London, 24 March 2015 -- Moody's Investors Service has today upgraded the ratings of twelve notes,
confirmed the rating of one note and affirmed the rating of one note in
five Italian mortgage-backed securities (RMBS) transactions:
F-E Mortgages S.r.l., F-E Mortgages
S.r.l. 2005, Siena Mortgages 07-5 S.p.A,
SIENA MORTGAGES 2010 -7 and Siena Mortgages 07-5,
Series 2.
Today's rating actions conclude the placement of the ratings on review
for upgrade of thirteen notes initiated on 23 January 2015, following
the upgrade of the Italian country ceiling to Aa2 from A2. (see
"Moody's takes rating actions on Irish, Italian, Portuguese,
Spanish ABS/RMBS deals" - http://www.moodys.com/viewresearchdoc.aspx?docid=PR_316959).
Please refer to the end of the Ratings Rationale section for a list of
affected ratings.
RATINGS RATIONALE
Today's rating upgrades reflect (1) the upgrade of the Italian local currency
country risk ceiling to Aa2; and (2) the updates to Moody's
structured finance rating methodologies to incorporate the new Counterparty
Risk ("CR") Assessment for banks .
Today's affirmation and confirmation reflect Moody's view that the
available credit enhancement is sufficient to maintain the current ratings
on the affected notes.
-- REDUCED COUNTRY RISK
The country ceilings reflect a range of risks that issuers in any jurisdiction
are exposed to, including economic, legal and political risks.
On 20 January 2015, Moody's announced a six-notch uplift
between a government bond rating and its country risk ceiling for Italy.
As a result, the maximum achievable rating for structured finance
transactions increased to Aa2 (sf) from A2 (sf) for Italy.
-- COUNTERPARTY RISK EXPOSURE AND UPDATES TO MOODY'S
STRUCTURE FINANCE RATING METHODOLOGIES
Today's rating actions took into consideration the notes'
exposure to relevant counterparties, such as servicers, account
banks or swap providers. Moody's incorporated the updates
to its structured finance methodologies in its analysis of the transactions
affected by today's rating actions (see "Moody's updates several
structured finance rating methodologies in light of its new counterparty
risk assessment for banks," published on 16 March 2015 -
http://www.moodys.com/viewresearchdoc.aspx?docid=PR_320674).
Moody's now matches banks' exposure in structured finance
transactions to the CR Assessment for commingling risk, and to the
bank deposit rating when analysing set-off risk. Moody's
has introduced a recovery rate assumption of 45% for both exposures.
Moody's considered how the liquidity available in the transactions
and other mitigants support continuity of note payments, in case
of servicer default, using the CR Assessment as a reference point
for servicers or cash mangers.
Moody's also assessed the default probability of each transaction's
account bank providers by referencing the bank's deposit rating.
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.
In addition Moody's uses internal guidance on the CR Assessments
to assess the rating impact on outstanding structured finance transactions.
The internal guidance is in line with the guidance published in its updated
bank rating methodology and its responses to frequently asked bank methodology-related
questions.
In Siena Mortgages 07-5 S.p.A, the exposure
to Banca Monte dei Paschi di Siena S.p.A. as swap
counterparty constrains the ratings on the class B and C notes.
The rating review placements of certain banks resulting from Moody's
revised bank methodology, will not affect the ratings in these five
transactions, if the final ratings on the banks are in line with
Moody's preliminary indications (see "Moody's reviews global
bank ratings", published on 17 March 2015 - http://www.moodys.com/viewresearchdoc.aspx?docid=PR_321005).
-- REVISION OF KEY COLLATERAL ASSUMPTIONS
Moody's has reassessed its lifetime loss expectation, taking into
account the transactions' underlying collateral performance to date.
The portfolios in F-E Mortgages S.r.l. and
F-E Mortgages S.r.l. 2005 show deteriorating
growth rate in defaults. As a result, Moody's increased its
Expected Loss (EL) assumption for F-E Mortgages S.r.l.
to 3.48% from 3.21% of the original pool balance
and, in F-E Mortgages S.r.l. 2005,
to 3.81% from 3.56%.
Moody's has also increased the MILAN CE in F-E Mortgages S.r.l.to
13.0% from 8.5% and, in F-E Mortgages
S.r.l. 2005, to 11.7% from 8.5%.
The increased EL assumptions in these two transactions resulted in a higher
Minimum EL Multiple which corresponds to the MILAN CE floor according
to Moody's methodology for rating RMBS transactions using the MILAN framework.
Moody's key collateral assumptions remain unchanged for Siena Mortgages
07-5 S.p.A, Siena Mortgages 07-5,
Series 2 and SIENA MORTGAGES 2010 -7, as the pools'
performance remains in line with Moody's assumptions.
Moody's quantitative analysis incorporates the ratings' sensitivity
to increases in key collateral assumptions. The increases included
stresses between 1.25x and 1.50x EL in line with the current
EL assumption, and 1.2x MILAN CE. Moody's sensitivity
analysis would typically expect to see the ratings fall by no more than
one to three notches using these stressed assumptions. The results
of this analysis limited the potential upgrade of the ratings on the class
B Notes in F-E Mortgages S.r.l., the
class C notes in F-E Mortgages S.r.l. 2005
and the class B notes in Siena Mortgages 07-5, Series 2.
Principal Methodology:
The principal methodology used in these ratings was "Moody's Approach
to Rating RMBS Using the MILAN Framework," published in January
2015. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
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) further decrease in sovereign risk; (2) better-than-expected
performance of the underlying collateral; (3) deleveraging of the
capital structure; and (4) improvements in the credit quality of
the transaction counterparties above the preliminary indication of outcome
ratings, after Moody's concluded its review under the bank
rating methodology (see "Moody's reviews global bank ratings,"
published on 17 March 2015 - http://www.moodys.com/viewresearchdoc.aspx?docid=PR_321005).
Factors or circumstances that could lead to a downgrade of the ratings
include (1) an increase in sovereign risk; (2) worse-than-expected
performance of the underlying collateral; (3) deterioration in the
notes' available credit enhancement; and (4) deterioration in the
credit quality of the transaction counterparties.
List of Affected Ratings:
Issuer: F-E Mortgages S.r.l.
....EUR 682M Class A1 Notes, Upgraded
to Aa2 (sf); previously on Jan 23, 2015 A2 (sf) Placed Under
Review for Possible Upgrade
....EUR 48M Class B Notes, Upgraded
to A1 (sf); previously on Jan 23, 2015 A2 (sf) Placed Under
Review for Possible Upgrade
....EUR 11M Class C Notes, Affirmed
Baa2 (sf); previously on Apr 29, 2014 Confirmed at Baa2 (sf)
Issuer: F-E Mortgages S.r.l. 2005
....EUR 951.6M Class A Notes,
Upgraded to Aa2 (sf); previously on Jan 23, 2015 A2 (sf) Placed
Under Review for Possible Upgrade
....EUR 41.1M Class B Notes,
Upgraded to Aa2 (sf); previously on Jan 23, 2015 A2 (sf) Placed
Under Review for Possible Upgrade
....EUR 36M Class C Notes, Upgraded
to Baa1 (sf); previously on Jan 23, 2015 Baa2 (sf) Placed Under
Review for Possible Upgrade
Issuer: Siena Mortgages 07-5 S.p.A
....EUR 4765.9M Class A Notes,
Upgraded to Aa2 (sf); previously on Jan 23, 2015 A2 (sf) Placed
Under Review for Possible Upgrade
....EUR 157.45M Class B Notes,
Upgraded to A1 (sf); previously on Jan 23, 2015 Baa3 (sf) Placed
Under Review for Possible Upgrade
....EUR 239M Class C Notes, Confirmed
at B3 (sf); previously on Jan 23, 2015 B3 (sf) Placed Under
Review for Possible Upgrade
Issuer: SIENA MORTGAGES 2010 -7 S.R.L.
....EUR 400M Class A2 Notes, Upgraded
to Aa2 (sf); previously on Jan 23, 2015 A2 (sf) Placed Under
Review for Possible Upgrade
....EUR 1666.9M Class A3 Notes,
Upgraded to Aa2 (sf); previously on Jan 23, 2015 A2 (sf) Placed
Under Review for Possible Upgrade
....EUR 817.6M Class B Notes,
Upgraded to Ba3 (sf); previously on Jan 23, 2015 Caa1 (sf)
Placed Under Review for Possible Upgrade
Issuer: Siena Mortgages 07-5, Series 2
....EUR 3129.4M Class A Notes,
Upgraded to Aa2 (sf); previously on Jan 23, 2015 A2 (sf) Placed
Under Review for Possible Upgrade
....EUR 108.3M Class B Notes,
Upgraded to A2 (sf); previously on Jan 23, 2015 Baa2 (sf) Placed
Under Review for Possible Upgrade
REGULATORY DISCLOSURES
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.
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 related to the monitoring of these transactions
in the past six months.
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.
Moody's weights the impact on the rated instruments based on its
assumptions of the likelihood of the events in such scenarios occurring.
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.
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 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.
Ali Khan
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
Barbara Rismondo
Senior Vice President/Manager
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Nadia Lamniai
Associate Analyst 2
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 takes rating actions in five Italian RMBS deals
