London, 27 March 2015 -- Moody's Investors Service has today upgraded the ratings of twelve notes
and confirmed the rating of one note in five Italian mortgage-backed
securities (RMBS) transactions: Argo Mortgage 2 S.r.l.,
BP Mortgages S.r.l. Series 2007-2, BPM
Securitisation 2 Srl, Leone Arancio Finance S.r.l.,
BSS Securitisation 1 S.r.l.
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 confirmation reflects 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 managers.
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.
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 BPM Securitisation 2 Srl and BP Mortgages S.r.l
Series 2007-2 show deteriorating growth rate in defaults.
As a result, Moody's increased its Expected Loss (EL) assumption
for BPM Securitisation 2 Srl to 1.65% from 1.52%
of the original pool balance and, in BP Mortgages S.r.l
Series 2007-2, to 5.76% from 5.41%.
Moody's has also increased the MILAN CE in BP Mortgages S.r.l
Series 2007-2 to 14.25% from 12.5%
and in BPM Securitisation 2 Srl, to 11.2% from 10%.
The increased EL assumptions 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
has decreased the MILAN CE in BSS Securitisation 1 S.r.l
to 22% from 23.5%, reflecting the stabilisation
in collateral trends and improving average loan-to-value
of the securitised pool.
Moody's key collateral assumptions remain unchanged for Argo Mortgage
2 S.r.l and Leone Arancio Finance S.r.l,
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
C notes in Argo Mortgage 2 S.r.l., the Class
B notes in BPM Securitisation 2 Srl and the Class B notes in BP Mortgages
S.r.l. Series 2007-2.
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: Argo Mortgage 2 S.r.l.
....EUR808.3M A Notes, Upgraded
to Aa2 (sf); previously on Jan 23, 2015 A2 (sf) Placed Under
Review for Possible Upgrade
....EUR26.8M B Notes, Upgraded
to Aa2 (sf); previously on Jan 23, 2015 A2 (sf) Placed Under
Review for Possible Upgrade
....EUR29.35M C Notes, Upgraded
to A3 (sf); previously on Jan 23, 2015 Baa2 (sf) Placed Under
Review for Possible Upgrade
Issuer: BP Mortgages S.r.l. Series 2007-2
....EUR1382M A2 Notes, Upgraded to Aa2
(sf); previously on Jan 23, 2015 A2 (sf) Placed Under Review
for Possible Upgrade
....EUR28.2M B Notes, Upgraded
to A1 (sf); previously on Jan 23, 2015 Baa1 (sf) Placed Under
Review for Possible Upgrade
....EUR36.2M C Notes, Upgraded
to Baa1 (sf); previously on Jan 23, 2015 Baa3 (sf) Placed Under
Review for Possible Upgrade
Issuer: BPM Securitisation 2 Srl
....EUR1574.6M A2 Notes, Upgraded
to Aa2 (sf); previously on Jan 23, 2015 A2 (sf) Placed Under
Review for Possible Upgrade
....EUR40.3M B Notes, Upgraded
to A2 (sf); previously on Jan 23, 2015 Baa3 (sf) Placed Under
Review for Possible Upgrade
....EUR50.4M C Notes, Confirmed
at Ba2 (sf); previously on Jan 23, 2015 Ba2 (sf) Placed Under
Review for Possible Upgrade
Issuer: BSS Securitisation 1 S.r.l.
....EUR72.6M A-2 Notes,
Upgraded to Aa2 (sf); previously on Jan 23, 2015 A2 (sf) Placed
Under Review for Possible Upgrade
....EUR40.8M B Notes, Upgraded
to A2 (sf); previously on Jan 23, 2015 Baa2 (sf) Placed Under
Review for Possible Upgrade
Issuer: Leone Arancio Finance S.r.l.
....EUR2332M A1 Notes, Upgraded to Aa2
(sf); previously on Jan 23, 2015 A2 (sf) Placed Under Review
for Possible Upgrade
....EUR2176.55M A2 Notes, Upgraded
to Aa2 (sf); previously on Jan 23, 2015 A2 (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.
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.
Christophe Larpin
Vice President - Senior 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
Carole Bernard
Vice President - Senior Analyst
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
