Approximately EUR 3,411.8 million of debt security affected
Milan, February 28, 2011 -- Moody's Investors Service has today assigned definitive credit ratings
to the following class of notes issued by BPL Mortgages S.r.l.:
Aaa (sf) to EUR 3,411,500 Class A - 2009 Residential
Mortgage-Backed Floating Rate Notes due 2055 ("Class A notes")
Moody's has not assigned any rating to EUR 578,624,000
Class B - 2009 Residential Mortgage-Backed Notes due 2055
("Class B notes" and together with Class A notes the "Notes")
RATINGS RATIONALE
The transaction was initially not rated by Moody's. Moody's
rating analysis of the notes is based on the transaction structure as
of today: the Class A notes issued at closing amounted to EUR 3,411.8
million and will start to amortize at the next payment date (May 31st,
2011). Funds available for the repayment of Class A notes are today
equal to 22.05% of Class A notes.
The transaction represents the fourth series of notes issued by BPL Mortgages
srl and one of the six RMBS transaction originated by banks belonging
to the Banco Popolare group. The assets supporting the notes,
which amount to around EUR 3,269.4 million (at November 2010),
consists of mortgage loans extended to individuals 58.7%
and SMEs 41.3% backed by first economic lien on residential
and commercial properties located in Italy. Loans have been originated
by Banca Popolare di Crema SpA, Banca Popolare di Cremona SpA ,
Banca Popolare di Lodi SpA , Banca Popolare di Novara SpA,
Banca Popolare di Verona -- S. Geminiano e S. Prospero
SpA, Credito Bergamasco SpA and Cassa di Risparmio di Lucca Pisa
e Livorno SpA. Each of the portfolios will serviced by the relevant
originator and a back up servicer will be appointed if Banco Popolare's
rating falls below Baa3 and/or the stake Banco Popolare holds in each
of the servicers falls below 77%.
The ratings of the notes take into account the credit quality of the underlying
mortgage loan pool, from which Moody's determined the MILAN Aaa
Credit Enhancement and the portfolio expected loss. The key drivers
for the 13% MILAN Aaa Credit Enhancement for the individual portion
of the portfolio, which is higher than for other Italian RMBS transactions,
are (i) the presence of loans that are in arrears for more than one month
representing approximately 5% of the pool, (ii) missing data
on the occupancy type, iii) a high proportion of loans granted for
equity release (32%) and (iv) the presence of loans currently enjoying
a interest and principal payment holiday (2.3%).
The expected default rate for the SMEs sub-portfolio was determined
according to the methodology described in the report "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 and "Moody's Approach to Rating
Granular SME Transactions in Europe, Middle East and Africa",
published in June 2007. The most important parameter for the expected
default rate of the SMEs sub-portfolio is the mean default probability
assumed for each of the SME loans derived via the analysis of the characteristics
of the loan-by-loan portfolio information. We expect
the average default probability of the pool to be a Ba3/B1 Moody's equivalent
(translating into 11.90% cumulative default rate over the
weighted average life of 4.4 years of the portfolio).
For the aggregate portfolio, the combined expected portfolio loss
of 5.6% on the portfolio current balance (equivalent to
6.6% of the portfolio balance at closing) and the equivalent
MILAN Aaa required Credit Enhancement of 19% served as input parameters
for Moody's cash flow model, which was based on a probabilistic
lognormal distribution as described in the report "The Lognormal Method
Applied to ABS Analysis", published in September 2000. The
expected loss which is well above the average for the Italian RMBS sector
takes into account the (i) the high portion of loans (41.3)%
extended to SMEs, (ii) the high amount of defaults that have been
experienced so far, (iii) the low recovery rate shown by the historical
data provided on the originators, (iv) benchmarking with comparable
transactions in the Italian market and (v) the negative outlook we have
on Italian RMBS. The loss distribution for the two sub-portfolios
were combined in order to achieve the aggregate loss distribution of the
portfolio that was used in the cash flow analysis to determine the rating
of the Class A notes.
The structure will benefit from a swap, provided by Banca IMI (Aa3/P-1),
which provides a guaranteed margin above Euribor of 140 bps,The
swap complies with Moody's standard swap de-linkage criteria,
however, as the swap counterparty could becomes subject to Italian
insolvency proceedings, and the swaps could terminate by operation
of law there is additional linkage for the notes to the rating of the
swap counterparty.
Liquidity in the transaction comes from principal to pay interest mechanism,
and from the cash reserve, which is equal to 7% of the Notes.
Moody's assigned a Composite V Score for this transaction of Low/Medium
based on Moody's V Score rating methodology as published in the report
"V-Scores and Parameter Sensitivities in the Major EMEA RMBS Sectors"
published in April 2009, which is in line with the V score assigned
for the Italian RMBS sector. Three sub components underlying the
V Score deviate from the average for the Italian RMBS sector: i)
"Issuer/Sponsor/Originator's Historical Performance Variability"
because of the poor performance of the securitized portfolio since closing
and of previous deals originated by banks belonging to the Banco Popolare
group, ii) "Disclosure of Securitization Collateral Pool Characteristic"
which is assessed at Medium, given that historically some information
in the servicer report of the transaction were not correct and resulted
in erroneous calculations in the application of the priority of payment
(corrected by the servicer) and iii) "Analytic Complexity"
which is at Medium driven by the fact that the transaction comprises two
sub pools: this is not standard in the market segment and required
the use of two different methodologies. 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.
Moody's Parameter Sensitivities: If the Expected Loss was increased
from 5.6 % to 11.2%, the model output
indicated that Classes A would have achieved Aa1 assuming that MILAN Aaa
CE remained at 19% and all other factors remained the same.
Moody's Parameter Sensitivity provide a quantitative/model-indicated
calculation of the number of rating notches that a Moody's-rated
structured finance security may vary if certain input parameters used
in the initial rating process differed. The analysis assumes that
the deal has 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. Qualitative factors are also taken into consideration
in the ratings process, so the actual ratings that would be assigned
in each case could vary from the information presented in the Parameter
Sensitivity analysis.
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 of 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.
The principal methodologies used in this rating were Moody's Approach
to Rating Italian RMBS, published in December 2004, Cash Flow
Analysis in EMEA RMBS: Testing Structural Features with the MARCO
Model (Moody's Analyser of Residential Cash Flows), published in
January 2006 and Moody's Approach to Rating Granular SME Transactions
in Europe, Middle East and Africa.
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.
Moody's Investors Service did not received a third party due diligence
report on the underlying assets or financial instruments in this transaction.
REGULATORY DISCLOSURES
The rating has been disclosed to the rated entity or its designated agents
and issued with no amendment resulting from that disclosure.
Information sources used to prepare the credit 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 Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
three years preceding the Credit Rating Action. Please see the
ratings disclosure page www.moodys.com/disclosures on our
website for further information.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
three years preceding the Credit Rating Action. Please see the
ratings disclosure page www.moodys.com/disclosures on our
website for further information.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit 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.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Milan
Francesca Pilu
Asst Vice President - Analyst
Structured Finance Group
Moody's Italia S.r.l
Telephone:+39-02-9148-1100
Milan
Michelangelo Margaria
VP - Senior Credit Officer
Structured Finance Group
Moody's Italia S.r.l
Telephone:+39-02-9148-1100
Moody's Italia S.r.l
Corso di Porta Romana 68
Milan 20122
Italy
Telephone:+39-02-9148-1100
Moody's Investors Service assigns definitive credit ratings to Italian RMBS notes issued by BPL Mortgages S.r.l.
