London, 23 February 2012 -- Moody's Investors Service has today downgraded to Aa3(sf) from Aa2(sf)
the ratings of the class A notes of UBI Finance 2 S.r.l.
and UBI Finance 3 S.r.l. Today's announcement
follows amendments made to the transactions' documents, particularly
those changing the eligible investment definition.
A detailed list of affected ratings can be found at the end of this press
release.
RATINGS RATIONALE
Today's rating action reflects changes made to the definition of
eligible investments in both transactions. The latest changes allow,
inter alia, the issuers to invest periodic borrower payments,
as well as other cash available in the structure, into eligible
investments with either an A3 or P-2 rating for a period of up
to one month. It is not possible to achieve a Aa2 rating according
to Moody's published criteria on "The Temporary Use of Cash In Structured
Transactions: Eligible Investment Guidelines". Further to
this change, the linkage between the notes and a potential issuer
of such eligible investments (e.g., UBI Banca) has
increased.
OTHER AMENDMENTS HAVE BEEN MADE TO THE DOCUMENTATION OF BOTH TRANSACTIONS,
WITH NO RATING IMPACT
A number of other amendments have been made to the transaction documentation
that have had no impact on the ratings of UBI Finance 2 or UBI Finance
3. The level of the back-up servicer rating trigger has
been lowered to the loss of Baa2 of UBI Banca (from the loss of Baa1)
and the collection period has been changed from semi-annual to
quarterly in both deals. Also, additional options were implemented
to mitigate commingling risk. For example, if the servicer
is downgraded to below P-2 and Baa2, (i) the option to notify
borrowers and ask them to pay directly into an issuer account remains;
(ii) a guarantee to cover potential commingling losses in case of the
servicer's insolvency can now be provided by an entity rated at
least P2 and Baa2; or (iii) a commingling reserve sized to cover
one-month's worth of collections (with a floor of 6%
of the outstanding pool balance in the case of UBI Finance 2 and 2.5%
of the outstanding pool balance in case of UBI Finance 3) can now be funded
and on each payment date adjusted according to the expected collections.
Additionally, if UBI Banca is downgraded to below A3, it can
continue in its role as the Italian account bank if the aforementioned
commingling reserve is funded (either by UBI Banca in its role as servicer
or in its role as the Italian account bank). Finally, the
rating trigger causing the replacement of the swap counterparty has been
lowered to Baa1 from A3. However, the swap counterparty rating
trigger level leading to posting a higher collateral amount according
to the second required rating trigger level remains unchanged at A3.
Key modelling assumptions, sensitivities, cash-flow
analysis and stress scenarios have not been updated as the rating action
has been primarily driven by increased linkage between the notes and a
potential issuer of eligible investments in which the issuers' cash
can be invested.
The principal methodology used in these ratings was Moody's Approach to
Rating CDOs of SMEs in Europe published in February 2007. Please
see the Credit Policy page on www.moodys.com for a copy
of this methodology.
Other factors used in these ratings are described in The Temporary Use
of Cash in Structured Transactions: Eligible Investment Guidelines
published in December 2008.
A LIST OF EFFECTED RATINGS
Issuer: UBI Finance 2 S.r.l.
....EUR1559.5M A Notes, Downgraded
to Aa3 (sf); previously on Oct 28, 2011 Downgraded to Aa2 (sf)
Issuer: UBI FINANCE 3 S.R.L.
....EUR1863.6M A Notes, Downgraded
to Aa3 (sf); previously on Oct 28, 2011 Downgraded to Aa2 (sf)
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 ratings have 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 each of the ratings are the following:
parties involved in the ratings, and public 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 related to the monitoring of these transactions in the past
six months.
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.
Anne-Sophie Spirito
Asst Vice President - Analyst
Structured Finance Group
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Stefan Augustin
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Frankfurt
Silvia Baumann
AVP-Analyst
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
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Moody's downgrades class A notes of UBI Finance 2 and 3