NOTE: On May 24, 2012 the press release was revised as follows: Added the following additional disclosure in the Regulatory Disclosures section: Moody?s considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating. Revised release follows.
EUR 1,087.4 million debt securities rated
Milan, December 22, 2011 -- Moody's Investors Service has today assigned definitive ratings to the
notes issued by Siena LEASE 11-1 S.r.l.:
....? 916'600'000 Class A1 Asset-Backed
Floating Rate Notes due 2040, Assigned Aaa (sf)
....? 170'800'000 Class A2 Asset-Backed
Fixed Rate Notes due 2040, Assigned Aaa (sf)
The notes are backed by a pool of lease receivables originated by Monte
dei Paschi di Siena Leasing & Factoring, Banca per i Servizi
Finanziari alle Imprese S.p.A. ("MPSLF"
-- NR) and granted to small and medium entities in Italy.
The Class A1 and A2 notes, completely pari passu, have 54%
credit enhancement, represented by subordination, namely the
? 1'276'200'000 Class B notes (NR). The ? 36'340'000
Class C notes will fund the cash reserve, whose initial amount has
been sized at ? 35,454,000 (i.e. 1.5%
of the Class A1, A2 and B notes amount). The cash reserve
may amortise over the life of the deal, but would need to remain
at 1.5% of the outstanding notes amount; a floor has
also been set at Eur 7,000,000. The cash reserve has
not been included in the credit enhancement computation as provided above,
as it will serve as liquidity support over the life of the deal and will
be available to repay the notes at maturity only.
RATINGS RATIONALE
The outstanding EUR 2,363 million portfolio is composed of 20,585
contracts granted to 13,203 borrowers, either Italian professionals
or Italian Small and Medium sized Enterprises ("SME"). Assets are
represented by financial lease receivables belonging to three different
pools: real estate (49.3%), equipment (37.9%),
vehicles (12.7%). The securitised portfolio does
not include the so-called "residual value option", i.e.
the final installment representing the option the lessee has to acquire
full ownership of the leased asset.
The leases were originated between 2003 and 2011 and have a weighted average
seasoning of 2.5 years and a weighted average remaining term of
8.8 years. The interest rate is floating for 84.2%
of the pool, the weighted average margin over the index being 2%.
15.7% of the portfolio is instead represented by fixed rate
leases, with a weighted average rate of 5.5%.
Geographically, the pool is concentrated in the Northern Italian
region of Lombardy (19%) and the Central Italian region of Tuscany
(16.8%). As far as industry concentration is concerned
- the "Construction & Building" sector represents 30%
of the pool.
Moody's notes as credit strengths of the transaction the granularity of
the portfolio, whose effective number is 1,152. Moody's
also underlines that the originator and servicer of the deal (MPSLF) is
part of a rated entity (Banca Monte dei Paschi di Siena - Baa1/P-2)
and that a back up servicer will be appointed as soon as the servicer
parent rating is downgraded below Baa3. A backup servicer facilitator,
appointed at issue date, will assist the issuer in this task.
Hence the deal's exposure to operational risk is mitigated. On
the other hand, Moody's notes that the transaction features a number
of credit weaknesses, including the important exposure (30%)
to the highly cyclical Construction and Building sector (industry of the
securitised borrowers) and the lack of an hedging mechanism to protect
the structure from an interest rate mismatch between the rate received
by the SPV on the portfolio and rate payable on the notes. As standard
for Italian leasing transactions, a further weakness is represented
by the legal uncertainty associated with recoveries on leased assets,
following potential bankruptcy of the originator; Moody's did take
this into account in its analysis.
Moody's analysis focused primarily on the evaluation of the underlying
portfolio of leases and its credit profile, along with the analysis
of the historical performance data as provided by the originator.
Moody's further focused on the legal and structural integrity of the transaction.
The resulting key assumptions of Moody's analysis for this transaction
were a mean default rate of 18.5% with a coefficient of
variation of 43.2% (implying an asset correlation of 8.6%).
The recovery rate assumed was 50%, however we also modeled
that upon servicer insolvency, the recovery rate would lower to
10%. Moody's also tested other sets of assumptions under
its Parameter Sensitivities analysis. The results show that the
rating would have been Aa1 if the mean default rate had been as high as
21.5% and the recovery rate as low as 40%,
all other parameters kept unchanged. For more details, please
refer to the full Parameter Sensitivity analysis included in the New Issue
Report of the transaction.
Moody's used in combination its CDOROM model and its ABSROM cash-flow
model to finally determine the potential loss incurred by the notes under
each default scenario. In parallel, Moody's also considered
non-modeled risks (such as counterparty risk).
Specifically, Moody's used CDOROM to test the consistency of one
of the main parameters (standard deviation) of the default distribution
applicable to the securitised portfolio. The Moody's CDOROM?
is a Monte Carlo simulation model which takes the Moody's default probabilities
as input. Each corporate reference entity is modeled individually
with a standard multi-factor model incorporating intra-
and inter-industry correlation. The correlation structure
is based on a Gaussian copula.
The ABSROM cash flow model evaluates all default scenarios that are then
weighted considering the probabilities of the Inverse Normal distribution
assumed for the portfolio default rate. On the recovery side Moody's
assumes a stochastic normal recovery distribution which is correlated
to the default distribution. 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 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.
Due to: 1) the fact that historical performance data available do
not fully capture the current economic environment, and 2) the nature
of the underlying debtors (SMEs), Moody's complemented the analytical
approach as described in the Special report "Multi-pool Financial
Lease Backed Transactions in Italy", June 2006 with the analytical
approach used for rating of EMEA SME ABS transactions as described in
the Rating Methodology reports "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", March
2009 and "Moody's Approach to Rating Granular SME Transactions in Europe,
Middle East and Africa", June 2007. Please see the Credit
Policy page on www.moodys.com for a copy of these methodologies.
The V Score for this transaction is Medium, which is in line with
the score assignable to the Italian Leasing sector and representative
of the volatility and uncertainty in the Italian Leasing Sector.
Moody's notes that Transaction Complexity is Medium. Back-up
Servicer Arrangement is Low/Medium, as appointment of back up servicer
happens at loss of Baa3 on the part of the servicer parent rating.
A back up servicer facilitator will assist the issuer in carrying out
this task.
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. For more information, the
V-Score has been assigned accordingly to the report "V Scores and
Parameter Sensitivities in the Global Consumer Loan ABS Sectors",
published in May 2009 and "V Scores and parameter Sensitivities in the
EMEA Small-to-Medium Enterprise ABS Sector" published in
June 2009.
The ratings address the expected loss posed to investors by the legal
final maturity of the notes (2040). In Moody's opinion, the
structure allows for the timely payment of interest and ultimate payment
of principal on the Class A1 and A2 notes at par on or before the final
legal maturity date. Moody's ratings address only the credit risks
associated with the transactions. Other non-credit risks
have not been addressed, but may have a significant effect on yield
to investors.
As noted in Moody's comment 'Rising Severity of Euro Area Sovereign Crisis
Threatens Credit Standing of All EU Sovereigns' (28 November 2011),
the risk of sovereign defaults or the exit of countries from the Euro
area is rising. As a result, Moody's could lower the maximum
achievable rating for structured finance transactions in some countries,
which could result in rating downgrades.
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, 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_SF270039
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 considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a 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
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
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 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.
Valentina Varola
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
Monica Curti
Vice President - Senior Analyst
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 has assigned definitive ratings to the notes issued by Siena LEASE 11-1 S.r.l.
