London, 01 April 2015 -- Moody's Investors Service has today upgraded the ratings of thirteen
notes in five Italian mortgage-backed securities (RMBS) transactions:
Apulia Mortgages Finance N. 3 S.r.l. (Apulia
3), Apulia Finance N. 4 S.r.l. (Apulia
4), Apulia Finance N. 4 S.r.l. --
Series 2008-2 (Apulia 2008-2), Marche Mutui 2 S.r.l.,
and Mars 2600 S.R.L.
Today's rating actions conclude the placement of the ratings on review
for upgrade of thirteen notes initiated on 23 January 2015, following
the upgrade of the Italian country ceiling to Aa2 from A2. (see
"Moody's takes rating actions on Irish, Italian, Portuguese,
Spanish ABS/RMBS deals" - http://www.moodys.com/viewresearchdoc.aspx?docid=PR_316959).
Please refer to the end of the Ratings Rationale section for a list of
affected ratings.
RATINGS RATIONALE
Today's rating upgrades reflect (1) the upgrade of the Italian local currency
country risk ceiling to Aa2; and (2) the updates to Moody's structured
finance rating methodologies to incorporate the new Counterparty Risk
("CR") Assessment for banks .
-- REDUCED COUNTRY RISK
The country ceilings reflect a range of risks that issuers in any jurisdiction
are exposed to, including economic, legal and political risks.
On 20 January 2015, Moody's announced a six-notch uplift
between a government bond rating and its country risk ceiling for Italy.
As a result, the maximum achievable rating for structured finance
transactions increased to Aa2 (sf) from A2 (sf) for Italy.
-- COUNTERPARTY RISK EXPOSURE AND UPDATES TO MOODY'S STRUCTURED
FINANCE RATING METHODOLOGIES
Today's rating actions took into consideration the transactions' exposure
to their relevant counterparties, such as servicers, account
banks or swap providers, and incorporated the updates to Moody's
structured finance methodologies (see "Moody's updates several structured
finance rating methodologies in light of its new counterparty risk assessment
for banks," published on 16 March 2015 - http://www.moodys.com/viewresearchdoc.aspx?docid=PR_320674).
Moody's now assesses exposures to banks in structured finance transactions
by referencing CR Assessment for commingling risk and deposit rating for
set-off risk. Moody's also assesses the default probability
of each transaction's account bank by referencing the bank's deposit rating.
Moody's has introduced a recovery rate assumption of 45% to all
the above exposures.
Moody's considers how the liquidity available in the transactions and
other mitigants support continuity of note payments, in case of
servicer default, using the CR Assessment as a reference point for
servicers.
Moody's analysis considers the risks of additional losses on the notes
if they were to become unhedged following a swap counterparty default
by using swap counterparty's CR Assessment as reference point.
Moody's concluded that the rating on Class B notes in Marche Mutui
2 S.r.l. is constrained by the issuer account bank,
Deutsche Bank AG, London Branch (A3, Possible Downgrade/(P)P-2).
In this rating action, Moody's used an internal guidance on the
CR Assessments to assess the rating impact on outstanding structured finance
transactions. This internal guidance is in line with the guidance
published in Moody's updated bank rating methodology and Moody's
responses to bank methodology-related frequently asked questions.
The rating review placements of certain banks resulting from Moody's revised
bank methodology, will not affect the ratings in these five transactions,
if the final ratings on the banks are in line with Moody's preliminary
indications (see "Moody's reviews global bank ratings", published
on 17 March 2015 - http://www.moodys.com/viewresearchdoc.aspx?docid=PR_321005).
-- REVISION OF KEY COLLATERAL ASSUMPTIONS
Moody's has reassessed its lifetime loss expectation, taking into
account the transactions' underlying collateral performance to date.
The portfolios in Apulia 3, Apulia 4, and Apulia 2008-2
show continuous increase in defaults. As a result, Moody's
increased its Expected Loss (EL) assumption as a percentage of the original
pool balance to 4.70% from 4.50% for Apulia
3, to 5.11% from 4.60% for Apulia 4,
and to 7.81% from 6.50% for Apulia 2008-2.
Moody's has also increased the MILAN CE assumption to 17.50%
from 13% for Apulia 2008-2 and to 9.70% from
8.50% for Marche Mutui 2 S.r.l. The
increased EL assumptions for Apulia 2008-2 resulted in a higher
Minimum EL Multiple which corresponds to the MILAN CE floor according
to Moody's methodology for rating RMBS transactions using the MILAN framework.
The increase of the MILAN CE assumption for Marche Mutui 2 S.r.l
is a result of the increased asset concentration in the collateral pool
as the transaction continues to deleverage.
Moody's quantitative analysis incorporates the ratings' sensitivity to
increases in key collateral assumptions. The increases included
stresses between 1.25x and 1.50x EL depending on the level
of current EL assumption, and 1.2x MILAN CE. Moody's
sensitivity analysis would typically expect to see the ratings fall by
no more than one to three notches using these stressed assumptions.
The results of this analysis limited the potential upgrade of the ratings
on the class C Notes in Apulia 3 and Apulia 4.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was "Moody's Approach
to Rating RMBS Using the MILAN Framework," published in January
2015. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
Factors that would lead to an upgrade or downgrade of the ratings:
Factors or circumstances that could lead to an upgrade of the ratings
include (1) further decrease in sovereign risk; (2) better-than-expected
performance of the underlying collateral; (3) deleveraging of the
capital structure; and (4) improvements in the credit quality of
the transaction counterparties above the preliminary indication of outcome
ratings, after Moody's concluded its review under the bank rating
methodology (see "Moody's reviews global bank ratings," published
on 17 March 2015 -
http://www.moodys.com/viewresearchdoc.aspx?docid=PR_321005).
Factors or circumstances that could lead to a downgrade of the ratings
include (1) an increase in sovereign risk; (2) worse-than-expected
performance of the underlying collateral; (3) deterioration in the
notes' available credit enhancement; and (4) deterioration in the
credit quality of the transaction counterparties.
LIST OF AFFECTED RATINGS
Issuer: Apulia Finance N. 4 S.r.l.
....EUR346.9M A Notes, Upgraded
to Aa2 (sf); previously on Jan 23, 2015 A2 (sf) Placed Under
Review for Possible Upgrade
....EUR11.3M B Notes, Upgraded
to Aa2 (sf); previously on Jan 23, 2015 A3 (sf) Placed Under
Review for Possible Upgrade
....EUR19.1M C Notes, Upgraded
to Baa2 (sf); previously on Jan 23, 2015 Ba1 (sf) Placed Under
Review for Possible Upgrade
Issuer: Apulia Finance N. 4 S.r.l. -
Series 2008-2
....EUR288.45M A Notes, Upgraded
to A1 (sf); previously on Jan 23, 2015 A3 (sf) Placed Under
Review for Possible Upgrade
Issuer: Apulia Mortgages Finance N. 3 S.r.l.
....EUR211.4M A Notes, Upgraded
to Aa2 (sf); previously on Jan 23, 2015 A2 (sf) Placed Under
Review for Possible Upgrade
....EUR11M B Notes, Upgraded to Aa2
(sf); previously on Jan 23, 2015 A2 (sf) Placed Under Review
for Possible Upgrade
....EUR12.7M C Notes, Upgraded
to Aa3 (sf); previously on Jan 23, 2015 Baa3 (sf) Placed Under
Review for Possible Upgrade
Issuer: Marche Mutui 2 S.r.l.
....EUR511.45M A2 Notes, Upgraded
to Aa2 (sf); previously on Jan 23, 2015 A2 (sf) Placed Under
Review for Possible Upgrade
....EUR12M B Notes, Upgraded to Aa3
(sf); previously on Jan 23, 2015 Baa1 (sf) Placed Under Review
for Possible Upgrade
....EUR15.8M C Notes, Upgraded
to Baa2 (sf); previously on Jan 23, 2015 B1 (sf) Placed Under
Review for Possible Upgrade
Issuer: MARS 2600 S.R.L.
....EUR248.9M A Notes, Upgraded
to Aa2 (sf); previously on Jan 23, 2015 A2 (sf) Placed Under
Review for Possible Upgrade
....EUR11M B Notes, Upgraded to Aa2
(sf); previously on Jan 23, 2015 Baa1 (sf) Placed Under Review
for Possible Upgrade
....EUR3.5M C Notes, Upgraded
to A1 (sf); previously on Jan 23, 2015 Baa3 (sf) Placed Under
Review for Possible Upgrade
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity
analysis, see the sections Methodology Assumptions and Sensitivity
to Assumptions of the disclosure form.
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.
The analysis relies on an assessment of collateral characteristics to
determine the collateral loss distribution, that is, the function
that correlates to an assumption about the likelihood of occurrence to
each level of possible losses in the collateral. As a second step,
Moody's evaluates each possible collateral loss scenario using a
model that replicates the relevant structural features to derive payments
and therefore the ultimate potential losses for each rated instrument.
The loss a rated instrument incurs in each collateral loss scenario,
weighted by assumptions about the likelihood of events in that scenario
occurring, results in the expected loss of the rated instrument.
Moody's quantitative analysis entails an evaluation of scenarios
that stress factors contributing to sensitivity of ratings and take into
account the likelihood of severe collateral losses or impaired cash flows.
Moody's weights the impact on the rated instruments based on its
assumptions of the likelihood of the events in such scenarios occurring.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain 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 certain 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 certain 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.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead analyst and the Moody's legal entity that has issued the ratings.
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.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Kevin Ma
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
Masako Oshima
Senior Vice President
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 Upgrades Thirteen Notes in Five Italian RMBS Transactions
