Approximately EUR 275.9 million of debt security affected
Milan, April 07, 2011 -- Moody's Investors Service has today assigned definitive credit ratings
to the following class of notes issued by Guercino Solutions S.r.l
EUR 275,900,000 Class A Asset Backed Floating Rate Notes due
October 2045, Assigned Aaa (sf)
RATINGS RATIONALE
The transaction was initially not rated by Moody's. Moody's rating
analysis of the notes is based on the transaction structure as of today:
the Class A notes issued at closing amounted to EUR 275.9 million
and have now amortized to EUR 187.2, notes ranking junior
in the waterfall to Class A will only amortize upon full repayment of
Class A notes. The amount of the notes outstanding at the most
recent payment date (November 2011) amount to EUR 195.8 million.
The transaction represents the first securitisation of Italian residential
mortgage loans originated by Cassa di Risparmio di Cento S.p.A.
(CR Cento), unrated. The headquarter of the bank is in Cento,
a city in the Center of Italy. The assets supporting the notes,
which amount to around EUR 195,78 million (at November 2010),
are prime mortgage loans secured on residential properties located in
Italy. The portfolio will be serviced by Cassa di Risparmio di
Cento S.p.A.. The transaction benefit also
of a back up servicer appointed at closing Cassa di Risparmio di Ferrara
(Baa3/P-3) The deal is static. Moody's had not issued public
ratings for these notes previously.
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 expected portfolio loss of 4.1% on the portfolio current
balance (equivalent to 4.1% of the portfolio balance at
closing) and the MILAN Aaa required Credit Enhancement of 12% 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 are (i) the performance
of the mortgage loans from the total book of CR Cento, (ii) the
amount of loans that have been in arrears for more than 120 days experienced
so far in the transaction (equal to 2.17% of initial portfolio
balance) (iii) the recovery rate shown by the historical data provided
by CR Cento (iv) benchmarking with comparable transactions in the Italian
market and (v) the negative outlook that Moody's has on Italian
RMBS.
The key drivers for the MILAN Aaa Credit Enhancement number, which
is higher than other Italian residential RMBS transactions, are
the portfolio geographical concentration, as 97% of the pool
is in the Emilia Romagna region and the presence of loans that are in
arrears for more than one month in the pool ( approximately 0.82%
).
The structure will benefit from a swap, provided by Royal Bank of
Scotland plc (Aa3/P-1), which provides a guaranteed margin
above Euribor 6m of 100 bps on a notional equal to the outstanding amount
of the notes. The swap complies with Moody's standard swap de-linkage
criteria. However, given that the swap provides credit and
liquidity support to the deal, Moody's quantifies in its analysis
the possibility that the swap can't be replaced with one with similar
characteristics.
Liquidity in the transaction comes from a principal to pay interest mechanism
and from the cash reserve (€12.356.000) , not
amortizing, which currently represents 6.3% of the
portfolio that provides liquidity support during the life of the deal
and credit enhancement at the end. Another mitigant is the presence
of a back up servicer appointed at closing and the presence in the deal
of a mechanism that allows the payment of the amounts in the waterfall
up to the interest of Class A in the case the servicer report is not timely
prepared by the servicer.
Moody's assigned a Composite V Score for this transaction of Medium based
on Moody's V Score rating methodology as published in the report "V-Scores
and Parameter Sensitivities in the Major EMEA RMBS Sectors" published
in April 2009, which is higher than the V score assigned for the
Italian RMBS sector.
The sub components underlying the V Score which deviate from the average
for the Italian RMBS sector are: i) "Quality of Historical Data
for the Issuer/Sponsor/Originator" from Low/Medium to Medium because data
provided by the originator doesn't represent a good proxy to estimate
the future performance of the transaction, ii) "Issuer/Sponsor/Originator's
Historical Performance Variability" because CR Cento used to repurchase
all the loans that were in arrears for more than 120 days so it is not
possible to benchmark the performance of the deal against the benchmark,
(iii) "Analytic Complexity" which is at Medium driven by the fact that
claw back risk has been assessed in the transaction and sensitivity has
been performed to value the support provided by the swap to the deal,
iii) "Experience of, Arrangements Among and Oversight of Transaction
Parties" to Medium given this is the first transaction that the originator
and servicer have participated in and iv) "Back-up Servicer
Arrangement" to Medium from Low because the servicer is unrated.
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.
Moody's Parameter Sensitivities: If the Expected Loss was increased
from 4.1% to 6.15%, the model output
indicated that Classes A would have achieved Aaa even if the MILAN Aaa
CE was increased to 14.4% from 12.0% and all
other factors remained the same. 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 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
with respect of the notes by the legal final maturity. 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 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
Pier Paolo Vaschetti
Vice President - Senior 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 today assigns definitive credit ratings to notes issued by Guercino Solutions S.r.l.
