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Rating Action:

Moody's confirms the rating of the Class B CMBS Notes issued by Girasole Finance 1 S.r.l.

Global Credit Research - 04 Jun 2010

Rating of the Class A Notes affirmed

Frankfurt, June 04, 2010 -- Moody's Investors Service has today affirmed the rating of the Class A CMBS Notes and confirmed the rating of the Class B CMBS Notes issued by Girasole Finance 1 S.r.l. (amounts reflect initial outstandings):

EUR64.6M Class A Notes, Affirmed at Aaa; previously on Aug 3, 2004 Assigned Aaa

EUR3.2M Class B Notes, Confirmed at A3; previously on Nov 5, 2009 A3 Placed On Review for Possible Downgrade

The ratings address the expected loss posed to investors by the legal final maturity. In Moody's view and in relation to the Class A Notes, the structure allows for timely payment of interest and ultimate payment of principal at par on or before the rated final legal maturity date. In Moody's view and in relation to the Class B Notes, the structure allows for ultimate payment of interest and principal at par on or before the rated final legal maturity date. Moody's has not assigned a rating to the Class C Notes issued by Girasole Finance 1 S.r.l.

1) Transaction Overview

Girasole Finance 1 S.r.l. represents the securitisation of initially 227 (currently 143) loans advanced to borrowers operating in the agricultural sector in Italy. The loans were mostly originated between 2000 and 2003 by Credito Agricole & Industriale Spa, now known as Sedicibanca Spa and part of Gruppo Delta Spa, based in Bologna. Sedicibanca is acting as the servicer under this transaction. The loans are secured with real estate properties and land in several regions of Italy. Liquidity support is provided by a cash reserve, which was funded with a subordinated loan at closing of EUR 1.65 million. The structure also incorporates some interest subordination clauses and full cash trapping triggers. The payment of interest and the ultimate payments of principal on Class A are guaranteed by the European Investment Fund ("EIF", rated Aaa).

2) Rating Rationale

Today's rating action concludes the review for possible downgrade of the rating assigned to the Class B Notes that was initiated in November 2009. During the review process, Moody's obtained updated information about each of the remaining loans and re-assessed the performance of the securitised portfolio and its future performance expectations. Moody's estimated the magnitude of the increase in the default probability for each loan as well as the realised and further expected value decline of the underlying property collateral. Furthermore, Moody's analysed the potential operational risks of the transaction in light of the current situation of the servicer, the backup arrangements for servicing and the credit protection for the Class A Notes stemming from the EIF guarantee.

Today's affirmation and confirmation were prompted by several counter-balancing factors, and in particular the following negative credit aspects:

i) The deterioration of the performance of the underlying pool and the rising level of arrears experienced over the most recent interest payment dates ("IPDs"). As of the March 2010 IPD, 30 loans, representing 35% of the current pool balance, reported a performance factor of 0%. As per the transaction documentation, the performance factor of a loan becomes 0% if the loan is in arrears of more than the equivalent of 6 months of interest and capital due. The priority event trigger has been in breach since Q3 2009, causing the interest due on the Class B Notes to be deferred and all available funds (excluding the cash reserve) to be used for partial repayment of the Class A Notes principal. The current balance of the cash reserve is still EUR 1.65 million. Moody's notes that the number of loans in arrears as well as the arrears levels are volatile and subject to seasonal fluctuations.

ii) The uncertainties regarding the value of the agricultural properties securing the loans, especially in case of loan acceleration and liquidation of the assets. Additionally, Moody's notes a limited visibility on the servicer's policies and procedures regarding loans in arrears and defaulted loans as in the past the originator repurchased distressed loans from the pool. The transaction structure does not allow for loan restructurings, being one reason for the past repurchase activities of the originator.

iii) Following the breach of the priority event trigger, interest due on Class B is currently not paid, which is positive for the Class A Notes, but negative for the Class B Notes.

iv) The uncertainties surrounding the future of the servicer given the current difficulties faced by its parent Gruppo Delta. Gruppo Delta was set up in 2002 by Cassa di Risparmio della Repubblica di San Marino and the Estuari financial management company, located in Bologna.

In Moody's view, the above negative credit factors are mitigated by:

i) The improving credit enhancement levels available for the Class A and Class B Notes. As a consequence of loan amortisation and the transaction being in breach of the priority event trigger, the Class A Notes amortised substantially over the last year, down to EUR 8.3 million in March 2010, from EUR 12.2 million one year before. Including the cash reserve and note subordination, the credit enhancement level for Class A is now 68% and the credit enhancement level for Class B is 56%. Such significant credit enhancement levels mitigate against the impact of worsening pool performance and the volatility of the arrears and defaults.

ii) In Moody's view (i) the existence of a back-up Servicer, Centrobanca Spa, part of the Unione di Banche Italiana ScpA (rated A1/P-1), (ii) the guarantee of EIF for the payment of interest and principal to Class A Noteholders, and (iii) the extended responsibility of the computation agent, JPMorgan Chase Bank, London Branch to perform most of the calculations on the loan side, would reduce the disruptional cash flow impact on the transaction should the existing servicer default.

Driven by, in most cases, a higher default risk assessment during the term of the loans, and accounting for the loans that have defaulted already, Moody's now anticipates that a very large portion of the portfolio will default over the course of the transaction term. Moody's now expects a high amount of losses, the expected loss is 18% of the current securitised portfolio. This expected loss level is significantly higher than at closing of the transaction, however the higher credit enhancement levels act as a mitigant.

3) Rating Methodology

The principal methodologies used in monitoring the transaction are "Update on Moody's Real Estate Analysis for CMBS Transaction in EMEA" June 2005 and "Moody's Updates on its Surveillance Approach for EMEA CMBS" March 2009, which are available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website. The last Performance Overview for this transaction was published on 10 November 2009. 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.

For updated monitoring information, please contact monitor.cmbs@moodys.com. To obtain a copy of Moody's Pre-Sale Report on this transaction, please visit Moody's website at www.moodys.com or contact our Client Service Desk in London (+44-20-7772 5454).

London

Christian Aufsatz

Senior Vice President

Structured Finance Group

Moody's Investors Service Ltd.

JOURNALISTS: 44 20 7772 5456

SUBSCRIBERS: 44 20 7772 5454

Frankfurt

Oliver Schmitt

Associate Vice President - Analyst

Structured Finance Group

Moody's Investors Service Ltd.

JOURNALISTS: 44 20 7772 5456

SUBSCRIBERS: 44 20 7772 5454

London
Christian Aufsatz
Senior Vice President
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

London
Thomas Babin
Associate Analyst
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's confirms the rating of the Class B CMBS Notes issued by Girasole Finance 1 S.r.l.
No Related Data.
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