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Rating Action:

Moody's upgrades and confirms ratings in three Italian small-ticket lease ABS deals

11 Jun 2015

London, 11 June 2015 -- Moody's Investors Service has today upgraded the ratings on seven notes and confirmed the ratings on four notes in three Italian asset-backed securities (ABS) 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 three affected deals are all backed by small-ticket leases.

The rating action follows the assignment of a Ba2 (cr) Counterparty Risk Assessment (CR Assessment) to Banco Popolare Societa Cooperativa (BPSC), and the confirmation of the senior unsecured rating of Banca Italease S.p.A at Ba3 on 27 May 2015.

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 introduction of the CR Assessment to Banco Popolare Societa Cooperativa and (2) deleveraging since the last rating actions for the deals in February 2015.

Moody's analysis takes into account the collateral performance to date as well as the exposure to relevant counterparty servicers, account banks and swap providers. The main assumptions (default probability, volatility, recovery rates) have not changed given that performances trend is in line with what we observed during the last rating actions in February 2015. Moody's performed model sensitivity test to key collateral assumptions (default probability and volatility), which only constrained the transactions' ratings of Class A in ITA 8 and LF 2.

--- INTRODUCTION OF THE COUNTERPARTY RISK ASSESSMENT

Moody's introduced the CR Assessment for banks as part of its revised bank rating methodology. The CR Assessment reflects an issuer's ability to avoid defaulting on certain obligations and contractual commitments, including payment obligations associated with derivatives, letters of credit, third-party guarantees, servicing and trustee obligations and other operational obligations. The CR Assessment applicable for the three transactions is Ba2 (cr) and is that of Banco Popolare Societa Cooperativa, the parent of the originator/servicer of the three transactions, namely Banca Italease S.p.A (Bance Italease). As per our methodology ("Cash Commingling Risk in EMEA ABS and RMBS Transactions: Moody's Approach"), we now use BPSC's CR Assessment at Ba2 (cr), rather than its senior unsecured debt rating of Ba3, to measure the probability of a commingling risk event. The commingling exposure using the CR Assessment, combined with a little deleveraging since the February 2015 rating action, results in upgrades for most tranches.

-- NOTES' RATINGS ARE LINKED TO BANCA ITALEASE'S RATINGS THROUGH ITS OBLIGATION TO REPURCHASE DEFAULTED LOANS

ITA 8, ITA 9 and LF 2 have a strong linkage with the originator, Banca Italease (Senior Unsecured Rating Ba3, outlook stable). The observed performance of these transactions, which is in line with Moody's assumptions so far, is conditioned by the obligation of the originator to repurchase defaulted loans (for a minimum price of 75% of their outstanding amount). Thus, the modelling of the linkage of the transaction to Banca Italease's obligation to repurchase defaulted loans used Banca Italease's senior unsecured rating of Ba3, unchanged from last rating action.

--- KEY COLLATERAL ASSUMPTIONS AND CREDIT ENHANCEMENT LEVELS

Moody's has not amended its default, recovery and volatility assumptions for these transactions, given that the assumptions were already updated in February 2015 and that no new element has taken place to justify a modification of these assumptions.

When modelling cash flows, Moody's maintained the recovery rate assumptions of ITA 8, ITA 9 and LF 2 at 75% based on Banca Italease's repurchase obligation. However, Moody's assumed that the recovery rate would go down to 15% upon Banca Italease's default. Legal uncertainty regarding the rights of the special purpose vehicles to recover amounts on the lease contracts upon originator's default drives this assumption. This feature increases the dependence of the notes' ratings on Banca Italease's rating.

For ITA 8, the credit enhancement (CE) under the Class A, Class B, Class C and Class D Notes has increased since December 2014 to 43.6% from 41.8%, to 33.3% from 31.2%, to 26.4% from 24.0% and to 24.1% from 21.6%, respectively. The limited increase in CE results from pro rata amortisation of the notes.

Performance has been in line with Moody's expectations, with a net cumulative default ratio of 1.98%.

For ITA 9, the CE under the Class A, Class B, Class C and Class D Notes has increased since October 2014 to 33.6% from 32.8%, to 20.6% from 19.6%, to 11.7% from 10.7% and to 8.8% from 7.7%, respectively. The limited increase in CE results from pro rata amortisation of the notes.

Performance has been in line with Moody's expectations, with a net cumulative default ratio of 2.74%, slightly below the sequential amortisation trigger level of 2.75%.

For LF 2, the CE under the Class A, Class B and Class C Notes has increased since December 2014 to 34% from 32.8%, to 25.5% from 24.0% and to 23.9% from 22.5%, respectively. The limited increase in CE results from pro rata amortisation of the notes.

Performance has been in line with Moody's expectations, with a net cumulative default ratio of 2.95%, slightly below the sequential amortisation trigger level of 3.00%.

--- 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. The rating agency 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. The exposure to counterparties limited none of the transactions' upgrades.

--- 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 ratings on the relevant notes.

The stressed scenarios assume (1) 25% stresses for the default probability assumption for ABS and (2) a 20% increase in the portfolio CE assumption. Moody's upgraded the ratings when the negative rating impact resulting from the above test was within the sensitivity tolerance. The sensitivity analysis for Moody's key collateral assumptions did not constrain the upgrades.

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 as a result of 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 as a result of 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 CE and (4) deterioration in the credit quality of the transaction counterparties.

LIST OF AFFECTED RATINGS:

Issuer: Italfinance Securitisation Vehicle S.r.l. (ITA 8)

....EUR959M A Notes, Confirmed at A1 (sf); previously on Mar 20, 2015 A1 (sf) Placed Under Review for Possible Upgrade

....EUR83M B Notes, Upgraded to A3 (sf); previously on Mar 20, 2015 Baa1 (sf) Placed Under Review for Possible Upgrade

....EUR56M C Notes, Upgraded to Baa2 (sf); previously on Mar 20, 2015 Baa3 (sf) Placed Under Review for Possible Upgrade

....EUR18.5M D Notes, Upgraded to Baa3 (sf); previously on Mar 20, 2015 Ba1 (sf) Placed Under Review for Possible Upgrade

Issuer: Italfinance Securitisation Vehicle 2 S.r.l. (ITA 9)

....EUR1442.4M A Notes, Confirmed at A3 (sf); previously on Mar 20, 2015 A3 (sf) Placed Under Review for Possible Upgrade

....EUR125M B Notes, Confirmed at Ba1 (sf); previously on Mar 20, 2015 Ba1 (sf) Placed Under Review for Possible Upgrade

....EUR84.3M C Notes, Upgraded to Ba3 (sf); previously on Mar 20, 2015 B1 (sf) Placed Under Review for Possible Upgrade

....EUR27.9M D Notes, Upgraded to B1 (sf); previously on Mar 20, 2015 B2 (sf) Placed Under Review for Possible Upgrade

Issuer: Leasimpresa Finance S.r.l. (LF 2)

....EUR931.5M A Notes, Confirmed at A1 (sf); previously on Mar 20, 2015 A1 (sf) Placed Under Review for Possible Upgrade

....EUR57.2M B Notes, Upgraded to A3 (sf); previously on Mar 20, 2015 Baa1 (sf) Placed Under Review for Possible Upgrade

....EUR10.3M C Notes, Upgraded to Baa2 (sf); previously on Mar 20, 2015 Baa3 (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.

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.

Anne-Sophie Spirito
Asst Vice President - Analyst
Structured Finance Group
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Mehdi Ababou
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 upgrades and confirms ratings in three Italian small-ticket lease ABS deals
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