Madrid, June 11, 2013 -- Moody's Investors Service has today downgraded the ratings of three mezzanine
and three junior notes in three Italian residential mortgage-backed
securities (RMBS) transactions: BP Mortgages Srl, BP Mortgages
Srl -- Series 2007 -- 2 and BPM Securitisation 2 Srl.
At the same time, Moody's confirmed the ratings of one note
in Bipitalia Srl, and one note in BP Mortgages Srl -- Series
2007-2. Insufficiency of credit enhancement to address sovereign
risk has prompted today's downgrade action.
Today's rating action concludes the review of four notes placed
on review on 13 March 2013, following Moody's review of the impact
on structured finance transactions stemming from sovereign risk http://www.moodys.com/research/Moodys-Reviews-for-Downgrade-Multiple-ABS-and-RMBS-Ratings--PR_268304.
This rating action also concludes the review of three notes placed on
review on 2 August 2012 following Moody's downgrade of the Italian government
bond ratings to Baa2 from A3 on 13 July 2012 http://www.moodys.com/research/Moodys-downgrades-to-A2sf-ratings-of-257-Italian-ABS-and--PR_252319
and on one note placed on review on 27 November 2012, following
Moody's review of the Italian RMBS sector http://www.moodys.com/research/Moodys-review-of-Italian-RMBS-sector-triggers-rating-actions-on--PR_260256.
For a detailed list of affected ratings, see towards the end of
the press release, before regulatory disclosures.
RATINGS RATIONALE
Today's rating action primarily reflects the insufficiency of credit enhancement
to address sovereign risk. Moody's confirmed the ratings
on two notes whose credit enhancement and structural features provided
enough protection against sovereign and counterparty risk.
The determination of the applicable credit enhancement driving today's
rating actions reflects the introduction of additional factors in Moody's
analysis to better measure the impact of sovereign risk on structured
finance transactions (see "Structured Finance Transactions:
Assessing the Impact of Sovereign Risk", 11 March 2013).
This report is available on www.moodys.com and can be accessed
via the following link http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF319988.
-- Additional Factors Better Reflect Increased Sovereign
Risk
Moody's has supplemented its analysis to determine the loss distribution
of securitised portfolios with two additional factors, the maximum
achievable rating in a given country (the local currency country risk
ceiling) and the applicable portfolio credit enhancement for this rating.
With the introduction of these additional factors, Moody's
intends to better reflect increased sovereign risk in its quantitative
analysis, in particular for mezzanine and junior tranches.
The Italian country ceiling, and therefore the maximum rating that
Moody's will assign to a domestic Italian issuer including structured
finance transactions backed by Italian receivables, is A2.
Moody's Individual Loan Analysis Credit Enhancement (MILAN CE) represents
the required credit enhancement under the senior tranche for it to achieve
the country ceiling. By lowering the maximum achievable rating
for a given MILAN, the revised methodology alters the loss distribution
curve and implies an increased probability of high loss scenarios.
In all four affected transactions, Moody's maintained the
current expected loss assumption as a percentage of original pool balance
and MILAN CE assumptions. The expected loss assumptions therefore
remain at 1.2% for Bipitalia Residential Srl, 3.67%
for BP Mortgages Srl, 4.72% for BP Mortgages Srl --
Series 2007-2 and 1.51% for BPM Securitisation 2
Srl. The MILAN CE assumptions also remain at 12.5%
for Bipitalia Residential Srl, 10% for BP Mortgages Srl,
12.5% for BP Mortgages Srl -- Series 2007-2
and 10% for BPM Securitisation Srl.
-- Exposure to Counterparty Risk
Moody's rating review has taken into consideration the exposure
to Citibank NA (A3/P-2) "Citibank" acting as issuer
account bank and swap counterparty in BPM Securitisation 2 Srl and Commerzbank
AG (Baa1/P-2) "Commerzbank"acting as swap counterparty
in Bipitalia Residential Srl. Moody's concluded that although
Commerzbank and Citibank are not posting collateral following the breach
of the first rating trigger as swap counterparty the increased risk does
not have a negative impact on the outstanding ratings in Bipitalia Residential
Srl and BPM Securitisation 2 Srl, although the non-posting
of collateral has increased the linkage between the notes and the respective
swap counterparties' ratings. With regard to Citibank still
acting as issuer account bank although it has breached the P-1
replacement trigger, in this case Moody's also concluded that
this additional risk does not have a negative impact on the outstanding
ratings in BPM Securitisation 2 Srl, although it increase the linkage
between the notes and the issuer account bank's rating. Finally
in the downgrade of the B and C notes for BPM securitisation 2 Srl Moody's
review has also taken into consideration the increase in probability of
set-off and commingling events occurring stemming from the downgrade
of Banca Popolare di Milano S.c.a.r.l.
to Ba3/NP from Baa3/P-3 on review for further downgrade that was
done on 16 May 2013.
-- Other Developments May Negatively Affect the Notes
In consideration of Moody's new adjustments, any further sovereign
downgrade would negatively affect structured finance ratings through the
application of the country ceiling or maximum achievable rating,
as well as potentially increased portfolio credit enhancement requirements
for a given rating.
As the euro area crisis continues, the ratings of structured finance
notes remain exposed to the uncertainties of credit conditions in the
general economy. The deteriorating creditworthiness of euro area
sovereigns as well as the weakening credit profile of the global banking
sector could further negatively affect the ratings of the notes.
METHODOLOGIES
The methodologies used in these ratings were "Moody's Approach to
Rating RMBS Using the MILAN Framework", published in May 2013
and "The Temporary Use of Cash in Structured Finance Transactions:
Eligible Investment and Bank Guidelines", published in March 2013.
Please see the Credit Policy page on www.moodys.com for
a copy of these methodologies.
In reviewing these transactions, Moody's used its cash flow model,
ABSROM, to determine the loss for each tranche. The cash
flow model evaluates all default scenarios that are then weighted considering
the probabilities of the lognormal distribution assumed for the portfolio
default rate. In each default scenario, Moody's calculates
the corresponding loss for each class of notes 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 (1) the probability of occurrence of each default scenario and (2)
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.
In the context of the rating review, the transactions have been
remodeled and some inputs have been adjusted to reflect the new approach
described above.
LIST OF AFFECTED RATINGS
Issuer: Bipitalia Residential S.r.l.
....EUR733M A2 Notes, Affirmed A2 (sf);
previously on Aug 2, 2012 Downgraded to A2 (sf)
....EUR16M B Notes, Affirmed A2 (sf);
previously on Aug 2, 2012 Downgraded to A2 (sf)
....EUR19M C Notes, Confirmed at Baa1
(sf); previously on Mar 13, 2013 Baa1 (sf) Placed Under Review
for Possible Downgrade
Issuer: BP Mortgages S.r.l.
....EUR1172.65M A2 Notes, Affirmed
A2 (sf); previously on Aug 2, 2012 Downgraded to A2 (sf)
....EUR25.3M B Notes, Downgraded
to A3 (sf); previously on Mar 13, 2013 A2 (sf) Placed Under
Review for Possible Downgrade
....EUR32.6M C Notes, Downgraded
to Baa3 (sf); previously on Nov 27, 2012 Downgraded to Baa2
(sf) and Remained On Review for Possible Downgrade
Issuer: BP Mortgages S.r.l. Series 2007-2
....EUR1382M A2 Notes, Confirmed at
A2 (sf); previously on Mar 13, 2013 A2 (sf) Placed Under Review
for Possible Downgrade
....EUR28.2M B Notes, Downgraded
to Baa1 (sf); previously on Aug 2, 2012 Downgraded to A2 (sf)
and Placed Under Review for Possible Downgrade
....EUR36.2M C Notes, Downgraded
to Baa3 (sf); previously on Aug 2, 2012 Baa1 (sf) Placed Under
Review for Possible Downgrade
Issuer: BPM Securitisation 2 Srl
....EUR1574.6M A2 Notes, Affirmed
A2 (sf); previously on Aug 2, 2012 Downgraded to A2 (sf)
....EUR40.3M B Notes, Downgraded
to Baa3 (sf); previously on Mar 13, 2013 A2 (sf) Placed Under
Review for Possible Downgrade
....EUR50.4M C Notes, Downgraded
to Ba2 (sf); previously on Aug 2, 2012 Baa2 (sf) Placed Under
Review for Possible Downgrade
REGULATORY DISCLOSURES
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 related to the monitoring of these transactions
in the past six months.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain 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 certain 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 certain 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.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
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.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Maria Turbica Manrique
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Christophe?de Noaillat
Associate Managing Director
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
David Bergman
Vice President-Senior Analyst
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's downgrades 6 notes and confirms 2 notes in four Italian RMBS transactions
