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Global Credit Research - 30 Mar 2011
EUR 2.2 billion of debt securities affected
Frankfurt am Main, March 30, 2011 -- Moody's Investors Service has assigned definitive credit ratings to the
two following classes of Series 2 notes issued by Siena Mortgages 07-5
- Aaa(sf) to the EUR 3,129,400,000 Series 2 Class
A Residential Mortgage Backed Floating Rate Notes due 2080,
- A1(sf) to the EUR 108,300,000 Series 2 Class B Residential
Mortgage Backed Floating Rate Notes due 2080.
Moody's has not assigned a rating to the EUR 178,300,000 Series
2 Class C Residential Mortgage Backed Floating Rate Notes due 2080 and
to the EUR 82,066,000 Series 2 Class D Residential Mortgage
Backed Variable Return Notes due 2080. Only the proceeds from the
issuance of Class A, B and C notes were used to fund the purchase
of the portfolio of residential mortgage loans while the proceeds from
the issuance of Class D notes were used to fund the cash reserve and transaction
expenses at closing.
The transaction closed in April 2008. As of the payment date in
October 2010, the outstanding amount of Class A was EUR 2,095,043,048
while the outstanding amounts of Class B and C were unchanged since the
The transaction was not rated by Moody's at the initial closing date.
Moody's rating analysis of the notes is based on the transaction structure
as of today. The aggregate amount of Class A, B and C notes
outstanding at the most recent payment date in October 2010 was EUR 2,381.6
The transaction represents the second series of notes issued by Siena
07-5 S.p.A. and one of ten securitisations
of the Siena series originated by Banca Monte dei Paschi di Siena ("BMPS";
A2/P-1). The assets supporting the notes are prime mortgage
loans secured by residential properties located in Italy originated by
BMPS. Moody's received loan-by-loan information for
the loans in the portfolio as of 31 January 2011. The portfolio
will be serviced by BMPS.
The ratings of the notes take into account the credit quality of the underlying
mortgage loan pool, from which Moody's determined the MILAN Aaa
Credit Enhancement and the portfolio expected loss. The expected
portfolio loss of 3.9% of the portfolio balance (equivalent
to 3.4% of the original portfolio balance) and the MILAN
Aaa required Credit Enhancement of 12% 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 expected loss reflects Moody's cumulative default assumption (7.1%
on the original balance) which is mainly driven by (i) defaults on global
BMPS residential mortgage book, which have experienced a substantial
increase in recent periods and show high volatility among vintages,
(ii) the amount of defaults that have been experienced so far in the transaction
(equal to 1.5% of initial portfolio balance), (iii)
benchmarking with comparable transactions in the Italian market and (iv)
the negative outlook that Moody's has on Italian RMBS. The key
drivers for the MILAN Aaa Credit Enhancement, which is higher than
other Italian RMBS transactions, are (i) the presence of loans that
are in arrears for more than one month in the pool of approximately 4.8%
of the pool, (ii) missing data on the employment type of the borrowers
for around 81.7% of the portfolio, (iii) the volatility
of historical information and (iv) the presence of loans originated by
The structure will benefit from a swap, provided by BMPS,
which provides a guaranteed asset margin above Euribor of 121 bps.The
swap complies with Moody's standard swap de-linkage criteria,
however, as the swap counterparty could become subject to Italian
insolvency proceedings, and the swap could terminate by operation
of law there is additional linkage for the notes to the rating of the
Liquidity in the transaction comes from a principal to pay interest mechanism
and from the cash reserve which currently represents 3.4%
of the notes (2.4% of the notes at closing), nevertheless
the cash reserve is allowed to amortise at 2.4% of the amount
of outstanding notes if certain conditions are met. Another mitigant
for the lack of direct liquidity support is the requirement to appoint
a back up servicer when BMPS' rating falls below Baa2 and servicer's substitution
at loss of Baa3.
Moody's assigned a Composite V Score for this transaction of Low/Medium
based on Moody's V Score rating methodology as published in the report
"V-Scores and Parameter Sensitivities in the Major EMEA RMBS Sectors"
published in April 2009, which is in line with the V score assigned
for the Italian RMBS sector. Only two sub components underlying
the V Score deviate from the sector score for the Italian RMBS sector:
i) "Issuer/Sponsor/Originator's Historical Performance Variability" was
assessed as Low/Medium (sector score is Low) because of the higher volatility
of performance and a steep increase in defaults during the current market
downturn and ii) the "Disclosure of Securitization Collateral Pool Characteristic"
was assessed as Medium (sector score is Low/Medium) due to data concerns
noted during the third party assessment. During the rating process,
Moody's became aware that according to the parties involved in the transaction
there was ambiguity regarding the calculations made in respect of the
payment reports in the past. As a result, the available monies
standing to the credit of the cash reserve were not used to amortise the
notes as part of the provisioning mechanism for defaulted loans.
It was confirmed to Moody's by the transaction parties that this ambiguity
has not affected the distribution of cash besides the described non-drawing
of the cash reserve for note amortisation and that the provisioning mechanism
will be fully reflected in the next payment report because the relevant
definitions in the documentation have been amended. V Scores are
a relative assessment of the quality of available credit information and
of the degree of dependence on various assumptions used in determining
the rating. High variability in key assumptions could expose a
rating to more likelihood of rating changes.
Moody's Parameter Sensitivities: If the Expected Loss increased
from 3.9% to 8.6%, the model output
indicated that Classes A would have achieved Aaa assuming that MILAN Aaa
CE remained at 12% and all other factors remained the same.
If the MILAN Aaa CE increased from 12% to 14.4%,
the model output indicated that Classes A would have achieved Aaa assuming
that Expected Loss remained at 3.9% 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
The 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
with respect of the notes by the legal final maturity. 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 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
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.
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
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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.
Frankfurt am Main
Vice President - Senior Analyst
Structured Finance Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
VP - Senior Credit Officer
Structured Finance Group
Moody's Italia S.r.l
Moody's Deutschland GmbH
Moody's assigns definitive ratings to two classes of Italian RMBS notes issued by Siena Mortgages 07-5 S.p.A.
An der Welle 5
Frankfurt am Main 60322
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
No Related Data.
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