EUR 488 MILLION DEBT SECURITIES AFFECTED
Milan, December 25, 2011 -- Moody's Investors Service has assigned definitive ratings to Notes issued
by BPM Securitisation 2 S.r.l.:
....EUR341,000,000 Class A1 Asset
Backed Floating Rate Notes due July 2053, Assigned Aaa (sf)
....EUR147,000,000 Class A2 Asset
Backed Floating Rate Notes due July 2053, Assigned Aaa (sf)
BPM Securitisation 2 S.r.l. is a cash securitisation
of secured and unsecured loans to small and medium-sized enterprises
(SME) domiciled in Italy extended by Banca Popolare di Milano S.c
a r.l.. (Baa3 / P-3/ negative outlook) ("BPM")).
RATINGS RATIONALE
The ratings take into account, among other factors (i) the specific
characteristics of the collateral portfolio which was evaluated on a loan-by-loan
basis, (ii) the historical performance information provided by the
originator on a portfolio with similar characteristics as the portfolio
being securitised, (iii) the deal structural features including
the liquidity support mechanism, (iv) the provisions for the appointment
of a back-up servicer; and (v) the sound legal structure of
the transaction. Finally, Moody's notes that the transaction
is exposed to fixed-floating interest rate risk as well as basis
risk given the discrepancy between the interest rates paid on the loans
compared to the rate payable on the notes; no hedging arrangement
has been put in place for the structure.
Given the comparatively low level of granularity of the underlying portfolio
(the relevant effective number being equal to 476) Moody's defined a a
transaction specific default distribution, derived from a Monte
Carlo simulation performed with Moody's CDOROM v2.8 tool with loan-by
loan data input. The major inputs for the simulation are (i) the
obligors' credit quality, (ii) loan specific data such as weighted
average life and outstanding amount and (iii) correlation. Based
on (i) the characteristics of the underlying portfolio (such as the industry
portfolio distribution), (ii) the historical performance data,
and (iii) the current macroeconomic environment in Italy, we expect
the average default probability of the pool to be a B1 Moody's equivalent
(translating into 13% cumulative default rate over the weighted
average life of 3.5 years of the portfolio). The correlation
framework applied is in line with the standard ABS SME framework:
specifically we assumed a 5% global correlation. The resulting
standard deviation over mean ratio was 55.3% for an asset
correlation of 10%, which is slightly higher compared to
more granular SME portfolios originated by other banks in the Italian
market. Furthermore, Moody's assumed stochastic recoveries
with a mean recovery rate at 60%; the prepayments were assumed
to be at a level of 6% p.a.
Moody's also tested other set of assumptions under its Parameter Sensitivities
analysis. The results show that the model output would have been
Aaa even if the mean default rate assumption had been as high as 17%
and the recovery rate as low as 40%, all other parameters
being kept unchanged. For more details, please refer to the
full Parameter Sensitivity analysis included in the New Issue Report of
this transaction.
The transaction's V-Score is Medium, which is equivalent
to the sector V-Score. For more details please refer to
the New Issue Report of this transaction.
As noted in Moody's comment 'Rising Severity of Euro Area Sovereign Crisis
Threatens Credit Standing of All EU Sovereigns' (28 November 2011),
the risk of sovereign defaults or the exit of countries from the Euro
area is rising. As a result, Moody's could lower the maximum
achievable rating for structured finance transactions in some countries,
which could result in rating downgrades.
The methodologies used in the asignment of these ratings were: Moody's
Approach to Rating the CDOs of SMEs in Europe, published in February
2007, Refining the ABS SME Approach: Moody's Probability of
Default Assumptions In The Rating Analysis of Granular Small and Mid-sized
Enterprise portfolios in EMEA, published in March 2009, Moody's
Approach to Rating Granular SME Transactions in Europe, Middle East
and Africa, published in June 2007 and Historical Default Data Analysis
for ABS Transactions in EMEA, published in December 2005.
Please see the Credit Policy page on www.moodys.com for
a copy of these methodologies.
Other Factors used in this rating are described in V Score and Parameter
Sensitivities in the EMEA Small-to-Medium Enterprise ABS
Sector, published in June 2009.
For rating this transaction Moody's used the following models: (i)
ABSROM (v.3.0) to model the cash flows and determine the
loss for each tranche and (ii) CDOROM (V.2.8) to simulate
the default definition applicable to this transaction.
More specifically, Moody's ABSROM cash flow model evaluates all
default scenarios that are then weighted considering the probabilities
of such default scenarios as defined by the transaction-specific
default distribution (as simulated in CDOROM). On the recovery
side Moody's assumes a stochastic (normal) recovery distribution which
is correlated to the default distribution. In each default scenario,
the corresponding loss for each class of notes is calculated given the
incoming cash flows from the assets and the outgoing payments to third
parties and noteholders. Therefore, the expected loss for
each tranche is the sum product of (i) the probability of occurrence of
each default scenario; and (ii) the loss derived from the cash flow
model in each default scenario for each tranche. As such,
Moody's analysis encompasses the assessment of stressed scenarios.
Moody's used CDOROM to simulate the default distribution for this transaction.
The Moody's CDOROM™ model is a Monte Carlo simulation which takes
borrower specific Moody's default probabilities as input. Each
borrower reference entity is modelled individually with a standard multi-factor
model incorporating intra- and inter-industry correlation.
The correlation structure is based on a Gaussian copula. In each
Monte Carlo scenario, defaults are simulated.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant 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 relevant 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 relevant 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.
The rating has been disclosed to the rated entity or its designated agent(s)
and issued with no amendment resulting from that disclosure.
Information sources used to prepare the rating are the following:
parties involved in the ratings, public information, and confidential
and proprietary Moody's Investors Service information.
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 in this transaction.
Further information on the representations and warranties and enforcement
mechanisms available to investors are available on http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF271276.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
Moody's adopts all necessary measures so that the information it
uses in assigning a 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.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
two years preceding the credit rating action. Please see the special
report "Ancillary or other permissible services provided to entities
rated by MIS's EU credit rating agencies" on the ratings disclosure
page on our website www.moodys.com for further information.
Please see the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and
for (B) further information regarding certain affiliations that may exist
between directors of MCO and rated entities as well as (C) the names of
entities that hold ratings from MIS that have also publicly reported to
the SEC an ownership interest in MCO of more than 5%. A
member of the board of directors of this rated entity may also be a member
of the board of directors of a shareholder of Moody's Corporation;
however, Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating Process
page on www.moodys.com for further information on the meaning
of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time
before Moody's ratings were fully digitized and accurate data may not
be available. Consequently, Moody's 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 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.
Valentina Varola
Vice President - Senior Analyst
Structured Finance Group
Moody's Italia S.r.l
Corso di Porta Romana 68
Milan 20122
Italy
Telephone:+39-02-9148-1100
Thorsten Klotz
MD - Structured Finance
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Italia S.r.l
Corso di Porta Romana 68
Milan 20122
Italy
Telephone:+39-02-9148-1100
Moody's assigns definitive ratings to ABS SME notes issued by BPM Securitisation 2 S.R.L.
