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Rating Action:

Moody's takes rating actions on 4 Italian ABS deals

24 Feb 2015

Madrid, February 24, 2015 -- Moody's Investors Service has today upgraded the ratings of 8 notes, and affirmed the ratings of 2 notes in 4 Italian asset-backed securities (ABS) transactions:

Locat Securitisation Vehicle 3 S.r.l.,

Locat SV S.r.l. - Serie 2006 (LSV4),

F-E Gold S.r.l. and

Medioleasing Finance S.r.l.

The upgrades of the local-currency country risk ceilings to Aa2 from A2 in Italy on 20 January 2015 prompted today's rating actions. Please refer to the revised methodology on country ceilings and the new ceiling applied to euro area countries: http://www.moodys.com/viewresearchdoc.aspx?docid=PR_316765.

Please refer to the end of the Ratings Rationale section for a list of affected ratings.

RATINGS RATIONALE

The main drivers behind today's upgrades are (1) the reduced country risk as reflected by the increase in the maximum achievable rating in Italy and (2), the deleveraging since the last rating actions for these deals.

Moody's analysis incorporates the revisions, when needed, of portfolio default assumptions taking into account the collateral performance to-date as well as the exposure to relevant counterparty servicers, account banks and swap providers. Moody's cash flow sensitivity stress tests as well as borrower concentration analysis were also taken into account in today's rating actions.

Moody's has also affirmed the ratings of the notes where the current credit enhancement was commensurate with the current ratings.

INCREASED LOCAL-CURRENCY COUNTRY CEILINGS

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 ratings for covered bonds and structured finance transactions were increased to Aa2 from A2 for Italy.

KEY COLLATERAL ASSUMPTIONS AND CREDIT ENHANCEMENT LEVELS

Moody's has revised its volatility assumption in those transactions given the reduced country risk while default and recovery assumptions remain unchanged given the stable performance of the transactions except for F-E Gold S.r.l. which showed recent significant increase in 90+ delinquencies.

In Locat Securitisation Vehicle 3 S.r.l., the default probability assumption on current balance of 12% together with a recovery rate of 35% and a volatility of 45.7% corresponds to an unchanged portfolio credit enhancement (portfolio CE) of 23.5%.

In Locat SV S.r.l. - Serie 2006 (LSV4), the default probability assumption on current balance of 12% together with a recovery rate of 35% and a volatility of 45.9% corresponds to an unchanged portfolio CE of 22.5%.

In F-E Gold S.r.l., Moody's increased its DP to 18% from 16% of the current pool balance to reflect current pool characteristics. In particular, this transaction has high level of late delinquencies which could translate into additional defaults in the transaction. The portfolio CE increased from 25% to 28% as reflected by the volatility of 46.1% and unchanged recovery rate of 45%.

In Medioleasing Finance S.r.l., the default probability assumption on current balance of 18% together with a recovery rate of 45% and a volatility of 48.1% corresponds to an unchanged portfolio credit enhancement of 25.5%.

Moody's assumed that the recovery rate would go down to 15% upon the originators default in those four transactions. Legal uncertainty regarding the rights of the special purpose vehicles to recover amounts on the lease contracts upon originator's default drives this assumption.

Moody's incorporated the sensitivity analysis of the ratings to borrower concentrations in the ABS deals that have collateral pools of SME loans and small-ticket leases, and considered the credit-enhancement coverage of the large debtors in the asset pools. The results of this analysis limited the potential upgrade of the rating on the Class B Notes and C Notes of Locat Securitisation Vehicle 3 S.r.l. to A3 (sf) as the credit enhancement of the Class B Notes of 44.9% only nearly covers the top ten debtors and the credit enhancement of the Class C Notes of 6% only covers the top one debtor.

--- EXPOSURE TO COUNTERPARTIES

Today's rating actions took into consideration the notes' exposure to relevant counterparties, such as servicers, account banks or swap providers. Moody's considered how the liquidity available in the transactions and other mitigants support continuity of note payments, in case of servicer default. Moody's also assessed the default probability of each transaction's account bank providers. Moody's analysis considered the risks of additional losses on the notes in the event of them becoming unhedged, following a swap counterparty default.

--- RATING SENSITIVITY

To ensure rating stability and to test the sensitivity of the notes' ratings, Moody's ran stressed scenarios in cash flow models before upgrading the relevant notes.

The stressed scenarios assume (1) a 25% stresses for the default probability assumption for ABS; and (2) a 20% increase in the portfolio CE assumption. The ratings were upgraded when the negative rating impact resulting from the above test was within the sensitivity tolerance. None of the transactions upgrades were limited by the sensitivity to key collateral assumptions.

The principal methodology used in these ratings was "Moody's Approach to Rating ABS Backed by Equipment Leases and Loans" 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 are (1) a lower probability of high-loss scenarios owing to an upgrade of the country ceiling; (2) performance of the underlying collateral that exceeds Moody's expectations; (3) deleveraging of the capital structure; and (4) improvements in the credit quality of the transaction counterparties.

Factors or circumstances that could lead to a downgrade of the ratings are (1) an increased probability of high-loss scenarios owing to a downgrade of the country ceiling; (2) performance of the underlying collateral that does not meet Moody's expectations; (3) deterioration in the notes' available credit enhancement; and (4) deterioration in the credit quality of the transaction counterparties.

List of Affected Ratings:

Issuer: Locat Securitisation Vehicle 3 S.r.l.

....EUR160M B Notes, Upgraded to A3 (sf); previously on Jan 23, 2015 Baa2 (sf) Placed Under Review for Possible Upgrade

....EUR33M C Notes, Affirmed Caa1 (sf); previously on Jun 25, 2013 Downgraded to Caa1 (sf)

Issuer: Locat SV S.r.l. - Serie 2006 (LSV4)

....EUR1348M A2 Notes, Upgraded to Aa2 (sf); previously on Jan 23, 2015 A2 (sf) Placed Under Review for Possible Upgrade

....EUR152M B Notes, Upgraded to A1 (sf); previously on Jan 23, 2015 Baa3 (sf) Placed Under Review for Possible Upgrade

....EUR64M C Notes, Affirmed Caa2 (sf); previously on Dec 10, 2012 Downgraded to Caa2 (sf)

Issuer: F-E Gold S.r.l.

....EUR749M A2 Notes, Upgraded to A2 (sf); previously on Jan 23, 2015 Baa1 (sf) Placed Under Review for Possible Upgrade

....EUR56M B Notes, Upgraded to Ba1 (sf); previously on Jan 23, 2015 B1 (sf) Placed Under Review for Possible Upgrade

....EUR10.2M C Notes, Upgraded to B2 (sf); previously on Jan 23, 2015 Caa2 (sf) Placed Under Review for Possible Upgrade

Issuer: Medioleasing Finance S.r.l.

....EUR300M A Notes, Upgraded to Aa2 (sf); previously on Jan 23, 2015 A2 (sf) Placed Under Review for Possible Upgrade

....EUR105.4M B Notes, Upgraded to B3 (sf); previously on Jan 23, 2015 Caa1 (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.

Antonio Tena
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Carole Gintz
Senior Vice President/Manager
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's takes rating actions on 4 Italian ABS deals
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