London, 11 July 2017 -- Moody's Investors Service ("Moody's") has today upgraded the rating of
Class B notes and also affirmed the rating of Class A notes in IBL CQS
2013 S.r.l.:
....EUR200.19M Class A Notes,
Affirmed Aa3 (sf); previously on Apr 30, 2015 Upgraded to Aa3
(sf)
....EUR18.84M Class B Notes,
Upgraded to Aa3 (sf); previously on Apr 30, 2015 Upgraded to
A2 (sf)
The upgrade reflects the increase in the levels of credit enhancement
for the affected note. Moody's affirmed the rating of the note
that had sufficient credit enhancement to maintain its current rating.
This transaction is an amortising cash securitisation of Cessione del
Quinto loans ("CDQ"), consumer loan products extended to borrowers
resident in Italy, with a number of legal and product specific features.
Under a CDQ loan, the debtor assigns to the lender up to one fifth
of his net monthly salary or pension to cover his loan obligations;
loans are collateralized by the monthly salary of the employee/pension
(net of taxes), plus any eventual severance pay treatment (TFR).
In addition, an obligatory insurance policy protects against loss
of job, resignation and death of the debtor.
RATINGS RATIONALE
Increase in Available Credit Enhancement
The upgrade is prompted by the deal deleveraging resulting in an increase
in credit enhancement for the affected tranche B to 11.2%
from 7.7% at the time of the last rating action on these
notes in April 2015, and the observed stable performance.
Credit enhancement in this transaction takes the form of subordination
from the class C notes as well as reserve fund.
Stable performance observed
The performance of the transaction has continued to be stable over the
last year. Total delinquencies have slightly increased in the past
year, with 90 days plus arrears currently standing at 1.0%
of current pool balance. Cumulative defaults currently stand at
2.9% of original pool balance up from 1.7%
a year earlier.
For this transaction, the current default probability is unchanged
at 8% of the original portfolio balance, which corresponds
to 8.2% of the current portfolio balance. Portfolio
credit enhancement remains unchanged at 25%.
Recovery rate assumptions have not been revised. When assessing
recoveries on defaulted loans, Moody's takes into account the benefit
of the insurance on the loans and the credit quality of the insurers.
As such Moody's considers in its analysis scenarios where insurers honor
their claims and scenarios where they can default on their obligation.
Moody's assumes 10% of recovery rate for scenarios where an insurance
company defaults, and 75% of recovery rate for scenarios
where insurers do not default.
Counterparty Exposure
Today's rating actions took into consideration the notes'
exposure to relevant counterparties, such as servicer and account
bank.
The ratings of class A and class B notes for this transaction are both
constrained by counterparty exposure, limiting the upgrade to Aa3
(sf). More specifically, the definition of eligible investments,
limited the upgrade to Aa3 (sf), as contemplated in "Moody's Approach
to Temporary Use of Cash in Structured Finance Transactions: Eligible
Investments and Account Banks" published in December 2015.
The principal methodology used in these ratings was "Moody's Approach
to Rating Consumer Loan-Backed ABS" published in September 2015.
Please see the Rating Methodologies 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
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.
Please note that on 22 March 2017, Moody's released a Request for
Comment, in which it has requested market feedback on potential
revisions to its Approach to Assessing Counterparty Risks in Structured
Finance. If the revised Methodology is implemented as proposed,
the credit ratings may be affected. Please refer to Moody's Request
for Comment, titled " Moody's Proposes Revisions to Its Approach
to Assessing Counterparty Risks in Structured Finance," for further
details regarding the implications of the proposed Methodology revisions
on certain Credit Ratings.
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.
Anne-Sophie Spirito
Vice President - Senior Analyst
Structured Finance Group
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
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 Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
