Approximately EUR 3,479 million of rated debt securities affected
Milan, November 03, 2010 -- Moody's Investors Service has today assigned provisional credit ratings
to the following class of notes issued by Siena Mortgages 10-7
S.r.l.:
- (P) Aaa (sf) to Euro [598.5] Class A1 Residential
Mortgage Backed Floating Rate Notes due 2070
- (P) Aaa (sf) to Euro [800.2] Class A2 Residential
Mortgage Backed Floating Rate Notes due 2070
- (P) Aaa (sf) to Euro [1,263.0] Class A3 Residential
Mortgage Backed Floating Rate Notes due 2070
- (P) Caa1 (sf) to Euro [817.7] Class B Residential
Mortgage Backed Floating Rate Notes due 2070
Moody's has not assigned any rating to the subordinated Euro Class
D [104.5] Asset Backed Variable Return Notes due August 2070.
RATINGS RATIONALE
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, as well as the
transaction structure and any legal considerations as assessed in Moody's
cash flow analysis. The above structure has been provided for the
purpose of Moody's analysis, this may not be reflected in the final
issuance level.
The expected portfolio loss of 3.35% of the original balance
of the portfolio and the MILAN Aaa required Credit Enhancement of 12.5%
served as input parameters for Moody's cash flow model, which is
based on a probabilistic lognormal distribution as described in the report
"The Lognormal Method Applied to ABS Analysis", published in September
2000.
The transaction represents the ninth securitization of the Siena's
RMBS series, the seventh rated by Moody's. The assets
supporting the notes, which amount to around EUR 3,479.5
million, are prime mortgage loans secured on residential properties
located in Italy originated by Banca Monte dei Paschi di Siena SpA ("BMPS";
A2/P-1), Banca Antonveneta ("BAV"), Banca
Toscana ("BT"), Banca Agricola Mantovana ("BAM")
and Banca 121, all part of the Banca Monte dei Paschi di Siena Group
(Banca 121, BAM and BT merged in BMPS since 2002, 2008 and
2009 respectively; BAV merged in BMPS in 2008 and partly spun off
in 2009). The portfolio will be serviced by BMPS.
The key drivers for the MILAN Aaa Credit Enhancement number, which
is higher than other comparable prime Italian RMBS transactions,
are (i) the weighted average loan-to-value (LTV) of 58.84%,
which is in line with other Italian RMBS transactions but with an higher
than average portion of loans with current LTV higher than 70%
(39.6%), (ii) missing data on the current arrear status
and, for a portion of the portfolio (26%), on employment
type and (iii) comparison with the historical default static cohorts volatility.
The key drivers for the portfolio expected loss are (i) defaults on global
BMPS residential mortgage book, which have experienced a substantial
increase in the last periods and show high volatility among vintages (ii)
rolls rate derived from previous transactions and (iii) benchmarking with
comparable transactions in the Italian market. Moody's believes
the assumed expected loss is appropriate for this transaction.
The structure will benefit from a swap, provided by Royal Bank of
Scotland plc (Aa3/P-1), which guarantees a margin above notes'
index (135 bps) and from an amortizing cash reserve fully funded at closing
for an amount equal to 3% of the rated notes. Liquidity
in the transaction comes from principal to pay interest and from the cash
reserve, but given the replenishment of the cash reserve will rank
junior to payment of interest and principal on Class B, if the cash
reserve has been fully drawn under extreme cases (such as servicer disruption)
there may not be liquidity available to cover interests on the rated notes;
however, the transaction documents contain certain mechanisms that
mitigate this weakness.
The rating addresses 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
on or before the legal final maturity with respect of the Class A1,
Class A2 and Class A3 notes, and ultimate payment of interest and
principal on or before the legal final maturity with respect of the Class
B notes. Moody's ratings only address the credit risk associated
with the transaction. Other non-credit risks have not been
addressed, but may have a significant effect on yield to investors.
The V-Score for this transaction is Low/Medium, which is
in line with the V-Score assigned for the Italian RMBS sector.
Only two sub components underlying the V Score deviate from the average
for the Italian RMBS sector: i) the "Quality of historical
data for the Issuer/Sponsor/Originator" which is assessed at Medium,
higher than the Low /Medium sector's average, because the
securitized portfolio has mainly (around 83%) been originated in
2009 and 2010: BMPS's originated volumes during these years
have almost doubled the average origination volumes of the preceding five
years and eventually historical data could not represent the portfolio
future performance and ii) "Issuer/Sponsor/Originator's Historical
Performance Variability" because of the high volatility among static
cohorts performance and steep increase in defaults during the last market
downturn.
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 report "V-Scores
and Parameter Sensitivities in the Major EMEA RMBS Sectors" published
in April 2009.
Moody's Parameter Sensitivities: the model output indicated that
Class A1, Class A2 and Class A3 would have achieved Aaa even if
expected loss was as high as 10.05% (3.0x base case)
assuming Milan Aaa CE at 12.5% (base case) and all other
factors remained the same. Classes B would have achieved Caa2 for
this same scenario. The model output further indicated that the
Class A1 and Class A2 would have achieved Aaa with Milan Aaa CE of 20.0%
(1.6x base case), and expected loss of 3.35%
(base case); Class A3 would have achieved Aa1 and Class B B3 for
this same scenario.
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 principal methodologies used in this rating were Moody's Approach
to Rating Italian RMBS, published in December 2004 and Cash Flow
Analysis in EMEA RMBS: Testing Structural Features with the MARCO
Model (Moody's Analyser of Residential Cash Flows), published in
January 2006. Other methodologies and factors that may have been
considered in the process of rating this issuer can also be found on Moody's
website.
Moody's Investors Service received and took into account a third party
due diligence report on the underlying assets or financial instruments
in this transaction and the due diligence report had a neutral impact
on the rating.
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, 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.
Additional research, including the new issue report for this transaction
and reports for prior transactions, are available at www.moodys.com.
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 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
Moody's Investors Service assigns provisional credit ratings to notes issued by Siena Mortgages 10-7 S.r.l.
