Approximately EUR 1151.2 million of debt security affected
Milan, March 16, 2011 -- Moody's Investors Service has today assigned definitive long term
ratings to Italian RMBS notes issued by Claris RMBs 2011 S.r.l.:
Aaa (sf) to the Euro 175.0 million Class A1 Asset Backed Floating
Rate Notes due November 2060
Aaa (sf) to the Euro 385.0 million Class A2 Asset Backed Floating
Rate Notes due November 2060
Aaa (sf) to the Euro 591.2 million Class A3 Asset Backed Floating
Rate Notes due November 2060
Moody's has not assigned any rating to Euro 203.2 million
Class B Asset Backed Floating Rate Notes due November 2060.
RATINGS RATIONALE
The ratings of the notes take into account the credit quality of the underlying
mortgage loan pool, the dynamic delinquency data and the vintage
data for defaults and recoveries received from the originator Veneto Banca
S.c.p.a. ("VB"). Based
on the different data sources Moody's has determined the Aaa MILAN
Credit Enhancement and the expected loss for the portfolio.
The transaction represents the ninth securitisation of receivables originated
by VB (Not publicly rated). The assets supporting the notes,
which amount to around EUR 1354.4 million, consists of residential
mortgage loans on properties located in Italy. The transaction
benefits from a cash reserve equal to 3.0% of the initial
asset balance that primarily can cover interest shortfall on the rated
notes and items senior thereto, while it only serves as credit enhancement
when the Class A notes are fully redeemed or at final legal maturity.
The portfolio will be serviced by VB (NR) and if VB loses the requisites
defined as "Requisiti di Unico Servicer" a back up servicer
will be appointed. The Representative of the Noteholders,
Securitisation Services S.p.A., facilitates
the search for and the appointment of a back-up servicer in case
it would be needed.
The expected portfolio loss of 3.0% of the initial asset
balance and the MILAN Aaa required Credit Enhancement of 11.0%
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 key drivers for the portfolio expected loss, which is slightly
higher than the Italian average for the sector, are: (i) nine
years of vintage data for defaults based on loans with similar characteristics
as the ones in the portfolio; (ii) the vintage data shows that the
default rates experienced by VB are strongly correlated with the market
wide default rates for Italian residential mortgage loans and that VB's
default data show a very weak "seasoning effect", if
any; (iii) the negative outlook Moody's has on Italian RMBS;
(iv) six years of dynamic delinquency data for loans with similar characteristics
as the portfolio (v) the vintage data for recoveries only covers closed
files and therefore the recovery rates and recovery lag has mainly been
based on benchmarking with comparable banks.
The key drivers for the MILAN Aaa Credit Enhancement number, which
is slightly higher than other Italian RMBS transactions are: (i)
around 52.6% of the borrowers in the pool are single borrowers,
which is slightly higher than other Italian transactions; (ii) for
12.7% of the loans in the pool the property value has been
estimated by the head of the branch while for a standard Italian RMBS
transaction the property values are assessed by a certified appraiser;
(iii) Moody's has also considered that there could be other characteristics
of the pool which have not been properly captured in the MILAN model and
therefore the MILAN number has been qualitatively adjusted in order to
generate a loss distribution with a certain level of volatility or with
other words to account for a higher probability of "fat tail"
events with respect to the expected loss.
The structure benefits from two interest rate swaps, provided by
J.P. Morgan Securities Ltd (Aa1/P-1): (i) a
fixed-floating rates swap, which is hedging around 37.5%
of the pool that consists of fixed rate loans and (ii) a basis swap whereby
the issuer is paying the 6-month EURIBOR received on most of the
floating rate loans and receives the three-month EURIBOR due under
the notes. Floating rate loans amounting to around 9.5%
of the initial pool balance are not perfectly hedged by the basis swap
and therefore Moody's has made a haircut to the interest that the
pool is generating in order to consider this basis risk. The swaps
are substantially compliant with Moody's standard swap de-linkage
criteria.
Liquidity in the transaction comes from (i) the non-amortising
cash reserve (equal to 3.0% of the initial pool balance),
which normally works more like liquidity ledger since it mainly covers
interest on the rated notes, swap payments and senior fees during
the life of the transactions and only serves as credit enhancement when
the Class A notes are redeemed or at final legal maturity, and (ii)
the principal to pay interest mechanism.
Moody's assigned a Composite V Score for this transaction of Low/Medium,
which is in line with the V score assigned for the Italian RMBS sector.
Two sub components of the transaction's V Score differ from the
Italian RMBS sector score: (i) Quality of Historical Data for the
Issuer/Sponsor/Originator which is assessed to be at Medium, higher
than the Low/Medium sector's average, given that the recovery
data was only provided on loans where the recovery process has been finalised
and therefore Moody's had rely on benchmarking in order to estimate
the recovery rate and recovery lag for the expected loss and (ii) "Issuer/Sponsor/Originator's
Historical Performance Variability" which is assessed to be Low/Medium,
higher than the Low sector's average, because of the mixed
performance of previous deals originated by VB. 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 according to the report "V-Scores and Parameter Sensitivities
in the Major EMEA RMBS Sectors" published in April 2009.
Moody's Parameter Sensitivities: If the expected loss increased
to 9.0% from 3.0%, the model output
indicated that Classes A1 and A2 would still have achieved Aaa even if
the MILAN Aaa CE increased to 17.6% from 11.0%
and all other factors remained the same, while the Class A3 note
would achieve A2 in the abovementioned 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 definitive 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 at par with respect to the Class A1, Class A2 and Class
A3 notes on or before the legal final maturity date of the 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 to investors.
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.
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.
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
David Bergman
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 has today assigned definitive ratings to the Italian RMBS Notes issued by Claris RMBS 2011 S.r.l.
