2010.

This RUEGEN EINS transaction represents a true sale securitisation backed by loan receivables to German small and medium entity ("SME") clients or large corporate clients of Commerzbank AG. On the issue date in October 2009 the issuance proceeds were used to fund the purchase price payable for the initial portfolio to Commerzbank AG. In previous years Commerzbank securitised very similar receivable portfolios via the synthetic securitisation structures CoSMO Finance 2007-1 Limited and CoSMO Finance 2008-1.

Under this standard true sale securitisation structure the issuer, RUEGEN EINS GmbH, securitises a revolving portfolio of SME loan receivables. As of the cut-off date on 31 May 2010 the securitised portfolio consists of commercial loans extended to SME borrowers and large corporates in Germany for mainly either financing investments (app. 72% of pool) or working capital needs (26%). Almost half of the portfolio (i.e. 48%) relates to loans with a bullet repayment schedule, while 22% of the loans amortise on a quarterly basis (18% on monthly / bi-monthly and 10.6% on an annual basis). The revolving period will be suspended in case a suspension trigger is breached and it finishes on the earlier of (i) the payment date falling in June 2013 or (ii) the date on which Commerzbank fails to fund any of the required reserve amounts.

According to Moody's, the definitive ratings take account of, among other factors, (i) the financial strength of Commerzbank AG, (ii) the sound performance of the previously securitised portfolios under the CoSMO Finance 2007-1 and CoSMO Finance 2008-1 transactions, (iii) the registration of the loan receivables and the related collateral (especially mortgage collateral) in Commerzbank AG's refinancing register, (iv) the structural features mitigating commingling risk and set-off risk as well as (v) the application of Moody's CDOROM® test on each replenishment date as major revolving period suspension trigger.

The issuer entered into a balanced guaranteed swap with Commerzbank (Aa3 / P-1) on the issue date. This swap is drafted under the German Master Agreement and does not completely comply with Moody's standard swap criteria (similar as other swaps under the German Master Agreement framework) in that upon the insolvency of the swap counterparty the swap is automatically terminated. This creates some additional linkage to the rating of the swap counterparty, which is, however, to a certain degree mitigated by, inter alia, an extended guarantee amount that could be provided upon downgrade of the swap counterparty below A3 / P-1.

Moody's based its credit analysis for this transaction mainly on a Monte Carlo simulation performed by CDOROM v2.6 with loan-by loan data input. An important input to this model is the Moody's rating for each loan as derived from a mapping table between Commerzbank's internal ratings and Moody's ratings. This mapping was based on the latest rating mapping agreed for the CoSMO Finance 2007-1 and CoSMO Finance 2008-1 transaction and further amended on the back of the latest migration tables and re-calibration results received from Commerzbank AG. Furthermore, the overall portfolio quality assumption was benchmarked against the estimated portfolio credit quality resulting from Moody's revised top-down approach (i.e. the methodology for granular SME portfolios in EMEA published on 17 March 2009). Depending on pool characteristics, including industry concentrations and loan product types, Moody's expects an average portfolio credit quality of Ba2 for this German SME portfolio and applied the standard recovery assumptions of CDOROM v2.6 for German senior unsecured loans.

For the Monte Carlo simulation Moodys assumed the standard default correlations applied to SME portfolios, specifically the global asset correlation was set at 5% and the standard industry over concentration stresses for SME portfolios were applied. Additionally, to better reflect the refinancing risk of short-term bullet loans a minimum one year weighted-average life was introduced for bullets loans with an original maturity of less than one year.

The transaction V-Score is overall " Medium", which is in line with the German SME ABS sector. For two sub-categories Moody's considers this transaction better than the market. First, the structure is less complex than other transactions of this sector and second, the disclosure of information is above average due to the quarterly reported loan-by-loan data.

The principal methodology used in rating the notes issued by RUEGEN EINS GMBH are "Refining the ABS SME Approach: Moody's Probability of Default Assumptions In The Rating Analysis of Granular Small and Mid-sized Enterprise portfolios in EMEA" published in March 2009, "Moody's Approach to Rating Granular SME Transactions in Europe, Middle East and Africa" published in June 2007 and "V Score and Parameter Sensitivities in the EMEA Small-to-Medium Enterprise ABS Sector published in June 2009 and which can be found at www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issue can also be found in the Rating Methodologies sub-directory on Moody's website. In addition, Moody's publishes a weekly summary of structured finance credit, ratings and methodologies, available to all registered users of our website, at www.moodys.com/SFQuickCheck.

The ratings address the expected loss posed to investors by the legal final maturity of the notes. In Moody's opinion, the structure allows for timely payment of interest and ultimate payment of principal with respect to the notes by the legal final maturity. Moody's ratings address only the credit risks associated with the transaction. Other non-credit risks have not been addressed, but may have a significant effect on yield to investors.

Moody's will monitor this transaction on an ongoing basis. For updated monitoring information, please contact monitor.abs@moodys.com. To obtain a copy of Moody's New Issue Report on this transaction, please visit Moody's website at www.moodys.com or contact our Client Service Desk in London (+44-20-7772 5454).

Frankfurt
Silvia Baumann
Asst Vice President - Analyst
Structured Finance Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Frankfurt
Thorsten Klotz
Managing Director
Structured Finance Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's: Approx. EUR 1,178 million of German SME ABS rated
No Related Data.
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