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Announcement:

Moody's confirms all ratings of five Italian Leasing ABS following transaction amendment and performance review

07 Sep 2010

Approximately EUR 5.14 billion of notes affected

Frankfurt am Main, September 07, 2010 -- Moody's Investors Service has today confirmed the long-term credit rating of fifteen classes of notes, issued by Italease Finance S.p.A. Series 2005-1 (ITA7), Italfinance Securitisation Vehicle S.r.l. (ITA8), Italfinance Securitisation Vehicle 2 S.r.l. (ITA9), Italfinance Securitisation Vehicle 2 S.r.l. (ITA10), and Leasimpresa Finance S.r.l. (LF2).

The notes of ITA7, ITA8, ITA9 and ITA10 have been placed under review for possible downgrade in September 2009 prompted by worse than expected performance combined with uncertainties surrounding the restructuring of Banca Italease's servicing units. Leasimpreasa Finance 2 was placed under review for possible downgrade in May 2010 prompted by worse than expected collateral performance. When reviewing the performance of the transactions, Moody's also considered amendments to the various structures in the ITA 8, ITA 9, ITA 10 and LF2 transactions.

The rating actions in details per transactions are:

Italease Finance S.p.A. Series 2005-1 (ITA 7)

....EUR447.9M A2 Certificate, Confirmed at Aaa (sf); previously on Sep 18, 2009 Aaa (sf) Placed Under Review for Possible Downgrade

....EUR45.4M B Certificate, Confirmed at Aa3 (sf); previously on Sep 18, 2009 Aa3 (sf) Placed Under Review for Possible Downgrade

....EUR18.7M C Certificate, Confirmed at A3 (sf); previously on Sep 18, 2009 A3 (sf) Placed Under Review for Possible Downgrade

Italfinance Securitisation Vehicle S.r.l. (ITA8)

....EUR959M A Certificate, Confirmed at Aa1 (sf); previously on Sep 18, 2009 Aa1 (sf) Placed Under Review for Possible Downgrade

....EUR83M B Certificate, Confirmed at A3 (sf); previously on Sep 18, 2009 A3 (sf) Placed Under Review for Possible Downgrade

....EUR56M C Certificate, Confirmed at Ba3 (sf); previously on Sep 18, 2009 Ba3 (sf) Placed Under Review for Possible Downgrade

....EUR18.5M D Certificate, Confirmed at B3 (sf); previously on Sep 18, 2009 B3 (sf) Placed Under Review for Possible Downgrade

Italfinance Securitisation Vehicle 2 S.r.l. (ITA 9)

....EUR1442.4M A Certificate, Confirmed at Aaa (sf); previously on Sep 18, 2009 Aaa (sf) Placed Under Review for Possible Downgrade

....EUR125M B Certificate, Confirmed at A3 (sf); previously on Sep 18, 2009 A3 (sf) Placed Under Review for Possible Downgrade

....EUR84.3M C Certificate, Confirmed at Baa3 (sf); previously on Sep 18, 2009 Baa3 (sf) Placed Under Review for Possible Downgrade

....EUR27.9M D Certificate, confirmed at Ba1 (sf); previously on Sep 18, 2009 Ba1 (sf) Placed Under Review for Possible Downgrade

Italfinance Securitisation Vehicle 2 S.R.L ( ITA 10)

....EUR830.7M A Certificate, Confirmed at Aaa (sf); previously on Sep 18, 2009 Aaa (sf) Placed Under Review for Possible Downgrade

Leasimpresa Finance S.r.l. (LF 2)

....EUR931.5M A Notes, Confirmed at Aaa (sf); previously on May 10, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

....EUR57.2M B Notes, Confirmed at A2 (sf); previously on May 10, 2010 A2 (sf) Placed Under Review for Possible Downgrade

....EUR10.3M C Notes, Confirmed at Baa2 (sf); previously on May 10, 2010 Baa2 (sf) Placed Under Review for Possible Downgrade

RATINGS RATIONALE

Moody's has been notified of an amendment of the transaction documentation of ITA8, ITA9, ITA10 and LF2, obliging the originator -- Banca Italease (for the ITA transactions) and Leasimpresa SpA (Not Rated) (for LF2) -- to repurchase defaulted loans from the issuer or to draw the liquidity line provided by Banca Italease in a corresponding amount to fulfill the collateralisation condition. The repurchase price will be equal to Banca Italease's book value of the repurchased loans with a minimum of 75% and will be used as principal collections received by the issuer and applied according to the order of payments. Moody's has been informed by the servicer that the noteholders have approved the amendment via a resolution. ITA7 will not benefit from such amendment.

As part of its analysis, Moody's took into account the current performance of the securitised leasing receivables. However, as the data do not fully capture the current recessionary environment and underlying borrowers are mainly represented by SMEs, Moody's complemented the historical data analysis with a top-down approach, as it was able to rely on detailed loan-by-loan data on the securitised portfolios. Moody's notes, that cumulative defaults are worse than initially expected at closing of the transactions or previous reviews compared to the pool factor and amortisation of the portfolio.

ITA 7

The amount of cumulative defaults as of the last reporting date in June stood at 5.5% of the total securitised balance, compared to expected cumulative defaults of 2.45% over the lifetime of the transaction at closing in March 2005 and thereafter increased to 3.70% in October 2008.

ITA 8

The amount of cumulative defaults as of the last reporting date in June stood at 8.7% of the total securitised balance, compared to expected cumulative defaults of 2.55% over the lifetime of the transaction at closing in December 2005, and thereafter increased to 5.80% in February 2009.

ITA9

The amount of cumulative defaults as of the last reporting date in July stood at 6.2% of the total securitised balance, compared to expected cumulative defaults of 3.2% over the lifetime of the transaction at closing in March 2007.

ITA10

The amount of cumulative defaults as of the last reporting date in July stood at 7.4% of the total securitised balance, compared to expected cumulative defaults of 3.75% over the lifetime of the transaction at closing in May 2008.

LF2

The amount of cumulative defaults as of the last reporting date in June stood at 3.4% of the total securitised balance, compared to expected cumulative defaults of 2.25% over the lifetime of the transaction at closing in October 2006.

Furthermore, Moody's assessed macro-economic indicators and additional information made available from the servicers, Banca Italease SpA and Leasimpresa SpA. Specifically, Moody's considered the forecasts for the main macro-economic drivers of the collateral deterioration, in particular, corporate insolvencies and GDP contraction.

Corporate insolvencies rose 20% in 2008 versus 2007 and another 35-40% in 2009 compared to 2008. According to credit management solutions company Euler-Hermes, business insolvencies are expected to increase by 15% in 2010. Italian GDP contracted unexpectedly in Q4 2009, following 0.6% quarter-on-quarter growth in Q3 2009, when Italy's economy emerged from five quarters of recession. The outlook for Italy's economy growth is weak for 2010, but is forecast to accelerate in 2011, with exports remaining the key growth driver.

As mentioned before, and due to the very nature of the underlying borrowers, Moody's complemented its historical data analysis with a top down approach (similar to a standard SME deal) in order to determine the expected mean default rate. Moody's first revised its assumption of the default probability (DP) of the Italian SME debtors to an equivalent rating in the single B-range for debtors operating in the building and real estate sector, and in the low Ba-range for non-real estate debtors.

In addition, Moody's made DP adjustments to reflect the size of the debtors' companies, notching down its rating proxy on a portion of the debtors to reflect additional default risk associated with micro-sized SMEs and self-employed borrowers. Moody's equivalent rating for loans in arrears was also notched down. Therefore, Moody's assumed a cumulative default rate over the remaining weighted average life of the deals equivalent to a Moody's proxy rating of single B, which led to increased assumptions of the cumulative mean default rate on all five transactions.

The coefficient of variation (volatility) has been updated to below 50% for all transactions to reflect the reduced uncertainty. The recovery rate for ITA8 to ITA10 and LF2 has been adjusted to 75%; an increase from the assumptions at deal inception or last review, to reflect the expected higher recoveries stemming from repurchases executed by the originators at a minimum of 75%. Moody's considered the potential effect of originator bankruptcy on the recoveries in the transaction. The rating agency expects recoveries on defaulted lease contracts following bankruptcy of the originator to be in the 10% range.

The mean default assumption on current balance for ITA7 was set at 9%, which translates into 7.4% on total securitised balance. The volatility was reduced to 49% compared to 82.5% at closing in March 2005 and in October 2008. The recovery rate remained constant at 50%. However, Moody's considered the potential effect of originator bankruptcy on the recoveries in the transaction. Recoveries on defaulted lease contracts following bankruptcy of the originator are expected to be in the 10% range.

The mean default assumption on current balance for ITA8 was set at 12%, which translates into 11% on total securitised balance. The volatility was reduced to 45% compared to 50% in February 2009 and 66.5% at closing in December 2005.

The mean default assumption on current balance for ITA9 was set at 11.25%, which translates into 10% on total securitised balance. The volatility was reduced to 46% compared to 50% at closing in March 2007.

The mean default assumption on current balance for ITA10 was set at 13%, which translates into 13% on total securitised balance. The volatility was reduced to 44% compared to 55% at closing in May 2008.

The mean default assumption on current balance for LF2 was set at 9.7%, which translates into 6.25% on total securitised balance. The volatility was reduced to 48% compared to 60% at closing in October 2006.

The revised DP assumptions are also in line with levels observed using a roll rate analysis based on defaulted loans.

Moody's ratings address the expected loss posed to investors by the legal final maturity of the notes. In Moody's opinion, these structures allow for timely payment of interest and ultimate payment of principal with respect to the notes by the respective final legal maturity.

The principal methodologies used in rating and monitoring the Notes were The Lognormal Approach applied to ABS Analysis, published in July 2000, Multi-Pool Financial Lease-Backed Transactions in Italy, published in June 2006, Moody's Approach to Rating Granular SME Transactions in Europe, Middle East and Africa, published in June 2006 and Revising Default/Loss Assumptions Over the Life of an ABS/RMBS Transaction, published in December 2008. Other methodologies and factors that may have been considered in the process of rating these Notes can also be found on Moody's website.

Moody's Investors Service did not receive or take into account a third party due diligence report on the underlying assets or financial instruments related to the monitoring of this transaction in the past 6 months.

Moody's performed stress tests in its modelling of each transaction taking into account a deterioration in credit quality of Banca Italease (or Leasimpresa for LF2) to Ba3. Such rating migration would have no effect on the rated notes. However, Moody's notes that the amendment of the documentation increases the linkage between Banca Italease and the rating of the notes, as the higher recovery rate is only achievable if Banca Italease is performing its obligation.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of maintaining 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.

Additional research, including the pre-sale report for this transaction and reports for prior transactions, are available at www.moodys.com. 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 in "Structured Finance Quick Check" at www.moodys.com/SFQuickCheck

All leasing ABS products mentioned in this document are structured finance products. Therefore please consider all actual ratings of tranches mentioned in this document as bearing an (sf) indicator

Frankfurt am Main
Iris Thate
Asst Vice President - Analyst
Structured Finance Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Milan
Alex Cataldo
Senior Vice President
Structured Finance Group
Moody's Italia S.r.l
Telephone:+39-02-9148-1100

Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany

Moody's confirms all ratings of five Italian Leasing ABS following transaction amendment and performance review
No Related Data.
© 2018 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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