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I AGREE
24 Jul 2009
Approximately EUR2.2 billion of debt securities affected.
Milan, July 24, 2009 -- Moody's Investors Service has placed on review for possible downgrade
all the rated notes issued by Sestante Finance S.r.l.:
Sestante Finance S.r.l. Series 2004 ("Sestante
2004"), Sestante Finance S.r.l. Series
2005 ("Sestante 2005"), and Sestante Finance S.r.l.
Series 2006 ("Sestante 2006").
Sestante 2004:
- Class A Asset-Backed Floating-Rate Notes due 2042,
current rating Aaa placed on review for possible downgrade, previously
on 26 January 2009 confirmed;
- Class B Asset-Backed Floating-Rate Notes due 2042,
current rating Aa3 placed on review for possible downgrade, previously
on 26 January 2009 confirmed;
- Class C1 Asset-Backed Floating-Rate Notes due 2042,
current rating A3 placed on review for possible downgrade, previously
on 26 January 2009 confirmed; and
- Class C2 Asset-Backed Floating-Rate Notes due 2042,
current rating Baa3 placed on review for possible downgrade, previously
on 26 January 2009 confirmed.
Sestante 2005:
- Class A Asset-Backed Floating-Rate Notes due 2045,
current rating Aaa placed on review for possible downgrade, previously
on 26 January 2009 confirmed;
- Class B Asset-Backed Floating-Rate Notes due 2045,
current rating Aa3 placed on review for possible downgrade, previously
on 26 January 2009 confirmed;
- Class C1 Asset-Backed Floating-Rate Notes due 2045,
current rating A3 placed on review for possible downgrade, previously
on 26 January 2009 confirmed; and
- Class C2 Asset-Backed Floating-Rate Notes due 2045,
current rating Baa3 placed on review for possible downgrade, previously
on 26 January 2009 confirmed.
Sestante 2006:
- Class A1 Asset-Backed Floating-Rate Notes due 2046,
current rating Aaa placed on review for possible downgrade, previously
on 26 January 2009 confirmed;
- Class A2 Asset-Backed Floating-Rate Notes due 2046,
current rating Aaa placed on review for possible downgrade, previously
on 26 January 2009 confirmed;
- Class B Asset-Backed Floating-Rate Notes due 2046,
current rating Aa3 placed on review for possible downgrade, previously
on 26 January 2009 confirmed;
- Class C1 Asset-Backed Floating-Rate Notes due 2046,
current rating A3 placed on review for possible downgrade, previously
on 26 January 2009 confirmed; and
- Class C2 Asset-Backed Floating-Rate Notes due 2046,
current rating Ba1 placed on review for possible downgrade, previously
on 26 January 2009 downgraded from Baa3.
Moody's rating actions were prompted by a worse-than-expected
collateral performance of the underlying portfolios. This may lead
to an increase in portfolio loss expectation resulting from higher-than-expected
delinquency and default levels in all three transactions.
Moody's concluded the review of these transactions on the 26 January
2009, downgrading the class C2 notes of Sestante 2006 to Ba1 from
Baa3. At the same time, all other ratings were confirmed
as we concluded also the review linked to Lehman swap exposure.
At that time, we took comfort from the size of the credit enhancement
available in these transactions. However, since the last
review delinquencies and defaults increased steeply in all three Sestante
transactions. In Sestante 2006, delinquencies 90+ days
jumped to 7.71% of current balance by July 2009 from 4.26%
at the time of review in January. Cumulative defaults increased
from 2.50% of original balance to 3.96% during
the same time frame. In Sestante 2005, delinquencies 90+
days increased to 4.95% by July from 3.50%
in January whilst defaults increased to 2.95% from 1.82%
during this time. In Sestante 2004, delinquencies 90+
days more than trippled to 5.83% in July from 1.84%
in January 2009 whilst defaults went up to 3.19% from 2.52%
during this time.
Moody's notes that all three transactions have been drawing on their
reserve funds. In Sestante 2004, the reserve fund stands
at EUR 2.38 million (38% of target) as of July 2009 as opposed
to the required target of EUR6.25 million. Both Sestante
2005 and Sestante 2006 have fully used their reserve funds and were unable
to pay the whole amount of the scheduled amortisation of the class C2
notes in July 2009. Sestante 2006 recorded an unpaid principal
deficiency ledger (PDL) in April 2009 with EUR 240,874.38
remaining unpaid. This unpaid PDL increased to EUR 2,682,733.35
in July . Moody's notes that if delinquencies and defaults
increase further, a portion of the pro-rata class C1 and
C2 interest may remain unpaid on the next payment dates.
As part of our detailed transaction review, we will reassess for
each portfolio its lifetime loss expectation reflecting the collateral
performance to date as well as the future macro-economic environment.
Moody's will also request, whenever not already available,
updated loan-by-loan information to revise its MILAN Aaa
credit enhancement. Loan-by-loan information will
also permit us to validate our assumptions with regards to which loans
have a higher default propensity. The lifetime loss and the MILAN
Aaa credit enhancement are the key parameters used by Moody's to calibrate
its loss distribution curve, which is one of the core inputs in
the cash-flow model.
During the review, Moody's will also assess the ability of
servicer Meliorbanca S.p.A. (Baa3/P-3/D) to
reduce delinquencies and new defaults and to increase the net present
value of recoveries on defaulted assets. Under the Sestante RMBS
transaction series, Meliorbanca securitised first-lien mortgage
loans granted to individuals, all of whom used these loans to acquire,
construct or refurbish residential properties in Italy. The issued
class A, B and C1 notes were backed by a portfolio of mortgage loans.
The class C2 notes in all transactions are repaid by excess spread,
in terms of both interest and principal.
The principal methodologies used in rating and monitoring the transaction
is "Moody's Approach to Rating Italian RMBS" published
in December 2004 and "Revising Default/Loss Assumptions Over the
Life of an ABS/RMBS Transaction" published in December 2008,
which can be found at www.moodys.com in the Credit Policy
& Methodologies directory, in the Ratings Methodologies subdirectory.
Other methodologies and factors that may have been considered in the process
of rating this issue can also be found in the Credit Policy & Methodologies
directory.
Moody's ratings address the expected loss posed to investors by
the legal final maturity of the notes. Moody's ratings address
only the credit risks associated with the transaction. Other non-credit
risks have not been addressed, but may have a significant effect
on yield to investors.
Moody's will continue to monitor the performance of these three
RMBS transactions closely. For more information, please see
Moody's research on www.moodys.com or contact Moody's
Client Service Desk on (+44-20) 7772 5454.
Frankfurt
Marie-Jeanne Kerschkamp
Managing Director
Structured Finance Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Milan
Nikoletta Knapcsek
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service
Telephone:+39-02-9148-1100
Moody's reviews for downgrade notes issued by Sestante Finance S.r.l.
No Related Data.
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