Madrid, December 19, 2018 -- Moody's Investors Service ("Moody's") has today upgraded the rating of
Class B in Casa D'Este Finance S.r.l., and
has confirmed the rating of Class B in Casa D'Este Finance S.r.l.
II, two Italian residential mortgage-backed securities (RMBS):
Casa D'Este Finance S.r.l.
....EUR35.2M Class B Notes, Upgraded
to Aa3 (sf); previously on Oct 25, 2018 Ba3 (sf) Placed Under
Review for Possible Upgrade
Casa D'Este Finance S.r.l. II
....EUR80.65M Class B Notes,
Confirmed at Caa1 (sf); previously on Oct 25, 2018 Caa1 (sf)
Placed Under Review for Possible Upgrade
RATINGS RATIONALE
The upgrade of Class B Notes in Casa D'Este Finance S.r.l.,
reflects the reduction of uncertainty related to the payment of interest
in the Class B Notes, as a consequence of the Class A2 notes being
fully repaid as of 17 December 2018. Following the priority of
payment in the transaction, the payment of interest on Class B Notes
will only be subordinated to senior fees and payments to the swap counterparty.
The confirmation of Class B Notes in Casa D'Este Finance S.r.l.
II, reflects that the current credit enhancement is sufficient to
maintain the current rating.
The reserve fund will be set to zero in both transactions, following
the repayment of the senior Notes. A liquidity facility provided
by BPER Banca S.p.A. (Baa3/P-3) is available
to cover interest payment shortfalls. Additionally, principal
is available to pay interest.
The credit enhancement of Class B Notes in Casa D'Este Finance S.r.l.
is 27.6% as of September 2018. This credit enhancement
is under the form of overcollateralization created by the cash trapping
mechanism existing in the transaction.
---No Revision of Key Collateral Assumptions:
Moody's key collateral assumptions remain unchanged for both transactions
as the pools' performance remains in line with Moody's assumptions.
As part of this rating action, Moody's reassessed its lifetime loss
expectation for the two transactions reflecting the collateral performance
to date. The performance of the transaction has continued to be
largely stable over the past year. Cumulative defaults only slightly
increased to 7.0% from 6.9% of original pool
balance in Casa D'Este Finance S.r.l. and increased
from 16.2% to 16.3% of original pool balance
in Casa D'Este Finance S.r.l. II.
As a result, Moody's maintained the expected loss assumption at
4.9% of original pool balance for Casa D'Este Finance S.r.l.
and at 10.9% of original pool balance for Casa D'Este Finance
S.r.l. II.
Moody's has also assessed loan-by-loan information as a
part of the transactions review, and has maintained the MILAN CE
assumption at 14.5% for Casa D'Este Finance S.r.l.
and at 25.0% for Casa D'Este Finance S.r.l.
II.
---Exposure to Counterparty Risk:
Today's rating actions took into consideration the Notes' exposure to
relevant counterparties, such as servicer, account banks or
swap providers.
Principal Methodology
The principal methodology used in these ratings was "Moody's Approach
to Rating RMBS Using the MILAN Framework" published in September 2017.
Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
The Credit Ratings for the two Classes of Notes in Casa D'Este Finance
S.r.l. and Casa D'Este Finance S.r.l.
II were assigned in accordance with Moody's existing Methodology entitled
"Moody's Approach to Rating RMBS Using the MILAN Framework" dated 11 September
2017. Please note that on 14 November 2018, Moody's released
a Request for Comment, in which it has requested market feedback
on potential revisions to its Methodology for RMBS Using the MILAN Framework.
If the revised Methodology is implemented as proposed, the Credit
Ratings for the two Classes of Notes in Casa D'Este Finance S.r.l.
and Casa D'Este Finance S.r.l. II may be NEUTRALLY
affected. Please refer to Moody's Request for Comment, titled
"Proposed Update to Moody's Approach to Rating RMBS Using the MILAN Framework"
for further details regarding the implications of the proposed Methodology
revisions on certain Credit Ratings.
The analysis undertaken by Moody's at the initial assignment of ratings
for RMBS securities may focus on aspects that become less relevant or
typically remain unchanged during the surveillance stage. Please
see "Moody's Approach to Rating RMBS Using the MILAN Framework" for further
information on Moody's analysis at the initial rating assignment and the
on-going surveillance in RMBS.
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) 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.
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 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.
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
Vice President - Senior 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
Client Service: 44 20 7772 5454
Masako Oshima
Associate Managing Director
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 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
Client Service: 44 20 7772 5454
