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Announcement:

Moody's reviews UBI Lease Finance 5 after transaction document changes

18 Jul 2011

London, 18 July 2011 -- Moody's Investors Service has reviewed UBI Lease Finance 5 S.r.l. in light of various amendments to the underlying transaction documentation.

Moody's has taken no rating action following its review. The amendments, which were executed on 25 February 2011 had the effect, among other things, of (i) extending the transaction maturity; (ii) allowing the issuer to purchase further receivables; and (iii) introducing a 24-month revolving period.

AMENDMENTS

Approximately EUR1.74 billion of cash had accumulated in an issuer account, constituting repayments and pre-payments during the first 18 months of the transaction (the "lock-out period"). The issuer then used these amounts to purchase approximately EUR1.6 billion of new receivables. Part of this amount (EUR834,876,462) was paid directly to UBI Leasing S.p.A. (UBI Lease) and part of it (EUR768,600,635) remained in an issuer account and will be repaid to UBI Lease through the deferred purchase price (DPP), in exchange for the new assets.

The DPP amounts will be included in the issuer available funds (i.e., at the top of the waterfall) at the end of the revolving period (the earlier of the occurrence of an early am event or end of the revolving period). This de-leverages the transaction's capital structure, increasing the credit enhancement provided by subordination to approximately 37%.

As part of its analysis, Moody's took account of, among other factors, (i) the robust transaction structure, which causes all cash collections (reduced by senior fees) to be paid as interest and principal to the Class A notes and only after the repayment of Class A notes, the Class B notes will receive interest and principal amounts; (ii) the continuously increasing credit enhancement, due to the capture of all excess spread; and (iii) the DPP amounts that serve to de-lever the transaction, once they are paid out through the waterfall.

Moody's also notes the financial strength and securitisation experience of Unione di Banche Italiane S.c.p.A. (UBI Banca) (A1/P-1), which owns 99% of the originator and acts as a back-up servicer, swap counterparty and calculation agent in this transaction. Similarly, Moody's considers that the rating triggers to appoint a back-up servicer are credit positive (triggers are breached if UBI Banca is downgraded below Baa3).

PERFORMANCE AND REVISED KEY ASSUMPTIONS

As part of its analysis, Moody's took into account the current performance of the leasing receivables. Periodic defaults and delinquencies showed some stabilisation in the last reporting period, but the levels observed are worse than initially expected at closing. The amount of cumulative defaults as of the last reporting date in April were 3.7% of the original portfolio amount. Total delinquencies have remained stable at around 4% (of the current balance) over the last 12 months.

Moody's main modelling assumption for this transaction is a normal inverse default distribution, which we used because of the portfolio's granularity. The parameters of the default distribution --namely the mean default probability and its standard deviation -- were derived via the analysis of (i) the characteristics of the loan-by-loan portfolio information and the historical vintage data; (ii) the potential fluctuations of the macroeconomic environment during the lifetime of this transaction; and (iii) the portfolio concentrations in terms of industry sectors and single obligors via the Monte Carlo simulation in CDOROM (v2.8).

We expect the mean default probability of the pool to be a Ba3 Moody's equivalent, translating into 12.8% mean cumulative default rate over the portfolio weighted-average life of 5.4 years. After the last transaction review in 26 July 2010, the mean cumulative default rate was assumed to be 10% over the weighted-average life of the deal.

The implied asset correlation was assumed to be 7.25%, which corresponds to a 45% co-efficient of variation. This was adjusted downwards from 49%, as per the last review. Moody's assumed stochastic recoveries with a mean recovery rate at 50%. This is 10% lower than at the last review (further decreasing to a mean of 10% upon an originator default). Moody's assumes prepayments of 5% per year.

The principal methodologies used for this rating were Moody's Approach to Rating CDOs of SMEs in Europe, published in February 2007 and Moody's Approach to Rating Multi-Pool Financial Lease-Backed Transactions in Italy, published in June 2006. Secondary methodology used was Refining the ABS SME Approach: Moody's Probability of Default Assumptions In The Rating Analysis of Granular Small and Mid-sized Enterprise portfolios in EMEA, published in March 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

For rating this transaction, Moody's used the following model. (i) ABSROM (v.2.2.8) to model the cash flows and determine the loss for each tranche and (ii) CDOROM (V.2.8) to estimate the standard deviation for the default distribution.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

London
Stefan Augustin
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Frankfurt am Main
Thorsten Klotz
MD - Structured Finance
Structured Finance Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

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 UBI Lease Finance 5 after transaction document changes
No Related Data.
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