Paris, February 07, 2011 -- Moody's Investors Service has assigned a definitive long-term rating
of Aaa to the Series 3 covered bonds issued by Intesa Sanpaolo S.p.A.
(the issuer) under the €10 billion Obbligazioni Garantite Programme
Guaranteed by ISP CB Pubblico S.r.l. (the programme)
established in accordance with the terms of the following (collectively
the legal framework): 1. Law 130 of 1999 as amended by Law
No. 80 of 14 May 2005; 2. Decree No. 310 of
14 December 2006 issued by the Ministry of Economy and Finance and 3.
The Supervisory Regulations of the Bank of Italy of 17 May 2007.
RATINGS RATIONALE
A covered bond benefits from (i) the issuer's promise to pay interest
and principal on the bonds; and (ii) if the issuer defaults,
the economic benefit of a collateral pool (the cover pool). The
ratings therefore take into account the following factors:
(i) The credit strength of the issuer (rated Aa2 / Prime-1).
(ii) The value of the cover pool in the event of issuer default.
The stressed level of losses modelled in event of issuer default (cover
pool losses) for this transaction is 23.4%.
The analysis of the value of the cover pool considered:
- iia) The credit quality of the assets backing the covered bonds.
The public sector covered bonds are backed primarily by claims against
Italian public sector entities or claims guaranteed by such entities.
The collateral score for the cover pool is 13.2%.
- iib) The legal framework.
- iic) The exposure to interest rate risk and the hedging arrangements
in place.
- iid) The over-collateralisation in the cover pool.
The minimum over-collateralisation level that is consistent with
the Aaa rating target is 4.0%. Moody's analysis
relies on a level of over-collateralisation of 14.5%
on a "committed" basis (numbers in nominal terms).
The TPI assigned to this transaction is Probable. Moody's
TPI framework does not constrain the rating of the covered bonds at its
current level.
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 rating assigned to the existing covered bonds is expected to be assigned
to all subsequent covered bonds issued by the issuers under these programmes
and any future rating actions are expected to affect all such covered
bonds. If there are 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 the issuer's
rating, and the stressed losses on the cover pool assets following
issuer default.
The cover pool losses for this programme are 23.4%.
This is based on the most recent Performance Overview and is an estimate
of the losses Moody's currently models if the issuer defaults.
Cover pool losses can be split between Market Risk of 16.1%
and Collateral Risk of 7.2%. 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 13.2%.
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 latest data that has been analysed by Moody's and
are subject to change over time. Quarterly these numbers are updated
in Performance Overview published by Moody's.
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 4 notches, meaning the issuer rating would need to be downgraded
to Baa1 before the covered bonds are downgraded, all other variables
being equal.
A multiple-notch downgrade of the covered bonds might occur in
certain limited circumstances. Some examples might be (i) a sovereign
downgrade negatively affecting both the issuer's senior unsecured rating
and the TPI; (ii) a multiple notch downgrade of the issuer;
or (iii) a material reduction of the value of the cover pool.
RATING METHODOLOGY
The principal methodology used in rating the issuer's covered bonds
is Moody's Rating Approach to Covered Bonds published in March 2010.
In addition, Moody's publishes a weekly summary of structured finance
credit, ratings and methodologies, available to all registered
users of our website, at www.moodys.com/SFQuickCheck
REGULATORY DISCLOSURES
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 maintaining
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
Alexis Michon
Asst Vice President - 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 definitive Aaa rating to Intesa Sanpaolo's public sector covered bonds
