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Rating Action:

Moody's downgrades notes in ABS transactions guaranteed by Assured Guaranty

22 Jan 2013

Actions follow downgrade of Assured Guaranty, financial insurer of affected securities

London, 22 January 2013 -- Moody's has today downgraded the ratings of 8 securities in 5 Asset Backed Securities (ABS) transactions that benefited from financial insurance from entities within the Assured Guaranty group. Today's actions solely reflects Moody's downgrade from Aa3 to either A2 or A3 of the Insurance Financial Strength (IFS) ratings of these entities (see "Moody's downgrades Assured Guaranty; lead insurer to A2", 17 January 2013). Moody's rates the affected notes at the higher of their underlying rating and the rating of their guarantor. Moody's has not changed the underlying ratings of the affected securities, which reflect their credit risk irrespective of the financial guarantee.

At the same time, Moody's has affirmed the rating of the securities guaranteed by Assured Guaranty (Europe) Ltd in Italian ABS transaction POSILLIPO FINANCE II S.R.L. SERIES 2007-1 The rating of these securities was downgraded on 14 September 2012 to the Italian country ceiling of A2 (see "Moody's downgrades guaranteed note in Posillipo Finance II, Italian ABS"), which is now also the IFS rating of the guarantor.

The detailed list of rating actions is as follows:

- Italian ABS-Health Care Receivables

Issuer: POSILLIPO FINANCE II S.R.L. SERIES 2007-1

....EUR870M A2 Notes, Affirmed A2 (sf); previously on Sep 14, 2012 Downgraded to A2 (sf)

- UK ABS-Other

Issuer: Bakethin Finance PLC

....GBP248M A Bond, Downgraded to A2 (sf); previously on Mar 22, 2012 Aa3 (sf) Placed Under Review for Possible Downgrade

- Turkish ABS-Future Receivables (Diversified Payment Rights)

Issuer: Akbank A.R.T.S. LTD Tranche 19

....US$225M Tranche 19 Notes, Downgraded to A2; previously on Mar 22, 2012 Aa3 Placed Under Review for Possible Downgrade

Issuer: AKbank A.R.T.S. LTD.

....US$100M Tranche 15 Notes, Downgraded to A3; previously on Mar 22, 2012 Aa3 Placed Under Review for Possible Downgrade

Issuer: Garanti Diversified Payment Rights Finance Company

....US$150M 2005 C Notes, Downgraded to A2; previously on Mar 22, 2012 Aa3 Placed Under Review for Possible Downgrade

....US$165M 2005 D Notes, Downgraded to A3; previously on Mar 22, 2012 Aa3 Placed Under Review for Possible Downgrade

Issuer: TIB Diversified Payment Rights Finance Company

....US$100M Series 2006 B Notes, Downgraded to A2; previously on Mar 22, 2012 Aa3 Placed Under Review for Possible Downgrade

....US$150M Series 2006 C Notes, Downgraded to A2; previously on Mar 22, 2012 Aa3 Placed Under Review for Possible Downgrade

Issuer: Yapi Kredi Diversified Payment Rights Finance Company

....US$175M Series 2006 A Notes, Downgraded to A3; previously on Mar 22, 2012 Aa3 Placed Under Review for Possible Downgrade

RATINGS RATIONALE

--Assured Guaranty Downgrade

On 17 January 2013, Moody's downgraded the IFS ratings of several entities in the Assured group. In particular, Moody's downgraded: (i) from Aa3 to A2 the IFRS of Assured Guaranty (Europe) Ltd. and Assured Guaranty Municipal Corp. and (ii) from Aa3 to A3 the IFRS of Assured Guaranty Corp.

The rating actions on these entities reflects Moody's downward reassessment of Assured's business franchise, expected future profitability, and financial flexibility. Assured operates in an industry that has not recovered from the financial crisis and, like its peers, will continue to struggle in the face of declining fundamentals, including a dramatic reduction in insurance usage, modest profitability and still-meaningful legacy risk.

--Insured ratings

Moody's rates the affected ABS notes guaranteed by entities in the Assured group at the higher of their underlying rating and the rating of their guarantor. The following entities serve as guarantors for the affected securities:

- Assured Guaranty (Europe) Ltd.: Bakethin Finance Plc. (Class A) and Akbank A.R.T.S. LTD Tranche 17-19 (Tranche 19 Notes)

- Assured Guaranty Municipal Corp.: Garanti Diversified Payment Rights Finance Company (2005-B to 2005-F) (2005 C), TIB Diversified Payment Rights Finance Company (2004-A to 2006-E) (Series 2006 B and Series 2006 C)

- Assured Guaranty Corp.: Garanti Diversified Payment Rights Finance Company (2005-B to 2005-F) (2005 D), Akbank A.R.T.S. LTD Tranches 10-16 (Tranche 15)

--Rating Methodologies (guaranteed ratings)

Moody's ratings on structured finance securities that are guaranteed or "wrapped" by a financial guarantor, while potentially subject to the further constraint of the relevant country ceiling, are generally maintained at a level equal to the higher of the following: a) the rating of the guarantor (if rated at the investment grade level); or b) the underlying rating. Moody's approach to rating wrapped transactions is outlined in Moody's special comment entitled "Assignment of Wrapped Ratings When Financial Guarantor Falls Below Investment Grade" (May, 2008); and Moody's November 10, 2008 announcement entitled "Moody's Modifies Approach to Rating Structured Finance Securities Wrapped by Financial Guarantors".

Moody's considers the guaranteed securities in transaction Posillipo Finance II to be exposed to risks that the rating agency has addressed in its country ceiling of A2 for Italian structured finance securities. This is because the guarantee may not cover all risks that arise from political, institutional, financial and economic factors affecting Italy, the country in which the receivables are located and the securities are issued. This view does not reflect the willingness or ability of Assured Guaranty to meet its obligations under the guarantee, rather, it reflects the risk that in the event of a currency redenomination the terms of the guarantee will not provide sufficient funds in euro to repay the securities in full by the final maturity date in accordance with the initial promise (see "Moody's downgrades guaranteed note in Posillipo Finance II, Italian ABS", 14 September 2012).

The country ceiling concept is described in the Rating Implementation Guidance "Local Currency Country Risk Ceiling for Bonds and Other Local Currency Obligations" published on 16 August 2012 (http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_140182).

--Rating Methodologies (underlying ratings)

Moody's methodology to determine the underlying rating in Posillipo Finance II considers a direct linkage to the rating of the Italian Region of Campania (Baa3) as the assets are unsecured, direct obligations of that region.

In Turkish Diversified Payment Rights (DPR) transactions, the collateral backing the notes involves DPR cash flows generated by the originator banks. Thus repayments from this collateral are dependent on the originator bank's ability to continue generating these cash flows during the life the transition. As a result, under our rating methodology, the rating assigned to the Turkish DPR transactions, in the absence of any transaction specific concerns, is linked to the local currency rating of the originators (Baa2). For more details, please see: "Moody's Approach to Rating Diversified Payment Right Securitisations" published in March 2009.

In Bakethin Finance, transaction payments are primarily exposed to the performance of Northumbrian Water Ltd (Baa1) but also benefit from a strong security package. For this reason, our underlying rating is a notch above the rating of the UK company.

--Assumptions and sensitivity

Key modelling assumptions, sensitivities, cash-flow analysis and stress scenarios for the affected transactions have not been updated as the rating action has been primarily driven by Moody's rating downgrade of the entity guaranteeing the affected notes.

If the ratings of Assured Guaranty were downgraded further, this would be credit negative for the affected notes, whose ratings could be downgraded further, as long as they remained above the underlying ratings.

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.

The below contact information is provided for information purposes only. Please see the ratings tab of the issuer page at www.moodys.com, for each of the ratings covered, Moody's disclosures on the lead analyst and the Moody's legal entity that has issued the ratings.

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.

Ariel Weil
Vice President - Senior Analyst
Structured Finance Group
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Carole Gintz
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 notes in ABS transactions guaranteed by Assured Guaranty
No Related Data.
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