London, 02 July 2013 -- Moody's Investors Service has today downgraded the ratings of one senior
and four junior and mezzanine notes in two Italian residential mortgage-backed
securities (RMBS) transactions: Marche Mutui 2 S.r.l.,.
and Marche Mutui Societ? per la Cartolarizzazione S.r.l..
At the same time Moody's has confirmed the rating of the senior
note in Marche Mutui 4 S.r.l. and Marche Mutui 2
S.r.l. Insufficiency of credit enhancement to address
sovereign risk, counterparty exposure and revision of key collateral
assumptions have prompted today's downgrade.
Today's rating action concludes the review of four notes placed on review
on 2 August 2012, following Moody's downgrade of Italian government
bond ratings to Baa2 from A2 on 13 July 2012. This rating action
also concludes the review of three notes placed on review on 13 Mar 2013,
due to the insufficiency of credit enhancement to address sovereign risk
following 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).
For a detailed list of affected ratings, see towards the end of
the ratings rationale section.
RATINGS RATIONALE
Today's rating action primarily reflects the insufficiency of credit enhancement
to address sovereign risk, counterparty exposure and revision of
key collateral assumptions. Moody's confirmed the ratings of securities
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/viewresearchdoc.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.
-- Revision of Key Collateral Assumptions
Moody's has revised its lifetime loss expectation (EL) assumption in Marche
Mutui 2 S.r.l. to 2.32% from 2.20%
and maintained its assumption for Marche Mutui 4 S.r.l.
at 9% and Marche Mutui Societ? per la Cartolarizzazione
S.r.l. at 2%. Moody's maintains
the MILAN CE assumption at 8.5% for Marche Mutui 2 S.r.l.,
22.2% for Marche Mutui 4 S.r.l. and
9% for Marche Mutui Societ? per la Cartolarizzazione S.r.l.
.
-- Exposure to Counterparty Risk
Today's rating action takes into consideration the set-off
and commingling risk arising from exposure to Banca delle Marche S.p.A.
(B3/NP), acting as servicer and originator in the three transactions.
The revised ratings in Marche Mutui 2 S.r.l. and
class C in Marche Mutui Societ? per la Cartolarizzazione S.r.l.
were negatively affected by this exposure. Moody's confirms
the Class A notes in Marche Mutui 4 S.r.l. noting
that the Issuer is currently in the process of transferring the Issuer
Collection Account, Expenses Account, Payment Account,
Debt Service Reserve Account and Securities Account currently held with
Deutsche Bank S.p.A. to Deutsche Bank AG, London
Branch (A2). The downgrade of Class A2 and B notes in Marche Mutui
Societ? per la Cartolarizzazione S.r.l. reflects
the lack of back-up serving arrangments in the transaction.
In the case of Marche Mutui 2 S.r.l. and Marche Mutui
4 Italfondiario is the appointed back-up servicer.
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.
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 ABSROM/ ABSCORE to
model the cash flows and 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, the
corresponding loss for each class of notes is calculated given the incoming
cash flows from the assets and the outgoing payments to third parties
and noteholders. Therefore, the expected loss or EL for each
tranche is the sum product of (i) the probability of occurrence of each
default scenario; and (ii) 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.
LIST OF AFFECTED RATINGS
Issuer: Marche Mutui 2 S.r.l.
....EUR511.45M A2 Notes, Confirmed
at A2 (sf); previously on Mar 13, 2013 A2 (sf) Placed Under
Review for Possible Downgrade
....EUR12M B Notes, Downgraded to Baa2
(sf); previously on Mar 13, 2013 A2 (sf) Placed Under Review
for Possible Downgrade
....EUR15.8M C Notes, Downgraded
to Ba1 (sf); previously on Aug 2, 2012 Baa1 (sf) Placed Under
Review for Possible Downgrade
Issuer: Marche Mutui 4 S.r.l.
....EUR1505.55M A Notes, Confirmed
at A2 (sf); previously on Mar 13, 2013 A2 (sf) Placed Under
Review for Possible Downgrade
Issuer: Marche Mutui Societ? per la Cartolarizzazione S.r.l.
....EUR281.8M A2 Notes, Downgraded
to A3 (sf); previously on Aug 2, 2012 Downgraded to A2 (sf)
and Remained On Review for Possible Downgrade
....EUR16.2M B Notes, Downgraded
to A3 (sf); previously on Aug 2, 2012 Downgraded to A2 (sf)
and Remained On Review for Possible Downgrade
....EUR11.4M C Notes, Downgraded
to Ba3 (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.
Sebastian Hoepfner
Analyst
Structured Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Barbara Rismondo
Senior Vice President/Manager
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Steven Becker
Associate Analyst
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's downgrades five notes and confirms two in three Italian RMBS transactions