London, 27 June 2013 -- Moody's Investors Service has today downgraded the ratings of two senior
notes in two Italian residential mortgage-backed securities (RMBS)
transactions: Media Finance S.r.l. --
Series 3 and Media Finance S.r.l. -- Series
4. At the same time, Moody's confirmed the rating of two
senior notes in MondoMutui Cariparma S.r.l. and MondoMutui
Cariparma S.r.l. Series 2012. Insufficiency
of credit enhancement to address sovereign risk and counterparty exposure
have prompted today's downgrade.
Today's rating action concludes the review of four notes placed on review
on 13 March 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 and counterparty exposure. 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.
-- Exposure to Counterparty Risk
The downgrades of senior notes in two Media Finance transactions reflects
the commingling and set-off risks due to exposure to Banca Popolare
di Puglia e Basilicata S.c.p.a. (NR) acting
as originator and servicer in both deals.
Moody's has assessed the probability and effect of a default of Banca
Popolare di Puglia e Basilicata S.c.p.a. on
the ability of the issuers to meet their obligations under the transactions.
The exposure to Banca Popolare di Puglia e Basilicata S.c.p.a.
is factored in the downgrade of these notes.
-- Revision of Key Collateral Assumptions
Moody's has revised its lifetime loss assumption in Media Finance S.r.l.
Series 3 because of worse-than-expected collateral performance
since the last review of the Italian RMBS sector in November 2012 however
this revision is not a driver of today's rating action.
Although arrears levels have been moderately decreasing in the last few
quarters, the cumulative defaults increased to 4.3%
of the original pool balance from 3.4% as the previous review.
After considering the current amount of realised defaults and completing
a roll-rate analysis for the non-defaulted portion of the
portfolio Moody's have increase the expected loss assumption to 5.5%
of the original pool balance. Moody's has maintained its expected
assumptions at 6.0% of the original pool balance in Media
Finance S.r.l. -- Series 4, at 2.3%
in in MondoMutui Cariparma S.r.l. and at 4.0%
in MondoMutui Cariparma S.r.l. Series 2012.
Moody's has also re-assessed updated loan-by-loan
information and increased its MILAN CE assumption in Media Finance S.r.l.
Series 3 to 14.4% from 12.7%, mostly
in order to generate a loss distribution with certain level of volatility
following the increase of the expected loss assumption, or,
with other words, to account for a higher probability of tail events
with respect to the revised expected loss.
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 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.
In the context of the rating review, the transactions have been
remodelled and some inputs have been adjusted to reflect the new approach
described above.
LIST OF AFFECTED RATINGS
Issuer: Media Finance S.r.l. Series 3
....EUR388.65M A Notes, Downgraded
to A3 (sf); previously on Mar 13, 2013 A2 (sf) Placed Under
Review for Possible Downgrade
Issuer: Media Finance S.r.l. - Series
4
....EUR254.9M A2 Notes, Downgraded
to A3 (sf); previously on Mar 13, 2013 A2 (sf) Placed Under
Review for Possible Downgrade
Issuer: MondoMutui Cariparma S.r.l.
....EUR3945.4M A Notes, Confirmed
at A2 (sf); previously on Mar 13, 2013 A2 (sf) Placed Under
Review for Possible Downgrade
Issuer: MondoMutui Cariparma S.r.l. Series
2012
....EUR2356.7M A Notes, Confirmed
at A2 (sf); previously on Mar 13, 2013 A2 (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.
In conducting surveillance of these credits, Moody's considered
performance data contained in servicer and remittance reports.
Moody's obtains servicer reports on these transactions on a periodic basis,
at least annually.
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
Christophe?de Noaillat
Associate Managing Director
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Lyudmila Udot
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
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 senior notes in Media Finance and confirms senior notes in MondoMutui CariParma Italian RMBS transactions
