London, 25 October 2018 -- Moody's Investors Service ("Moody's") has today
downgraded the ratings of 25 Notes in 16 Italian ABS transactions.
The rating action reflects the increase in country risk in Italy and the
lowering of the related local-currency country ceiling of Italy.
In addition, Moody's has affirmed the ratings of 14 Notes
in 10 deals that had sufficient credit enhancement to maintain current
rating levels. Moody's has also upgraded 3 tranches in 2
transactions due to the increased levels of credit enhancement for the
affected Notes.
Out of the 17 transactions, Moody's has downgraded 3 tranches
in three Italian Healthcare ABS transactions (POSILLIPO FINANCE II S.R.L.
SERIES 2007-1, POSILLIPO FINANCE S.R.L.
and D'Annunzio S.r.l.) which have been previously
placed on review for downgrade following the placement on review for downgrade
of the regions of Campania and Abruzzo. Please see the related
press release for full details: http://www.moodys.com/viewresearchdoc.aspx?docid=PR_384492.
Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF475337
for the List of Affected Credit Ratings. This list is an integral
part of this Press Release and identifies each affected issuer.
RATINGS RATIONALE
Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF475337
for the List of Affected Credit Ratings. This list is an integral
part of this Press Release and provides, for each of the credit
ratings covered, Moody's disclosures on the following items:
• Key Rationale for Action / review placement and Constraining Factor(s)
• Principal Methodologies
Government of Italy's sovereign rating was downgraded to Baa3 from Baa2,
which resulted in a decrease in the local-currency country ceiling
to Aa3 from Aa2. Please see this link http://www.moodys.com/viewresearchdoc.aspx?docid=PR_390302
for the sovereign press release and rationale behind the action.
As a result of the action, Moody's has also downgraded the
ratings of the regions of Campania and Abruzzo. Please refer to
the press release published by the Sub Sovereign Group for full details:
http://www.moodys.com/viewresearchdoc.aspx?docid=PR_390231.
Furthermore, following the downgrade of Government of Italy's
sovereign rating, some banks acting as counterparties in the affected
Italian ABS transactions have also been downgraded. See http://www.moodys.com/viewresearchdoc.aspx?docid=PR_390365
for full details on the actions taken on Italian banks. Today's
rating action considered the impact of these downgrades on the Italian
ABS transactions.
Following the downgrades of Government of Italy's bond rating and corresponding
downgrades of the Italian regions and banks, 25 tranches in 16 deals
have been downgraded due to the increased country risk and related local-currency
country ceiling of Government of Italy to Aa3. Based on the new
country ceiling, the maximum rating that Moody's will assign to
a domestic Italian issuer including structured finance transactions backed
by Italian receivables, is Aa3 (sf).
The increase in sovereign risk is reflected in Moody's quantitative
analysis for mezzanine and junior tranches. Moody's concluded
that 14 tranches in 10 deals have not been impacted by the Sovereign action
and thus affirmed the ratings of such Notes.
The upgrade in 3 tranches of 2 transactions is prompted by deal deleveraging
resulting in an increase in credit enhancement for the affected tranches.
COUNTERPARTY EXPOSURE
Today's rating actions took into consideration the Notes'
exposure to relevant counterparties, such as servicer, account
banks or swap providers.
Moody's considered how the liquidity available in the transactions and
other mitigants support continuity of Notes payments, in case of
servicer default, using the CR Assessment as a reference point for
servicers. Moody's considers that the current back-up servicing
arrangements are sufficient to support payments in the event of servicer
disruption.
Moody's matches banks' exposure in structured finance transactions to
the CR Assessment for commingling risk, and to the bank deposit
rating when analyzing set-off risk. Moody's has introduced
a recovery rate assumption of 45% for both exposures. Furthermore,
Moody's assessed the default probability of the account bank providers
by referencing the bank's deposit rating.
Moody's assessed the exposure to the swap counterparties. Moody's
analysis considered the risks of additional losses on the Notes if they
were to become unhedged following a swap counterparty default by using
the CR Assessment as reference point for swap counterparties.
Moody's also assessed the default probability of the transactions account
bank providers by referencing the bank's deposit rating.
The supporting excel link mentioned above explains in detail for which
tranches the ratings of the Notes were constrained due to the counterparty
risk exposure.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
Factors or circumstances that could lead to an upgrade of the ratings
include: (1) performance of the underlying collateral that is better
than Moody's expected, (2) deleveraging of the capital structure,
(3) improvements in the credit quality of the transaction counterparties,
and (4) reduction in sovereign risk.
Factors or circumstances that could lead to a downgrade of the ratings
include: (1) performance of the underlying collateral that is worse
than Moody's expected, (2) deterioration in the Notes' available
credit enhancement, (3) deterioration in the credit quality of the
transaction counterparties, and (4) an increase in sovereign risk.
REGULATORY DISCLOSURES
Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF475337
for the List of Affected Credit Ratings. This list is an integral
part of this Press Release and provides, for each of the credit
ratings covered, Moody's disclosures on the following items:
• Releasing Office
• Person Approving the Credit Rating
For further specification of Moody's key rating assumptions and sensitivity
analysis, see the sections Methodology Assumptions and Sensitivity
to Assumptions of the disclosure form.
The analysis relies on an assessment of collateral characteristics to
determine the collateral loss distribution, that is, the function
that correlates to an assumption about the likelihood of occurrence to
each level of possible losses in the collateral. As a second step,
Moody's evaluates each possible collateral loss scenario using a
model that replicates the relevant structural features to derive payments
and therefore the ultimate potential losses for each rated instrument.
The loss a rated instrument incurs in each collateral loss scenario,
weighted by assumptions about the likelihood of events in that scenario
occurring, results in the expected loss of the rated instrument.
Moody's quantitative analysis entails an evaluation of scenarios
that stress factors contributing to sensitivity of ratings and take into
account the likelihood of severe collateral losses or impaired cash flows.
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 credit rating action on the support provider and in relation to
each particular credit 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 credit rating action,
and whose ratings may change as a result of this credit 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.
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead rating analyst and the Moody's legal entity that has issued
the ratings.
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.
Daliya Nureeva
Associate Lead Analyst
Structured Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Mehdi Ababou
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Angel Jimenez
Analyst
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Ian Perrin
Associate Managing Director
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 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
Client Service: 44 20 7772 5454
