London, 24 September 2013 -- Moody's Investors Service has today placed on review for downgrade the
Baa1 ratings of the covered bonds from Banca Carige's mortgage programme
(residential), and the Baa2 ratings of the covered bonds from its
mortgage programme 2 (commercial).
These review placements follow Moody's decision to downgrade to
B2 from Ba2, and place on review for further downgrade, the
issuer rating of Banca Carige SpA (deposits B2 on review for downgrade,
standalone bank financial strength rating E+/baseline credit assessment
b3; on review for downgrade).
RATINGS RATIONALE
Today's rating actions are prompted by the downgrade and further
review for downgrade of the issuer ratings on 18 September 2013.
For additional details, please see https://www.moodys.com/research/Moodys-downgrades-Banca-Carige-to-B2-from-Ba2-all-ratings--PR_281971.
In our review we will incorporate all available information, including
the recent ECOFIN proposal and until such analysis is completed we intend
to leave on review any covered bond ratings potentially affected by downgrades
of bank senior unsecured ratings.
The Credit Ratings of the covered bonds from Banca Carige mortgage programmes
were assigned in line with Moody's existing Credit Rating Methodology
entitled "Moody's Approach to Rating Covered Bonds", dated
July 2012. Moody's notes that on 19 September 2013 it published
a Request for Comment (RFC). In the RFC, the rating agency
proposes an adjustment to the anchor point it uses in its covered bond
analysis. If the revised Credit Rating Methodology is implemented
as proposed, the Credit Ratings of the covered bonds from Banca
Carige mortgage programmes may be positively impacted relative to application
of the existing Credit Rating Methodology. Please refer to Moody's
Request for Comment, titled "Approach to Determining the Issuer
Anchor Point for Covered Bonds" for further details regarding the
implications of the proposed Credit Rating Methodology changes on Moody's
Credit Ratings https://www.moodys.com/research/Approach-to-Determining-the-Issuer-Anchor-Point-for-Covered-Bonds--PBS_SF342448.
The TPIs assigned to Carige's residential and commercial programmes
remain "Improbable". Moody's TPI framework may
constrain the final rating of both Carige's covered bond programmes
following the review of Carige's ratings.
The rating that Moody's has assigned addresses the expected loss
posed to investors. Moody's ratings address only the credit risks
associated with the transaction. Moody's did not address
other non-credit risks, but these may have a significant
effect on yield to investors.
KEY RATING ASSUMPTIONS/FACTORS
Moody's determines covered bond ratings using a two-step
process: an expected loss analysis and a TPI framework analysis.
EXPECTED LOSS: Moody's uses its Covered Bond Model (COBOL)
to determine a rating based on the expected loss on the bond. COBOL
determines expected loss as (1) a function of the issuer's probability
of default (measured by the issuer's rating); and (2) the stressed
losses on the cover pool assets following issuer default.
The cover pool losses are an estimate of the losses Moody's currently
models if the relevant issuer defaults. Moody's splits cover
pool losses between market risk and collateral risk. Market risk
measures losses stemming from refinancing risk and risks related to interest-rate
and currency mismatches (these losses may also include certain legal risks).
Collateral risk measures losses resulting directly from the cover pool
assets' credit quality. Moody's derives collateral
risk from the collateral score.
--- RESIDENTIAL MORTGAGE COVERED BONDS
The cover pool losses are 29.5%, with market risk
of 23.5% and collateral risk of 6.0%.
The collateral score for this programme is currently 9.0%.
The over-collateralisation (OC) in this cover pool is 51.9%,
of which Carige provides 22% on a "committed" basis.
Once the rating review concludes, Moody's will reassess the
minimum level of OC required to meet the maximum rating achievable.
--- COMMERCIAL MORTGAGE COVERED BONDS
The cover pool losses are 44.3%, with market risk
of 19.6% and collateral risk of 24.7%.
The collateral score for this programme is currently 36.8%.
The OC in this cover pool is 46.5%, of which Carige
provides 10.5% on a "committed" basis.
Once the rating review concludes, Moody's will reassess the
minimum level of OC required to meet the maximum rating achievable.
For further details on cover pool losses, collateral risk,
market risk, collateral score and TPI Leeway across covered bond
programmes rated by Moody's please refer to "Moody's EMEA Covered Bonds
Monitoring Overview", published quarterly. All numbers in
this section are based on Moody's most recent modelling .
TPI FRAMEWORK: Moody's assigns a "timely payment indicator" (TPI),
which indicates the likelihood that the issuer will make timely payments
to covered bondholders if the issuer defaults. The TPI framework
limits the covered bond rating to a certain number of notches above the
issuer's rating.
SENSITIVITY ANALYSIS
The issuer's credit strength is the main determinant of a covered
bond rating's robustness. The TPI Leeway measures the number
of notches by which Moody's might downgrade the issuer's rating
before the rating agency downgrades the covered bonds because of TPI framework
constraints.
The TPI assigned to Carige's residential and commercial covered
bonds remains Improbable. The TPI Leeway for these programmes is
limited, and thus any downgrade of the issuer ratings may lead to
a downgrade of the covered bonds.
A multiple-notch downgrade of the covered bonds might occur in
certain limited circumstances, such as (1) a sovereign downgrade
negatively affecting both the issuer's senior unsecured rating and the
TPI; (2) a multiple-notch downgrade of the issuer; or
(3) a material reduction of the value of the cover pool.
RATING METHODOLOGY
The principal methodology used in these ratings was "Moody's
Approach to Rating Covered Bonds" published in July 2012.
Please see the Credit Policy page on www.moodys.com for
a copy of this methodology.
REGULATORY DISCLOSURES
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.
Monica Bianchi
Associate 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
Juan Pablo Soriano
MD - Structured Finance
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 reviews Banca Carige's mortgage covered bonds for downgrade
