Paris, May 13, 2011 -- Moody's has assigned a definitive long term rating to the following series
of covered bonds (the "Covered Bonds" or the "OBG") issued by Banca Monte
dei Paschi di Siena S.p.A. (the Issuer) under the
€10bn Obbligazioni Bancarie Garantite Programme Guaranteed by MPS
Covered Bond S.r.l. (the "Programme") established
in accordance with the terms of the following (collectively the "CB Legal
Framework"): 1) Law 130 of 1999 as amended by Law No. 80
of 14 May 2005 (the "CB Law"); 2) Decree No. 310 of 14 December
2006 issued by the Ministry of Economy and Finance (the "CB Decree");
and 3) the Supervisory Regulations of the Bank of Italy of 17 May 2007
(the "CB Supervisory Regulations").
- EUR 50 Mln Registered Covered bonds (Gedekte Namensschuldverschreibung)
due May 2031- assigned Aaa
- EUR 75 Mln Registered Covered bonds (Gedekte Namensschuldverschreibung)
due May 2026- assigned Aaa
- EUR 75 Mln Registered Covered bonds (Gedekte Namensschuldverschreibung)
due May 2030- assigned Aaa
RATINGS RATIONALE
As with all covered bonds, the covered bonds benefit from two layers
of protection by having recourse to both the issuer and a collateral pool.
The rating therefore takes into account the following factors:
1) The credit strength of the Issuer (A2; Prime1).
2) The credit quality of the cover pool. The Covered Bonds are
backed by Italian residential loans originated by Banca Monte dei Paschi
(the "Seller").
Other key factors:
3) The commitment of the issuer to maintain a minimum over-collateralisation
of 32.3%.
4) The CB Legal Framework and the use of structuring techniques designed
to mitigate the rating linkage between the issuer and the covered bonds.
These include, but are not limited to, the extended grace
period for payment of the covered bonds or the Pre-Maturity Test,
and the obligation to maintain a reserve amount in accordance with the
programme documents.
Moody's has assigned a Timely Payment Indicator (TPI) of "Probable" to
the Covered Bonds.
The ratings assigned by Moody's address the expected loss posed to investors.
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 Aaa rating assigned to the existing Covered Bonds is expected to be
assigned to all subsequent Covered Bonds issued by the Issuer under this
programme and any future rating actions are expected to affect all such
Covered Bonds. Should there be any exceptions to this, Moody's
will in each case publish details in a separate press release.
KEY RATING ASSUMPTIONS/FACTORS
Covered bond ratings are determined after applying a two-step process:
expected loss analysis and TPI framework analysis.
EXPECTED LOSS: Moody's determines a rating based on the expected
loss on the bond. The primary model used is Moody's Covered Bond
Model (COBOL) which determines expected loss as a function of the issuer's
probability of default, measured by its rating and the stressed
losses on the cover pool assets following issuer default.
The Cover Pool Losses for this programme are 21.4%.
This is an estimate of the losses Moody's currently models in the event
of issuer default. Cover Pool Losses can be split between Market
Risk of 15.9% and Collateral Risk of 5.5%.
Market Risk measures losses as a result of refinancing risk and risks
related to interest rate and currency mismatches (these losses may also
include certain legal risks). Collateral Risk measures losses resulting
directly from the credit quality of the assets in the cover pool.
Collateral Risk is derived from the Collateral Score which for this programme
is currently 8.2%.
TPI FRAMEWORK: Moody's assigns a "timely payment indicator" (TPI)
which indicates the likelihood that timely payment will be made to covered
bondholders following issuer default. The effect of the TPI framework
is to limit the covered bond rating to a certain number of notches above
the issuer's rating.
SENSITIVITY ANALYSIS
The robustness of a covered bond rating largely depends on the credit
strength of the issuer.
The number of notches by which the Issuer's rating may be downgraded before
the Covered Bonds are downgraded under the TPI framework is measured by
the TPI Leeway. Based on the current TPI of Probable the TPI Leeway
for this programme is 1 notch, meaning the issuer rating would need
to be downgraded to Baa1 before the covered bonds are downgraded,
all other things being equal.
A multiple notch downgrade of the covered bonds might occur in certain
limited circumstances. Some examples might be (a) a sovereign downgrade
negatively affecting both the Issuer's senior unsecured rating,
and the TPI; (b) a multiple notch downgrade of the Issuer; or
(c) a material reduction of the value of the cover pool.
For further details on Cover Pool Losses, Collateral Risk,
Market Risk, Collateral Score and TPI Leeway across all covered
bond programmes rated by Moody's please refer to "Moody's EMEA Covered
Bonds Monitoring Overview", published quarterly. These figures
are based on the most recent Performance Overview published by Moodys
and are subject to change over time.
The principal methodology used in this rating was Moody's Rating Approach
to Covered Bonds rating methodology published in March 2010.
Other methodologies and factors that may have been considered in the process
of rating this issuer can also be found on Moody's website.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings and public 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.
The rating has been disclosed to the rated entity or its designated agents
and issued with no amendment resulting from that disclosure.
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.
Paris
Elise Lemaire
Analyst
Structured Finance Group
Moody's France SAS
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Madrid
Juan Pablo Soriano
MD - Structured Finance
Structured Finance Group
Moody's Investors Service Espana, S.A.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's assigns a definitive rating of Aaa to the covered bonds issued by Banca Monte dei Paschi di Siena S.p.A.
