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Rating Action:

Moody's downgrades notes issued by A-Leasing Finance, Italian lease ABS

31 Aug 2011

EUR 260.7 million of debt securities affected

Frankfurt am Main, August 31, 2011 -- Moody's Investors Service has today downgraded A-Leasing Finance S.r.l.'s class A notes to Aa2(sf) from Aaa(sf) and class C notes to Baa2(sf) from Baa1(sf).

Today's rating action on the class A notes concludes the review for downgrade that Moody's initiated on 2 March 2011. A detailed list of today's rating actions can be found at the end of this press release.

RATINGS RATIONALE

The downgrade of the class A notes reflects Moody's concerns regarding operational risk, given the insufficient operational risk mitigants within the transaction's structure. In addition, the downgrade of the class C notes reflects the worse-than-expected performance of the collateral pool.

Moody's placed the rating of the class A notes on review for downgrade following the implementation on 2 March 2011 of Moody's rating guidance entitled "Global Structured Finance Operational Risk Guidelines: Moody's Approach to Analyzing Performance Disruption Risk". During the review process, Moody's considered the operational risks of the transaction and performed a detailed review of the performance of the transaction.

-- OPERATIONAL RISK

The servicer is A-Leasing S.A. (not rated) and there is no back-up servicer (BUS) nominated in this transaction. However, the operational risk of the unrated servicer is partially mitigated by the back-up servicer facilitator, BNP Paribas Securities Services. The paying agent (BNP Paribas Securities Services) executes the payments to the noteholders, acting on the instructions of the calculation agent, Securitisation Services (unrated). BNP Paribas Securities Services is a fully owned subsidiary of BNP Paribas (Aa2 on review for downgrade/P-1).

Moody's views positively the relatively high level of liquidity present in the transaction, which represents approximately 13.5% of the current balance of the outstanding rated notes and covers more than 12 months of interest payments on the rated notes. However, in the event of a servicer disruption that would prevent it from providing its servicer report, there is uncertainty in the transaction legal documentation on whether Securitisation Services acting as calculation agent would be able to determine the amount of the senior items of the waterfall, including interests payment on the notes, and then instruct the paying agent to execute such payment. Moody's received a written confirmation from the calculation agent that they will continue to prepare a payment report in order for the paying agent to use available cash to pay interest on the senior notes in absence of servicer report. Moody's considered this scheduled procedure positively although it does not provide the same level of comfort as if it was detailed in the transaction documents.

-- REVISED PERFORMANCE ASSUMPTIONS

Asset performance has deteriorated markedly over the last year. As of July 2011, total loans in arrears amounted to approximately 8.05% of the current portfolio balance. This compares with 5.61% at the same time in 2010.

As of July 2011, cumulative defaults reached 8.5% of the total securitised pool since closing, representing 5.7% of the total securitised balance since the date of the transaction restructuring in December 2009. This compares with the expected cumulative defaults of 10% over the remaining life of the transaction from the restructuring date.

To reflect this deterioration, Moody's has reassessed its lifetime default expectation for A-Leasing's collateral pool. This factored in the worse-than-expected collateral performance to date and any likely further performance deterioration of the pool in the current down cycle.

Moody's assumes the default probability of SME debtors to be in the low Ba/high B range and estimates the remaining weighted-average life of the portfolio to be 4.2 years. Consequently, these revised assumptions have translated into a rise in the cumulative mean default assumption for the current portfolio, equal to 17.3% of the current portfolio balance. This default assumption corresponds to an equivalent rating of B1/B2 over the portfolio weighted-average life. This implies a revised cumulative mean default for the entire transaction (since closing) equal to 14.9% of the original portfolio balance.

Given the pool's relatively low granularity with an effective number of 250, Moody's used a Monte Carlo simulation to derive the gross default distribution. As a result of the simulation, the coefficient of variation has decreased to 39.5%, compared with 45% at the last review date. The prepayment rate remained at 3%.

Moody's maintained the average recovery-rate assumption of 50% assumed at closing. In addition, Moody's considered the potential effect of originator insolvency on the recoveries in the transaction. If the originator became insolvent, Moody's would expect recoveries on defaulted lease contracts to be approximately 10%.

Although the revised assumption would result in a model/quantitative rating output equivalent to Aaa for class A notes given the 49% credit enhancement, operational risk as described above resulted in the downgrade to Aa2(sf) for the class A notes.

Credit enhancement of 35% below class B offsets the increase in the default assumption; however, credit enhancement is insufficient for class C, which Moody's has therefore downgraded to Baa2(sf).

Moody's analysed various sensitivities of cumulative default rates to test the robustness of its revised ratings. For instance, an increase of the cumulative default rate on the current balance to 18.7% from 17.3% (base case) or an increase of the coefficient of variation to 45% from 39.5% (base case) would not result in a migration of the quantitative/model-indicated rating outcome for class C. Also, a lower recovery rate of 40% instead of 50% (base case) does not affect the quantitative/model-indicated rating outcome for class C.

-- TRANSACTION DETAILS

A-Leasing closed in June 2008. The portfolio comprises three pools of Italian financial-lease contracts backed by auto, equipment and real-estate assets. Due to the shorter amortisation profile of the equipment and auto portion, the securitised pool is now mainly exposed to real-estate contracts. The split between the three sub-pools (as of the last reporting date in July 2011) was 4.8% for equipment, 7.8% for auto and 87.4% for real estate.

The principal methodologies used in this rating were Moody's Approach to Rating Multi-Pool Financial Lease-Backed Transactions in Italy, published in June 2006 and 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 these methodologies.

Other methodology used in this rating was "Historical Default Data Analysis for ABS Transactions in EMEA", published in December 2005.

Moody's used its excel based cash flow model, Moody's ABSROM™, as part of its quantitative analysis of the transactions. Moody's ABSROM™ model enables users to model various features of a standard European ABS and RMBS transactions including: (i) the specifics of the default distribution of the assets, their portfolio amortization profile, yield or recoveries; and (ii) the specific priority of payments, triggers, swaps and reserve funds on the liability side of the ABS and RMBS structures. Moody's ABSROM™ User Guide is available on Moody's website and covers the model's functionality as well as providing a comprehensive index of the user inputs and outputs.

LIST OF AFFECTED SECURITIES:

Issuer: A-Leasing Finance S.r.l

....EUR230.85M A Notes, Downgraded to Aa2 (sf); previously on Mar 2, 2011 Aaa (sf) Placed Under Review for Possible Downgrade

....EUR29.85M C Notes, Downgraded to Baa2 (sf); previously on Jun 13, 2008 Assigned Baa1 (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 rating has 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 the rating are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service 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 this transaction 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 three years preceding the credit rating action. Please see the ratings disclosure page on our website www.moodys.com for further information.

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.

Frankfurt am Main
Sebastian Schranz
Associate Analyst
Structured Finance Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Paris
Carole Gintz
VP - Senior Credit Officer
Structured Finance Group
Moody's France SAS
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's downgrades notes issued by A-Leasing Finance, Italian lease ABS
No Related Data.
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