London, 21 February 2014 -- Moody's Investors Service has today taken rating actions on four Italian
covered bond programmes. Today's rating actions follow Moody's
raising of its timely payment indicator (TPI) for all mortgage-backed
-- except Banca Carige mortgage Covered Bond programme 2
(commercial) -- and public-sector backed covered
bonds to "Probable" from "Improbable".
The affected ratings are:
(1) Upgraded to Baa1 from Baa2 the ratings on the covered bonds issued
by Banca Popolare dell'Emilia Romagna s.c.a.r.l.
(2) Upgraded to Baa1 from Baa2 the ratings on the covered bonds issued
under the residential mortgage covered bond programme of Banco Popolare
Societa Cooperativa (deposits Ba3 positive, standalone bank financial
strength rating E+/baseline credit assessment b3 positive)
(3) Upgraded to Baa2 from Baa3 the ratings on the covered bonds issued
under the commercial mortgage covered bond programme 2 of Banco Popolare
Societa Cooperativa (deposits Ba3 positive, BFSR E+/BCA b3
positive)
(4) Upgraded to A2 from A3 the ratings on the covered bonds issued under
the public sector covered bond programme of Intesa Sanpaolo (Baa2 stable,
BFSR D+/BCA baa3 stable)
Please click here http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF357799
for the list of affected credit ratings. This list is an integral
part of this press release and identifies each affected issuer.
RATINGS RATIONALE
A combination of different factors that have lowered the refinancing risk
of the Italian covered bonds underpin Moody's raising of the TPIs
to "Probable".
(1) The stabilisation of the Italian economy, reflected in the change
of Italian's Baa2 government bond rating outlook to stable from
negative (https://www.moodys.com/research/Moodys-changes-outlook-to-stable-on-Italys-Baa2-government-bond--PR_292815).
(2) Stronger market liquidity, reflected in an improvement of funding
conditions for Italian banks.
(3) The high level of over-collateralisation (OC) maintained by
Italian issuers, as evidenced by the Italian average surplus OC,
which has remained stable over the last few years. Elevated OC
levels can compensate for the higher discount prices, if the insolvency
administrator has to sell the assets to meet payment obligations under
the bonds.
(4) Credit quality of the cover pool. The stability of the public-sector
pool quality is signalled by the stabilisation of the outlook on the Italian
sovereign and sub-sovereign ratings; the residential mortgage
pools have been characterised by stable collateral scores.
The TPI of the Banca Carige mortgage covered bond programme 2 (commercial)
remains at Probable-High. The Probable-High TPI already
reflects the limited level of refinancing risk due to the combination
of low acceleration risk and the 30 years' maturity extension.
KEY RATING ASSUMPTIONS/FACTORS
Moody's determines covered bond ratings using a two-step
process: an expected loss analysis and a TPI framework analysis.
EXPECTED LOSS: Moody's uses its Covered Bond Model (COBOL)
to determine a rating based on the expected loss on the bond. COBOL
determines expected loss as (1) a function of the issuer's probability
of default as measured by the issuer's rating; and (2) the
stressed losses on the cover pool assets following issuer default.
TPI FRAMEWORK: Moody's assigns a "timely payment indicator" (TPI),
which indicates the likelihood that the issuer will make timely payments
to covered bondholders if the issuer defaults. The TPI framework
limits the covered bond rating to a certain number of notches above the
issuer's rating.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
The issuer's credit strength is the main determinant of a covered
bond rating's robustness. The TPI Leeway measures the number
of notches by which Moody's might downgrade the issuer's rating
before the rating agency downgrades the covered bonds because of TPI framework
constraints.
A multiple-notch downgrade of the covered bonds might occur in
certain limited circumstances, such as (1) a sovereign downgrade
negatively affecting both the issuer's senior unsecured rating and the
TPI; (2) a multiple-notch downgrade of the issuer; or
(3) a material reduction of the value of the cover pool.
RATING METHODOLOGY
The principal methodology used in these ratings was "Moody's
Approach to Rating Covered Bonds" published in July 2012.
Please see the Credit Policy page on www.moodys.com for
a copy of this methodology.
The credit ratings of the covered bonds were assigned in line with Moody's
existing Credit Rating Methodology entitled "Moody's Approach
to Rating Covered Bonds", dated July 2012. Moody's
notes that on 19 September 2013 it published a request for comment (RFC).
In the RFC, the rating agency proposes an adjustment to the anchor
point it uses in its covered bond analysis.
If the revised Credit Rating Methodology is implemented as proposed,
the credit ratings of the covered bonds may be affected. Please
refer to Moody's request for comment, titled "Approach
to Determining the Issuer Anchor Point for Covered Bonds" for further
details regarding the implications of the proposed Credit Rating Methodology
changes on Moody's Credit Ratings ( https://www.moodys.com/research/Approach-to-Determining-the-Issuer-Anchor-Point-for-Covered-Bonds--PBS_SF342448).
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 use any stress scenario simulations in its analysis.
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.
Elise Savoye
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
Juan Pablo Soriano
MD - Structured Finance
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 four Italian covered bonds; raises most Italian TPIs to Probable
