London, 22 December 2011 -- Moody's Investors Service has today downgraded the class B notes
in Casa d'Este Finance S.r.l. and Casa d'Este
Finance S.r.l. II. Today's rating actions
follows the downgrade of Cassa di Risparmio di Ferrara S.p.A.
(Ba3/NP) on the 5th of October 2011.
Issuer: Casa D'este Finance Srl ("CdE1")
....EUR35.2M B Notes, Downgraded
to Ba3 (sf); previously on Nov 25, 2009 Downgraded to Baa3
(sf)
Issuer: CASA D'ESTE FINANCE S.R.L. II ("CdE2")
....EUR80.65M B Notes, Downgraded
to Ba3 (sf); previously on Nov 25, 2009 Downgraded to Baa3
(sf)
RATING RATIONALE
Today's action reflects : (i) the exposure to Cassa di Risparmio
di Ferrara S.p.A. that acts as financial guarantor
on the class B notes (ii) the increased commingling risk and (iii) the
increased set-off exposure.
FINANCIAL GUARANTEE
In both transactions, Cassa di Risparmio di Ferrara S.p.A.(Ba3/not
on watch) provides a guarantee on interest and principal payments for
all classes of notes. Class B notes in both transactions benefit
from limited credit enhancement and their rating is primarily based on
this financial guarantee. Hence the downgrade of Cassa di Risparmio
di Ferrara S.p.A. to Ba3 resulted in a downgrade
of both classes of notes to Ba3 (sf). The credit enhancement for
Class A1 and A2 in both transactions is sufficient to maintain their current
rating.
Uncertainty mainly stems from the role of financial guarantor of Cassa
di Risparmio di Ferrara. If the rating of the guarantor is downgraded
further, the ratings of the class B notes will be negatively affected.
COMMINGLING RISK
In both transactions, Cassa di Risparmio di Ferrara services the
portfolios. All of the payments under the loans in the pools are
transferred daily from the collection account held in Cassa di Risparmio
di Ferrara to the issuer's account. In CdE1 Cassa di Risparmio
di Ferrara acts as issuer account bank, but all the obligations
in respect to this account are guaranteed by BNP Paribas S.A.
(Aa3, P-1). In CdE2 the issuer account bank is BNP
Paribas Securities Services (not rated), guaranteed by BNP Paribas
S.A. (Aa3, P-1). Moody' s has
taken into account the increased commingling risk in the transaction due
to the exposure to Cassa di Risparmio di Ferrara in its role of collection
account bank. The commingling risk is not a driver in today's rating
action.
Uncertainty mainly stems from the exposure to Cassa di Risparmio di Ferrara
S.p.A. as collection account bank. If the
rating of Cassa di Risparmio di Ferrara S.p.A. is
downgraded further, in absence of other mitigants to commingling
risk, both transactions would be negatively affected.
SET OFF
Moody's also considered set-off risk in its analysis. Based
on data available for the Italian market, Moody's made assumptions
on the amount of deposits that debtors in this transactions had when mortgage
loans were assigned to the issuer at closing. In its cashflow analysis
Moody's has assessed the impact of set-off on the notes if the
originator became insolvent at different time horizons, giving some
value to the protection provided to borrower deposits by the Italian deposit's
compensation funds. The set-off risk is not a driver in
today's rating action.
Uncertainty mainly stems from the exposure to Cassa di Risparmio di Ferrara
S.p.A. as the originator of the mortgage loans in
the two portfolios. If the rating of Cassa di Risparmio di Ferrara
S.p.A. is downgraded further both transactions would
be negatively affected.
POTENTIAL CHANGE IN AMORTISATION WATERFALL IN CDE1
In CdE1, any payments made by Cassa di Risparmio di Ferrara S.p.A.
under the financial guarantee to cover an interest shortfall triggers
a change in the amortisation waterfall, such that Class B interest
becomes subordinated to senior class principal repayment. Moody's
considers such scenario to be likely and has taken this into account in
its cashflow analysis of the transaction.
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
The principal methodology used in these ratings was Moody's Approach to
Rating RMBS in Europe, Middle East, and Africa published in
October 2009. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
In rating these transactions, Moody's used ABSROM to model the cash
flows and determine the loss for each tranche. The cash flow model
evaluates all default scenarios that are then weighted considering the
probabilities of the lognormal distribution assumed for the portfolio
default rate. 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.
As such, Moody's analysis encompasses the assessment of stressed
scenarios.
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 ratings have been disclosed to the rated entities or their designated
agent(s) and issued with no amendment resulting from that disclosure.
Information sources used to prepare each of the ratings 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 related to the monitoring of these transactions in the past
six months.
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 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 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.
In addition to the information provided below please find on the ratings
tab of the issuer page at www.moodys.com, for each
of the ratings covered, Moody's disclosures on the lead rating
analyst and the Moody's legal entity that has issued each of the
ratings.
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.
Maria Divid
Associate Analyst
Structured Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Barbara Rismondo
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Investors Service takes rating actions on Italian RMBS notes issued by Casa d'Este Finance Srl
