EUR 1,333.2 million of Debt Securities rated
Milan, April 30, 2012 -- Moody's Investors Service has assigned definitive credit ratings to the
following class of notes issued by Credico Finance 10 S.r.l.:
....EUR1333.2M Class A Asset Backed
Floating Rate Notes due October 2050, Assigned Aa2 (sf)
Moody's has not assigned any rating to EUR 249,256,000 Class
B Asset Backed Floating Rate Notes due October 2050.
The transaction represents the tenth securitization transaction originated
by various Cooperative Banks ("BCCs") and arranged by the ICCREA Banca
S.p.A.. The assets supporting the notes,
which amount to around EUR 1,582.4 million, consists
of mortgage loans extended to individuals with a first economic lien on
residential properties located in Italy. Loans have been originated
by Banca Romagna Cooperativa, BCC di Forlì, Banca della
Marca (A3/P-2 on review for downgrade), BCC Trevigiano,
BCC CentroMarca, BCC di Anghiari, BCC del Valdarno,
BCC Vicentino, CRA di Brendola, BCC di Alba, BCC di
Pistoia, BCC di Campiglia dei Berici, BCC Crediveneto,
CrediUmbria BCC, BCC Pompiano e Franciacorta, Banca Adige
Po, BCC di Ancona, BCC di Bedizzole T. V, BCC
di Ostra e Morro d'Alba, BCC Adda e del Cremasco, BCC Banca
San Biagio del Veneto Orientale, BCC di Gatteo, Romagna Est
BCC, BCC Camerano, BCC di Monastier (A3/P-2 on review
for downgrade), RovigoBanca, Banca San Giorgio Quinto Valle
Agno, BCC Valdinievole, BCC di Carate Brianza and BCC Malatestiana.
Each bank will service its own portfolio. The transaction has 30
servicers Banca Romagna Cooperativa, BCC di Forlì,
Banca della Marca, BCC Trevigiano, BCC CentroMarca,
BCC di Anghiari, BCC del Valdarno, BCC Vicentino, CRA
di Brendola, BCC di Alba, BCC di Pistoia, BCC di Campiglia
dei Berici, BCC Crediveneto, CrediUmbria BCC, BCC Pompiano
e Franciacorta, Banca Adige Po, BCC di Ancona, BCC di
Bedizzole T. V, BCC di Ostra e Morro d'Alba, BCC Adda
e del Cremasco, BCC Banca San Biagio del Veneto Orientale,
BCC di Gatteo, Romagna Est BCC, BCC Camerano, BCC di
Monastier, RovigoBanca, Banca San Giorgio Quinto Valle Agno,
BCC Valdinievole, BCC di Carate Brianza and BCC Malatestiana ("BCCs).
ICCREA Banca S.p.A. (NR) has been appointed as back-up
servicer at closing and Zenith Service S.p.A. as
Back Up Servicer Facilitator.
RATINGS RATIONALE
The ratings of the notes take into account the credit quality of the underlying
mortgage loan pool and the vintage data for defaults and recoveries received
from the originator from which Moody's determined the MILAN Aaa Credit
Enhancement and the portfolio expected loss, as well as the transaction
structure and any legal considerations as assessed in Moody's cash flow
analysis.
The expected portfolio loss of 2.2% of original balance
of the portfolio at closing and the MILAN Aaa required Credit Enhancement
of 12% served as input parameters for Moody's cash flow model,
which is based on a probabilistic lognormal distribution as described
in the report Testing Structural Features with the MARCO Model (Moody's
Analyser of Residential Cash Flows) published in January 2006.
The key drivers for the MILAN Aaa Credit Enhancement number of 12%,
which is similar to the Italian RMBS sector average, takes into
account (i) the high concentration of loans falling into the 70%-80%
LTV bucket (around 19%); (ii) the presence in the pool of
properties where the value was estimated without full internal inspection
by an independent valuer, approximately 38% of the pool;
and (iii) Moody's assessment of origination and servicing process of the
BCCs, that resulted in a score below the Italian average.
The key drivers for the portfolio expected loss of 2.2%,
which is in line with the Italian sector average, is based on Moody's
assessment of the lifetime loss expectation for the pool taking into account
(i) the historical performance of mortgage loans originated by the BCCs.;
(ii) the vintage data on recoveries that includes open and closed files,
(iii) the performance of the nine RMBS transactions of the originators,
under the Credico Finance series (iv) benchmark with comparable transactions
in the Italian market and (v) the negative outlook we have on Italian
RMBS sector.
The Notes benefit from a EUR 79,19 million of non amortizing cash
reserve, equivalent to around 5% of the pool. The
cash reserve fund is replenished senior in the waterfall ahead of the
any payments due to principal on the notes meaning it mainly acts as source
of liquidity to the Notes, providing also credit enhancement during
the life of the deal or at maturity.
In detail the Notes benefit from 30 non amortizing cash reserves equal
to 5% of the pool balance (EUR 79,19 million). An
amount equal to 4% of the Class A notes can only cover interest
shortfall on the rated notes and items senior thereto and will work as
credit enhancement when the Class A notes are fully redeemed or at final
legal maturity. The part of the cash reserve equal to the difference
between 5% of the pool balance and 4% of the Class A notes
balance can be used as credit enhancement at any time.
The transaction is completely unhedged at closing with respect to 100%
of the pool. Moody's analysis takes into account the potential
interest rate exposure in assessing the ratings of the notes. For
the floating-rate portion of the portfolio, the analysis
is based on the observation of the historical difference between the index
due on the loans and on the notes. For floating rate mortgage loans
with cap, the analysis is performed assuming that the interest due
under the notes was increasing of 50bps each quarter up to 8.2%
and remains at that level until the end of the deal. This because
in accordance with the terms of conditions of the notes the maximum rate
due on the Class A has been set to 8.5%, coupon Class
A is equal to 30bps.
The 30 portfolios are not cross-collateralised at inception,
but triggers are put in place to cross-collateralise the portfolios
if the collateral performance deteriorate significantly. Each waterfall
repays the Class A and Class B Notes allocated to the relevant originator's
portfolio. As each sub pool can experience different levels of
e.g. delinquencies, defaults and prepayments the Class
A Notes will not be reimbursed in a conform way. As the defaults
can vary between the different sub-pools the amounts that have
been used of each cash reserve can also vary considerably between different
waterfalls, moreover excess spread may leak out from the transaction
even if the cash reserve of some originators are not at their target level
and theoretical speed at which the notes are repaid can also be different.
In order to rebalance the cash reserve or the theoretical speed at which
the notes are repaid there are various triggers. In the case some
portfolios are performing very differently or the sum of the pool has
a very bad performance then all the waterfalls will be merged to one single
waterfall and thereby the excess spread.
Moody's assigned a Composite V Score for this transaction of Medium based
on Moody's V Score rating methodology as published in the Rating Implementation
Guidance "V-Scores and Parameter Sensitivities in the Major EMEA
RMBS Sectors" published in April 2009, which is equal to the V score
assigned for the Italian RMBS sector, Low/Medium.
The main deviations from the Italian benchmark are: (i) "Issuer/Sponsor/Originator's
Historical Performance Variability" which is set to Low/Medium given the
sovereign risk may increase performance volatility. (ii) "Disclosure
of Securitisation Collateral Pool Characteristics" which is set
to Medium given that set-off data has been provided on a loan-by-loan
basis and spilt between deposits and bonds for only 89% of the
pool; (iii) "Transaction Complexity " which is assessed to be Medium/High,
given that the transaction involves 30 different originators; (iv)
"Analytic Complexity " which is set to Medium given that the
standard cash flow model can only be run for the cross collateralized
waterfall; (v) "Market Value Sensitivity" which is assessed to be
Medium given that the transaction is exposed to the interest rate risk;
(vi) "Experience of, Arrangements Among and Oversight of Transaction
Parties" which is set to Medium as some of the originators have
never participated in any securitization transaction, 10 over 30
banks; (vii) "Back-up Servicer Arrangement" which
is set to Low/Medium given that majority of the originators/servicers
are unrated, 28 over 30; (viii) "Legal, Regulatory,
or Other Uncertainty" which is assessed to be Medium, as the transaction
could be affected by some payment holiday schemes and other change in
payment terms granted by recent laws. V Scores are a relative assessment
of the quality of available credit information and of the degree of dependence
on various assumptions used in determining the rating. High variability
in key assumptions could expose a rating to more likelihood of rating
changes. The V Score has been assigned accordingly to the Rating
Implementation Guidance "V Scores and Parameter Sensitivities in the Major
EMEA RMBS Sectors" published in April 2009.
Moody's Parameter Sensitivities provide a quantitative/model-indicated
calculation of the number of rating notches that a Moody's structured
finance security may vary if certain input parameters used in the initial
rating process differed. The analysis assumes that the deal is
not aged and is not intended to measure how the rating of the security
might migrate over time, but rather how the initial rating of the
security might have differed if key rating input parameters were varied.
Parameter Sensitivities for the typical EMEA RMBS transaction are calculated
by stressing key variable inputs in Moody's primary rating model.
If the Expected Loss was increased from 2.2% to 6.6%,
the model output indicated that Class A, would have achieved A1
assuming that MILAN Aaa CE remained at 12% and all other factors
remained the same.
The principal methodology used in this rating was Moody's Approach to
Rating RMBS in Europe, Middle East, and Africa published in
October 2009. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
Other Factors used in this rating are described in Global Structured Finance
Operational Risk Guidelines: Moody's Approach to Analyzing
Performance Disruption Risk published in June 2011.
In rating this transaction, Moody's used ABSROM to model the cash
flows and determine the loss for each tranche. The cash flow model
evaluates all default scenarios that are then weighted considering the
probabilities of the lognormal distribution assumed for the portfolio
default rate. In each default scenario, the corresponding
loss for each class of notes is calculated given the incoming cash flows
from the assets and the outgoing payments to third parties and noteholders.
Therefore, the expected loss or EL for each tranche is the sum product
of (i) the probability of occurrence of each default scenario; and
(ii) the loss derived from the cash flow model in each default scenario
for each tranche.
As such, Moody's analysis encompasses the assessment of stressed
scenarios.
As the Euro area crisis continues, the rating of the structured
finance notes remain exposed to the uncertainties of credit conditions
in the general economy. The deteriorating creditworthiness of euro
area sovereigns as well as the weakening credit profile of the global
banking sector could negatively impact the ratings of the notes.
For more information please refer to the Rating Implementation Guidance
published on 13 February 2012 "How Sovereign Credit Quality May Affect
Other Ratings". Please also refer to the recent rating actions
on banks published on 15 February 2012, (please see "Moody's Reviews
Ratings for European Banks" and "Moody's Reviews Ratings for Banks and
Securities Firms with Global Capital Markets Operations" for more information).
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.rmbs@moodys.com.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt 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 relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant 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.
The rating has been disclosed to the rated entity or its designated agent(s)
and issued with no amendment resulting from that disclosure.
Information sources used to prepare the rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, and confidential and proprietary Moody's
Investors Service information.
Moody's did not receive or take into account a third-party
assessment on the due diligence performed regarding the underlying assets
or financial instruments in this transaction.
Further information on the representations and warranties and enforcement
mechanisms available to investors are available on http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF282875.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
Moody's adopts all necessary measures so that the information it
uses in assigning a rating is of sufficient quality and from sources Moody's
considers to be reliable including, when appropriate, independent
third-party sources. However, Moody's is not
an auditor and cannot in every instance independently verify or validate
information received in the rating process.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
two years preceding the credit rating action. Please see the special
report "Ancillary or other permissible services provided to entities
rated by MIS's EU credit rating agencies" on the ratings disclosure
page on our website www.moodys.com for further information.
Please see the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and
for (B) further information regarding certain affiliations that may exist
between directors of MCO and rated entities as well as (C) the names of
entities that hold ratings from MIS that have also publicly reported to
the SEC an ownership interest in MCO of more than 5%. A
member of the board of directors of this rated entity may also be a member
of the board of directors of a shareholder of Moody's Corporation;
however, Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating Process
page on www.moodys.com for further information on the meaning
of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time
before Moody's ratings were fully digitized and accurate data may not
be available. Consequently, Moody's provides a date that
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that is available to it. Please see the ratings disclosure page
on our website www.moodys.com for further information.
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.
Pier Paolo Vaschetti
Vice President - Senior Analyst
Structured Finance Group
Moody's Italia S.r.l
Corso di Porta Romana 68
Milan 20122
Italy
Telephone:+39-02-9148-1100
Michelangelo Margaria
VP - Senior Credit Officer
Structured Finance Group
Telephone:+39-02-9148-1100
Releasing Office:
Moody's Italia S.r.l
Corso di Porta Romana 68
Milan 20122
Italy
Telephone:+39-02-9148-1100
Moody's Investors Service assigned definitive ratings to RMBS notes issued by Credico Finance 10 S.r.l.
