Approximately EUR 344.9 million of debt securities affected
Milan, April 12, 2011 -- Moody's Investors Service has assigned definitive long term ratings to
Italian RMBS notes issued by Media Finance Srl (Media 4):
Aaa(sf) to the EUR 90,000,000 Class A1 Asset Backed Fixed
Rate Notes due 2052
Aaa(sf) to the EUR 254,900,000 Class A2 Asset Backed Fixed
Rate Notes due 2052
Moody's has not assigned any rating to the subordinated EUR 78,500,000
Class B Asset Backed Notes due 2052.
The rating of the notes take into account the credit quality of the underlying
mortgage loan pool, the dynamic delinquency data and the vintage
data for defaults and recoveries received from the originator, Banca
Popolare di Puglia e Basilicata S.C.P.A. ("BPPB"),
from which Moody's determined the MILAN Aaa Credit Enhancement and the
portfolio expected loss. The transaction structure and legal considerations
have been considered in Moody's cash flow analysis.
The transaction represents the fourth securitisation of Italian residential
mortgage loans originated by BPPB (unrated entity). The assets
supporting the notes consists of around EUR 412.3 million residential
mortgage loans on properties mainly located in Southern Italy (approximately
69.8% of the portfolio). The transaction benefits
from a cash reserve equal to 3.0% of the rated notes providing
liquidity to the rated notes over the life of the transaction and credit
enhancement at the legal final maturity.
The portfolio will be serviced by BPPB (unrated). Cassa di Risparmio
di Volterra S.p.A. (Baa1/P-2) has been appointed
as back-up servicer since closing and will substitute BPPB as Servicer
should it be revoked or substitute for any reason. Furthermore,
should the Servicer not be able to prepare the Servicer Report at any
payment date, continuity of payment for rated notes will be assured
by the computation agent preparing the payment report on estimates:
in this case only the amounts due to the rated notes and to item in priority
thereto will be paid.
The expected portfolio loss of 5.7% of the current asset
balance and the MILAN Aaa required Credit Enhancement of 15% 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, which
is higher than the Italian average for this sector, are: (i)
defaults on global BPPB residential mortgage book, above the Italian
index and showing an high volatility among vintages, (ii) the high
concentration of loans originated in two vintages characterized by a ten
years low interest rate window (approximately 93% of the pool),
(iii) high concentration of loans falling into the 70%-80%
LTV bucket (around 30%), (iv) historical information received
from BPPB showing a weak recovery rate and lag longer than the average
observed in the italian market, (v) benchmarking with comparable
transactions in the Italian market, (vi) the negative outlook Moody's
has on Italian RMBS.
The key drivers for the MILAN Aaa Credit Enhancement number, which
is higher than other Italian RMBS transactions are: (i) the higher
than the average percentage of borrowers initially introduced to BPPB
by intermediaries related to these or other credit products, as
historical evidence on general market data shows a weaker performance
for brokers' originated loans, (ii) the high concentration
in Southern Italy (69.8%) and the twofold effect of geographic
concentration on the future performance of the deal: high asset
correlation and weak economic condition of the Italian southern regions,
(iii) Moody's has also considered that there could be other characteristics
of the pool which have not been properly captured in the MILAN model and
therefore the MILAN number has been qualitatively adjusted in order to
generate a loss distribution with a certain level of volatility or,
with other words, to account for a higher probability of tail events
with respect to the expected loss.
The servicer in this transaction is an unrated entity (BPPB). Moody's
has taken a conservative view on the risk profile of the entity for the
assessment of commingling, set-off and other possible source
of credit linkage.
The structure will benefit from a swap, provided by BNP Paribas
SA (Aa2/P-1), which covers basis risk for the fixed rate
portion of the pool and the cap effect under the cap rate loans (83.5%
of the pool), the basis risk instead is not perfectly hedged and
therefore Moody's has made a haircut to the interest that the pool is
generating in order to consider this basis risk, the swap is [compliant]
with Moody's standard swap de-linkage criteria.
Liquidity in the transaction comes from (i) the amortizing cash reserve
(equal to 3.0% of the rated notes), which normally
works more like liquidity ledger since it mainly covers interest on the
rated notes, swap payments and senior fees during the life of the
transactions and only serves as credit enhancement when the Class A notes
are redeemed or at final legal maturity, and (ii) the principal
to pay interest mechanism.
The V Score for this transaction is Medium, higher than the V score
assigned for the Italian RMBS sector. Three sub components of the
transaction's V Score differ from the Italian RMBS sector score:
i) the "Issuer/Sponsor/Originator's Historical Performance Variability"
which is assessed at Medium, higher than the Low sector's average,
because of the weaker performance shown in recent vintages, as well
as the recovery rate and lag being worse than the Italian average;
ii) the "Market Value Sensitivity" which is assessed at Medium,
higher than the Low/Medium sector's average, because of hedging
structure that required non standard modeling, and (iii) the "Back-up
Servicer Arrangement" which is assessed at Medium, higher than the
Low sector's average, as BPPB is an unrated servicer, not
a standard in the Italian RMBS market.
Moody's Parameter Sensitivities: If the MILAN Aaa CE was increased
from 15% to 24% the model output indicated that Class A
would have achieved A1 assuming that expected loss remained at 5.7%
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 definitive 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 at par on or before the final legal maturity date of the
notes. 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 the 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.
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
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
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Please see ratings tab on the issuer/entity page on Moodys.com
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Asst Vice President - Analyst
Structured Finance Group
Moody's Italia S.r.l
VP - Senior Credit Officer
Structured Finance Group
Moody's Italia S.r.l
Moody's Italia S.r.l
Moody's assigns definitive long term ratings to Italian RMBS notes issued by Media Finance Srl (Media 4)
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