London, 19 December 2016 -- Moody's Investors Service has today upgraded the ratings on notes issued
by three Italian Small-Ticket Lease transactions and affirmed the
ratings on notes issued by one Italian SME and two of the three Italian
Small-Ticket Lease transactions. The actions follow the
upgrade of Banco Popolare Societa Cooperativa's ("Banco Popolare")
Counterparty Risk assessment "CR assessment" to Ba1(cr) from
Ba2(cr). Moody's has affirmed the ratings of four notes in
BPL Mortgages S.r.l. (2014 SME), an Italian
SME transaction, and additionally has upgraded the ratings of nine
notes and affirmed the ratings of two notes in three Italian small ticket
lease transactions (Italfinance Securitisation Vehicle S.r.l
(ITA 8), Italfinance Securitisation Vehicle 2 S.r.l
(ITA 9) and Leasimpresa Finance S.r.l. (LF 2)).
The rating upgrades result primarily from deleveraging of the transactions
since their last rating actions in June 2015, with the upgrade of
Banco Popolare having only a limited effect. The rating affirmations
follow the upgrade of Banca Popolare and its subsidiaries.
All four transactions have exposure to Banco Popolare through its roles
of originator and servicer. Banco Popolare merged with Banca Italease
S.p.A. -- the originator of ITA 8, ITA
9 and LF 2 -- in March 2015.
Issuer: BPL Mortgages S.r.l. (2014 SME)
....EUR 1077.4M Class A1-2014
Notes, Affirmed A1 (sf); previously on Feb 26, 2016 Affirmed
A1 (sf)
....EUR 1936M Class A2-2016 Notes,
Affirmed A1 (sf); previously on Feb 26, 2016 Rating Assigned
A1 (sf)
....EUR 269.3M Class B1-2014
Notes, Affirmed Baa1 (sf); previously on Feb 26, 2016
Downgraded to Baa1 (sf)
....EUR 1M Class B2-2016 Notes,
Affirmed Baa1 (sf); previously on Feb 26, 2016 Rating Assigned
Baa1 (sf)
Issuer: Italfinance Securitisation Vehicle S.r.l.
(ITA 8)
....EUR 959M Class A Notes, Upgraded
to Aa2 (sf); previously on Jun 11, 2015 Confirmed at A1 (sf)
....EUR 83M Class B Notes, Upgraded
to A1 (sf); previously on Jun 11, 2015 Upgraded to A3 (sf)
....EUR 56M Class C Notes, Upgraded
to A3 (sf); previously on Jun 11, 2015 Upgraded to Baa2 (sf)
....EUR 18.5M Class D Notes,
Upgraded to A3 (sf); previously on Jun 11, 2015 Upgraded to
Baa3 (sf)
Issuer: Italfinance Securitisation Vehicle 2 S.r.l.
(ITA 9)
....EUR1442.4M Class A Notes,
Upgraded to A2 (sf); previously on Jun 11, 2015 Confirmed at
A3 (sf)
....EUR125M Class B Notes, Upgraded
to Baa3 (sf); previously on Jun 11, 2015 Confirmed at Ba1 (sf)
....EUR84.3MClass C Notes, Upgraded
to Ba2 (sf); previously on Jun 11, 2015 Upgraded to Ba3 (sf)
....EUR27.9M D Notes, Affirmed
at B1 (sf); previously on Jun 11, 2015 Upgraded to B1 (sf)
Issuer: Leasimpresa Finance S.r.l. (LF 2)
....EUR931.5M A Notes, Affirmed
at A1 (sf); previously Jun 11, 2015 Confirmed at A1 (sf)
....EUR57.2M B Notes, Upgraded
to A1 (sf); previously on Jun 11, 2015 Upgraded to A3 (sf);
....EUR10.3M C Notes, Upgraded
to A1 (sf); previously on Jun 11, 2015 Upgraded to Baa2 (sf);
RATINGS RATIONALE
The main drivers of today's action are (1) deal deleveraging resulting
in an increase in credit enhancement for the affected notes; and
(2) the upgrade of Banco Popolare's CR Assessment by 1 notch to
Ba1(cr).
Moody's analysis takes into account collateral performance to date,
borrower concentrations within the collateral pools and rating sensitivity
to modelling assumptions. Particularly in the cases of the ITA
8 and LF 2 collateral pools, borrower concentrations are significant;
the rating approach for ITA 8 incorporates a stressed default distribution
to mitigate the very high levels of borrower concentrations, whereas
for the more-granular LF 2 transaction, cashflow model ratings
were constrained to reflect the relationship between available credit
enhancement and the most significant collateral pool borrower concentrations.
Increase in Available Credit Enhancement
For BPL Mortgages S.r.l. (2014 SME), sequential
amortization and non-amortizing reserve funds led to the increase
in available credit enhancement (CE). For instance, the CE
for the most senior tranche affected by today's rating action increased
to 46.76% from 39.23% since the last rating
action in February 2016.
The rated notes in ITA 8, ITA 9 and LF 2 are amortizing on a pro-rata
basis. With non-amortizing reserve funds and the unrated
(equity) tranches currently locked out of principal cashflows, credit
enhancement for the rated notes has been increasing.
For ITA 8, the CE under the Class A, Class B, Class
C and Class D Notes has increased since the last rating action in June
2015 to 63.1% from 43.6%, to 56.4%
from 33.3%, to 51.8% from 26.4%
and to 50.3% from 24.1% respectively.
The increase in CE results from pro rata amortisation of the rated notes
whilst the unrated Class E remains outstanding at its originally issued
amount.
For ITA 9, the CE under the Class A, Class B, Class
C and Class D Notes has increased since the last rating action in June
2015 to 36.7% from 33.6%, to 24.2%
from 20.6%, to 15.8% from 11.7%
and to 13.0% from 8.8% respectively.
The increase in CE results from pro rata amortisation of the rated notes
whilst the unrated Class E remains outstanding at its originally issued
amount .
For LF 2, the CE under the Class A, Class B and Class C Notes
has increased since the last rating action in June 2015 to 46.1%
from 34.0%, to 39.1% from 25.5%
and to 37.8% from 23.9% respectively.
The increase in CE results from pro rata amortisation of the rated notes
whilst the unrated Class D remains outstanding at its originally issued
amount .
Revision of Key Collateral Assumptions
BPL Mortgages S.r.l. (2014 SME)
As part of the rating action, Moody's reassessed its default probability
and recovery rate assumptions for the portfolio reflecting the collateral
performance to date.
The performance of the transaction has been stable since February 2016
when the deal was restructured. Since the last rating action,
total delinquencies stand at 9.91%, with 90 days plus
arrears currently at 3.29% of current pool balance.
Cumulative defaults currently stand at 2.81% of original
pool balance.
As part of the analysis for BPL Mortgages S.r.l.
(2014 SME), Moody's adjusted the recovery rate assumption
to a fixed value of 50% from the prior stochastic recovery rate
assumption of 55%. Moody's kept unchanged the current
default probability of 20.30% of the current portfolio balance,
as well as the current portfolio credit enhancement (PCE) of 32.30%
which, combined with the revised key collateral assumptions,
results in a marginal increase of the Coefficient of Variation (CoV) to
54.89% from 52.00%.
Italfinance Securitisation Vehicle S.r.l (ITA 8)
As part of the rating action, Moody's reassessed its default probability
and recovery rate assumptions for the collateral portfolio, reflecting
transaction performance and the very high levels of borrower concentrations.
The Top 50 borrowers make up over 70% of the remaining performing
collateral balance, whilst the top 20 names represent approximately
47% of the remaining performing collateral balance. In its
analysis of the transaction, Moody's considered portfolio
concentrations by generating a default probability distribution which
included rating stresses on the largest concentrations and an increase
in correlation assumptions for the largest industry concentrations within
the collateral pool.
ITA 8 has low levels of delinquencies but exhibits some volatility in
its reported delinquency values due to the concentrated nature of the
collateral pool. Total delinquencies reduced to 0.51%
of current pool balance in September 2016 from 3.06% of
current pool balance in June 2016, whilst 90 plus days delinquencies
were reported at 0.0% in September 2016.
Moody's assessment of the transaction included a base case run using
a recovery rate of 50% from the prior assumption of 75%
(which reflected the obligation of the Originator to maintain the collateralization
condition by purchasing defaulted loans at a minimum of 75% of
book value) to reflect the underlying long-term assumed recovery
rate on the collateral, as well as stressed cases and runs exploring
the sensitivity of the transaction to higher recovery rates. The
default probability distribution used in the base model run is consistent
with a default probability of 20.89% of current balance,
a PCE of 35.74% and a CoV of 77.09%.
For ITA 8, the rating model output was subject to a constraint due
to the presence of the Italian country risk ceiling of Aa2.
Italfinance Securitisation Vehicle 2 S.r.l (ITA 9)
As part of the rating action, Moody's reassessed its default probability
and recovery rate assumptions for the portfolio reflecting the collateral
performance to date.
The performance of the transaction shows some volatility, with total
delinquencies reported at 3.31% in September 2016 from 6.50%
in the prior period. Cumulative defaults currently stand at 10.28%
of original pool balance and cumulative net defaults show a declining
trend, reducing to 2.72% in October 2016 from 2.74%
in January 2016.
Moody's has adjusted the recovery rate assumption to 50%
from the prior assumption of 75% to reflect recoveries on the collateral
in place of the repurchase obligation of the Originator to maintain the
collateralization condition by purchasing defaulted collateral for a minimum
of 75% of book value. Moody's maintained the default
probability assumption of 14.0% of the current portfolio
balance as well as the PCE of 22.5% which, combined
with the revised key collateral assumptions, results in a marginal
decrease in CoV to 52.93% from 55.10%.
Leasimpresa Finance S.r.l. (LF 2)
As part of the rating action, Moody's reassessed its default probability
and recovery rate assumptions for the portfolio reflecting the collateral
performance to date.
Notwithstanding the small remaining balance, the performance of
the transaction is relatively stable with total delinquencies reported
at 1.00% in September 2016. Cumulative defaults currently
stand at 5.81% of original pool balance and cumulative net
defaults show a declining trend, reducing to 2.72%
in September 2016 from 2.85% in December 2015.
Moody's has adjusted the recovery rate assumption to 50%
from the prior assumption of 75% to reflect recoveries on the collateral
in place of the repurchase obligation of the Originator to maintain the
collateralization condition by purchasing defaulted collateral for a minimum
of 75% of book value. Moody's maintained the default
probability assumption of 10.0% of the current portfolio
balance as well as the PCE of 20.0% which, combined
with the revised key collateral assumptions, results in a marginal
increase in CoV to 64.21% from 62.13%.
For LF 2, the rating model output was subject to a rating committee
constraint at the single "A" rating category to reflect the
relationship between significant concentrations of borrowers within the
collateral pool and the subordination available to each class of note.
Counterparty Exposure
Banco Popolare acts as the servicer, issuer account bank and administrative
agent in BPL Mortgages S.r.l. (2014 SME).
Banco Popolare is also the servicer in ITA 8, ITA 9 and LF 2 following
its March 2015 merger with Banca Itealease S.p.A.
Banco Popolare Societa Cooperativa's CR assessment was upgraded
to Ba1(cr) on 20 October 2016. (see http://www.moodys.com/viewresearchdoc.aspx?docid=PR_356383).
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
servicer. The upgrade of the CR assessment of Banco Popolare had
a limited impact on the ratings.
The methodology used in BPL Mortgages S.r.l. (2014
SME) was "Moody's Global Approach to Rating SME Balance Sheet Securitization"
published in October 2015. The methodology used in Italfinance
Securitisation Vehicle S.r.l., Italfinance
Securitisation Vehicle 2 S.r.l. and Leasimpresa Finance
S.r.l. was "Moody's Approach to Rating ABS
Backed by Equipment Leases and Loans" published in December 2015.
Please see the Rating Methodologies page on www.moodys.com
for a copy of these methodologies.
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 and
(3) improvements in the credit quality of the transaction counterparties
and (4) a decrease in sovereign risk.
Factors or circumstances that could lead to a downgrade of the ratings
include (1) an increase in sovereign risk (2) performance of the underlying
collateral that is worse than Moody's expected, (3) deterioration
in the notes' available credit enhancement and (4) deterioration in the
credit quality of the transaction counterparties.
STRESS SCENARIOS:
To ensure rating stability and to test the sensitivity of the notes ratings,
Moody's modelling included an assessment of various stress scenarios.
BPL Mortgages S.r.l. (2014 SME) showed rating sensitivity
to a 25% stresses in the default probability assumption and a 20%
increase in the PCE assumption. This sensitivity analysis imposed
a constraint on rating upgrades.
For ITA 8, ITA 9 and LF 2, the base case assumptions already
include certain stresses. For example, the originator in
all 3 deals has an obligation to repurchase defaulted loans at a minimum
price of 75% such that the collateralisation condition is maintained,
whereas the base case recovery rate of 50% reflects the assumed
"natural" recovery rate of defaulted collateral. As
a general comment, the default probability and PCE assumptions for
the 3 deals include adjustments for the concentrated nature of the collateral
pools.
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.
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 describes the stress scenarios it has considered for this
rating action in the section "Ratings Rationale" of this press
release.
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 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.
James Morton
Asst Vice President - 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
Mehdi Ababou
VP - Senior Credit Officer
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
