Approx. EUR 280 Million of debt securities affected
Paris, February 28, 2011 -- Moody's Investors Service has assigned the following definitive ratings
to notes issued by Ifis Collection Services SRL (the "Issuer"):
....EUR90M A1Notes, Assigned A3 (sf)
....EUR10M A2 Notes, Assigned A3 (sf)
....EUR90M A3 Notes, Assigned A3 (sf)
....EUR90M A4 Notes, Assigned A3 (sf)
The transaction is a cash securitisation of factoring receivables originated
by Banca Ifis SpA in Italy, which has retained the role of servicer
in this transaction. The transaction has closed in October 2008
and is revolving until November 2013. This is the first public
securitisation transaction sponsored by Banca Ifis SpA.
The securitised portfolio consists of unsecured trade receivables purchased
by Banca Ifis from its Italian corporate clients (the assignors) under
standard factoring contracts. Those trade receivables were initially
extended by the assignors to their Italian corporate clients (the debtors)
within their business relationships. The 1st January 2011 portfolio
comprises approximately 1800 assignors and 1600 debtors and shows some
degree of concentration as the top first debtor account for 4.87%
of the total portfolio amount and the top assignor 3.55%.
Moreover, the portfolio is exposed to industrial sector concentration
with 16.42% of the debtors belonging to the Construction
and Building sector. The debtor concentration level is capped given
each debtor group rating, with the maximum concentration of unrated
debtor group at 4%, while the top assignor group shall not
account for more than 5%. The average payment terms of the
factoring receivables is 4 months. The eligibility criteria provide
that the public entities are excluded from the debtor portfolio as well
as the receivables which are delinquent by more than 90 days. As
of 1 January 2011, the portfolio consists of approximately 57,000
The Class A1, A2, A3 and A4 notes (together the Class A notes)
are pro rata and pari passu. The Class A notes benefit from a 6
months liquidity in the form of a cash reserve fund to cover senior expenses
and notes coupon during the amortisation period (12 months of liquidity
is available during the revolving period). The credit enhancement
of the Class A1 to A4 notes is in the form of overcollateralisation through
a deferred purchase price (DPP) of which payment is subordinated to the
notes principal payment. The DPP amount may vary on a monthly basis
given a dynamic formula which stresses the default and dilution past 12
months average rate by 2.15. The DPP formula include a floor
set at 16% for default risk and 2% for dilution risk.
The total credit enhancement resulting from this DPP formula is 18.96%
as of the end of February 2011.
According to Moody's, the transaction benefits from credit strengths
such as a reserve fund available to cover up to 6 months of liquidity
shortfalls throughout the amortisation period and credit enhancement that
will adjust to the preceding year performances. Furthermore,
a floor of credit enhancement to cover for the top debtors concentration,
the debtors and assignors concentration limits, the short average
life of the receivables together with the performance triggers attached
to the default rate, dilution rate and asset/liability test also
are mitigants given the revolving nature of the transaction. In
addition, the debtors notification to pay directly in the issuer
bank account strongly mitigates the commingling risk.
The Class A notes rating was constrained by the transaction operational
weaknesses given that the originator and servicer is not rated and given
the absence of back-up servicer at closing of the transaction.
The transaction is exposed to the ability of the servicer to perform its
various obligations related to servicing and to the cash manager ability
to act in a timely fashion (a role associated with payment calculations
and instructions handled by Securitisation Services as calculation agent
and BNP Paribas as paying agent). The absence of back-up
servicer at closing is mitigated by the back-up servicer facilitator
appointment (being Securitisation Services S.p.A being also
the Representative of Noteholders). The transaction documents include
replacement events that are triggered when the capital adequacy ratio
of Banca Ifis ceases to be in line with Bank of Italy requirements.
However, Moody's believes these triggers imperfectly protect the
transactions from possible disruptions in the event of a sudden deterioration
in the credit quality of Banca Ifis and if a successor servicer could
not be rapidly found, especially given the short term nature of
From a quantitative stand point, Moody's assessed the credit
enhancement floor under various portfolio scenario to anticipate on the
potential portfolio volatility over the 3 year revolving period.
In that respect, Moody's assumed a debtor weighted average
default rate of 11.6% and a 50% volatility over a
3 year average life, equivalent to a B1 default probability rating
following "Moody's Approach to Rating Granular SME Transactions
in Europe, Middle East and Africa, June 2007".
The debtor portfolio was analysed under different concentration scenario
using CDOROM model as per "Moody's Approach to Rating the
CDOs of SMEs in Europe, February 2007". Further,
Moody's weighted in its analysis the dilution risk through the modelling
of the assignors portfolio credit risk under various dilution rate scenario
from 5% to 50%. Although Banca Ifis origination and
servicing procedures mitigates the dilution risk, such risk is by
nature volatile and explain such range of scenario. The assignor
portfolio credit risk was also assessed following the same approach as
for the debtors credit risk, resulting in a B1/B2 equivalent default
rate and 45% volatility.
The V-score analysis for the transaction is Medium/High.
Moody's has compared the transaction v-score with the Italian Leasing
sector scores. The main contribution to an overall Medium/High
V-score assessment for the transaction is from the absence of back-up
servicer arrangement and limited historical data provided of up to 5 years.
For more information on V-scores, please see the report "V
Scores and parameter Sensitivities in the EMEA Small-to-Medium
Enterprise ABS Sector", published in June 2009.
The principal methodologies used in this rating were Moody's Approach
to Rating Granular SME Transactions in Europe, Middle East and Africa,
June 2007 Moody's Approach to Rating the CDOs of SMEs in Europe,
February 2007 and the Moody's Approach to rating trade receivables
backed transactions, July 2002.
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 receive or take into account a
third party due diligence report on the underlying assets or financial
instruments in this transaction.
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
on the Class A Notes. 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
Moody's used its excel based Moody's CDOROM™ as part of its quantitative
analysis of the transaction.
In rating factoring receivables ABS, debtors default rate and debtors
concentration levels are two key inputs that the minimum credit enhancement
to support the floor analysis level. Parameter sensitivities for
this transaction have been tested in the following manner: Moody's
tested three scenarios derived from the combination of the debtors mean
default: 11.6% (base case), 13% (base
case -- 0.5 notch), 14. 5% (base case
-- 1 notch) . The model output results for Class A notes under
these scenarios vary from A3 to Baa3. Parameter Sensitivities provide
a quantitative/model-indicated calculation of the number of 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. It is not intended
to measure how the rating of the security might migrate over time,
but rather, how the initial model output of the security might have
differed if the two parameters within a given sector that have the greatest
rating impact were varied.
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,
and public information.
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Vice President - Senior Analyst
Structured Finance Group
Moody's France SAS
JOURNALISTS: 44 20 7772 5456
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Senior Vice President
Structured Finance Group
Moody's Italia S.r.l
Moody's France SAS
Moody's Investors Service has assigned definitive ratings to notes issued by Ifis Collection Services SRL
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JOURNALISTS: 44 20 7772 5456
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