Milan, October 04, 2011 -- Moody's Investors Service has today confirmed the ratings of the
Class A2, Class C and Class D notes and has downgraded the Class
B notes issued by Berica 6 Residential MBS S.r.l.
(Berica 6). A detailed list of ratings affected by this action
is provided at the end of the press release.
The rating of the Class A2 notes was placed on review following the implementation
on March 2 2011 of Moody's rating guidance entitled "Global
Structured Finance Operational Risk Guidelines: Moody's Approach
to Analyzing Performance Disruption Risk". The Class B,
Class C and Class D notes were placed on review on 20 May 2011 because
of worse-than- expected collateral performance.
RATINGS RATIONALE
Today's rating action concludes the review and takes into account
: (i) the deterioration of the collateral performance since the
latest review of the assumptions, (ii) the structural changes put
in place to mitigate operational risk in the structure and (iii) the increased
credit enhancement available in the structure following the repurchase
of defaulted loans by the originator.
The future losses (expected loss) and the Moody's Individual Loan Analysis
(MILAN) Aaa Credit Enhancement (Milan Aaa CE) are the two key parameters
used by Moody's to calibrate its loss distribution curve, which
is used in the cash flow model to rate European RMBS transactions.
Moody's confirmation of the senior note is mainly driven by the
measures put in place to mitigate operational risk and by the increase
of the available credit enhancement in the structure. The main
rationale for the downgrade of the Class B note is the revision of the
expected loss assumption and the increase in the MILAN Aaa CE that is
not sufficiently offset by the increase in the credit enhancement.
The rating action takes into account the likelihood that the interest
deferral triggers are breached for both Class B and C and also the likely
amortisation of Class D notes .
Portfolio Expected Loss
Moody's has reassessed its expected loss assumption for Berica 6
taking into account the collateral performance to date as well as the
current macroeconomic environment in Italy. Berica 6 is performing
worse than anticipated as of the last rating action on 10 March 2009.
The cumulative defaults as a percentage of the original portfolio balance
amount to 6.17% , up from 3.8% as of
the payment date in January 2009. 90+ delinquencies are stable
at 4% of the current balance. Considering the current amount
of cumulative defaults together with a roll rate analysis for the non
defaulted pool Moody's has increased its cumulative default rate assumptions
to 9.5% from 6.7% of the closing pool balance.
After also having updated the severity assumption the expected loss has
been increased to 3.0% from 2.5% of the current
pool balance.
MILAN Aaa CE
The MILAN Aaa credit enhancement assumption has been revised to 11.5%
up from 8.2%. The key drivers for the MILAN Aaa credit
enhancement increase are: (i) the exposure to foreigner borrowers
corresponding to approximately 25% of the current pool balance,
which according to the default data that Moody's has received from the
BPVI group has experienced default rates three times higher than borrowers
born in Italy; and (ii) the relatively high portion of loans that
are more the 90 days in arrears delinquent (3.9% of the
loans in the portfolio). After the repurchase of the defaulted
loans the credit enhancement available to the Class A2 is approximately
16.8%.
Operational Risk
The mortgage loans in the transaction were originated by Banca Popolare
di Vicenza S.c.p.A. (BPVI) and Banca Nuova
S.p.A. (BN) and they both act as servicer for their
part of the portfolio with BPVI (not rated) acting as Master Servicer
for the whole portfolio. The issuer will appoint a back-up
servicer to the transaction should the servicer's credit profile not fulfil
the criteria defined in a confidential side letter. In this side
letter an agreement will be signed between Securitisation Services SpA,
acting as BUS-facilitator, BPVI and the issuer, whereby
the BUS-facilitator is obliged to monitor the credit profile of
BPVI. In Moody's opinion the variables that are mentioned in the
agreement have a similar forward looking value as a public rating.
If the BUS-facilitator finds that the credit profile of BPVI was
at a level below a comparable investment grade institution, or if
the BUS-facilitator were not to receive relevant updated information,
then BPVI would no longer fulfil the criteria defined in the agreement.
In that case the BUS-facilitator will step in and help find a BUS
to be appointed to the transaction.
Furthermore, should the Servicer Report not be available at any
payment date, continuity of payments for rated notes will be assured
as the Calculation Agent, on a best effort basis, will prepare
the payment report on estimates: in this case only the amounts of
interest to the rated notes and items in priority thereto will be paid.
Additional credit enhancement in the transaction following the repurchase
of defaulted loans by the originators
BPVI and BN have agreed to purchase from the issuer approximately 39.0
million (BPVI purchase around 36.0 million and BN around
3.0 million) of defaulted mortgage loans. The price
is equal to the current principal amount outstanding of the mortgage loans
plus any accrued interest and unpaid interest and fees. Moody's
has concluded that the potential claw back risk is sufficiently mitigated
by the certificates of solvency provided by the purchasers to the issuer.
For a detailed analysis of this risk please refer to the press release
"Moody's updates on Berica 6 Residential MBS S.r.l.,
Italian RMBS", dated 23rd of December 2009.
The proceeds of the repurchase of defaulted loans will be applied as revenue
funds to the interest waterfall. The priority of payment has been
amended so that instead of leaking out as deffered consideration to the
Class E noteholders the proceeds will be credited to the Cash Reserve.
As of the next interest payment date the cash reserve will be replenished
to its target amount, which is expected by BPVI to be around 16.6
million. An additional amount of 21.5 will also be
retained and credited to the Cash Reserve. The resulting cash reserve
will correspond to around 5.6% of the Class A2, Class
B and Class C notes and will also provide additional liquidity to the
structure.
Pro-Rata amortisation and amortisation of the Class D notes
The Servicer has confirmed that as of the next payment date the amortisation
of the notes will switch to pro-rata since all the conditions for
switching to pro-rata are expected to be satisfied after the repurchase
of the defaulted loans.
In addition after the repurchase is completed the Cumulative Net Default
Ratio will be equal to 0% and the Cash Reserve will be allowed
to amortise as it is expected to be filled up to its target. All
amounts released from the cash reserve will be applied to redeem the Class
D notes. BPVI has estimated that around 300 thousand of the
Cash Reserve will be used to redeem the Class D Notes as of the next payment
date. Moody's notes that the amortisation of the Class D notes
will reduce the amount of credit enhancement available in the structure.
The amortisation of the class D notes in each period will be equal to
the difference between 8 million plus 1.3% of the
then current balance of the Class A to Class C notes at that payment date
and the amount calculated in the same way at the previous payment date.
Interest Subordination Triggers on the Class B and Class C notes
In case the Cumulative Defaults Ratio is greater than 12% then
the interest payments on the Class B and the Class C notes will be made
junior to the amounts due on Principal Deficiency Ledger. The Cumulative
Default Ratio is calculated as the total amount of defaulted loans since
the inception of the deal and will not be modified by the repurchase of
the defaulted assets.
RATING METHODOLOGIES
The principal methodologies used in this rating was Moody's Approach to
Rating RMBS in Europe, Middle East, and Africa, published
in October 2009. Other methodologies used in this rating were 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. Please see the Credit Policy page on
www.moodys.com for a copy of these methodologies.
The ratings address the expected loss posed to investors by the legal
final maturity of the notes. In Moody's opinion, the structure
allows for timely payment of interest and ultimate payment of principal
at par with respect to the Class A2, Class B and Class C notes on
or before the legal final maturity date 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.
LIST OF AFFECTED SECURITIES
Issuer: Berica 6 Residential MBS S.r.l.
....EUR1185M A2 Notes, Confirmed at
Aaa (sf); previously on Mar 2, 2011 Aaa (sf) Placed Under Review
for Possible Downgrade
....EUR42.8M B Notes, Downgraded
to A3 (sf); previously on May 20, 2011 A1 (sf) Placed Under
Review for Possible Downgrade
....EUR28.6M C Notes, Confirmed
at Baa3 (sf); previously on May 20, 2011 Baa3 (sf) Placed Under
Review for Possible Downgrade
....EUR8.565M D Notes, Confirmed
at B3 (sf); previously on May 20, 2011 B3 (sf) Placed Under
Review for Possible Downgrade
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant 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 relevant 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 relevant 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.
The rating has been disclosed to the rated entity or its designated agent(s)
and issued with no amendment resulting from that disclosure.
Information sources used to prepare the rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, and confidential and proprietary Moody's Investors
Service information.
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 in this transaction related to the monitoring
of this transaction in the past six months.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a rating is of sufficient quality and from sources Moody's
considers to be reliable including, when appropriate, independent
third-party sources. However, Moody's is not an auditor
and cannot in every instance independently verify or validate information
received in the rating process.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
three years preceding the credit rating action. Please see the
special report "Ancillary or other permissible services provided to entities
rated by MIS's EU credit rating agencies" on the ratings disclosure page
on our website www.moodys.com for further information.
Please see Moody's Rating Symbols and Definitions on the Rating Process
page on www.moodys.com for further information on the meaning
of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time
before Moody's ratings were fully digitized and accurate data may not
be available. Consequently, Moody's provides a date that
it believes is the most reliable and accurate based on the information
that is available to it. Please see the ratings disclosure page
on our website www.moodys.com for further information.
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.
David Bergman
Asst Vice President - Analyst
Structured Finance Group
Moody's Italia S.r.l
Corso di Porta Romana 68
Milan 20122
Italy
Telephone:+39-02-9148-1100
Barbara Rismondo
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Italia S.r.l
Corso di Porta Romana 68
Milan 20122
Italy
Telephone:+39-02-9148-1100
Moody's takes action on Italian RMBS notes issued by Berica 6 Residential MBS S.r.l.