Milan, July 18, 2019 -- Moody's Investors Service ("Moody's") has today
upgraded the rating of Class C Notes in Apulia Finance N. 4 S.r.l.
The rating action reflects the increased levels of credit enhancement
for the affected Notes.
Moody's affirmed the ratings of the Notes that had sufficient credit enhancement
to maintain the current rating on the affected Notes.
....EUR 346.9M (Current outstanding
balance EUR 11.4M) Class A Asset Backed Floating Rate Notes due
July 2044, Affirmed Aa3 (sf); previously on Oct 25, 2018
Downgraded to Aa3 (sf)
....EUR 11.3M Class B Asset Backed
Floating Rate Notes due July 2044, Affirmed Aa3 (sf); previously
on Oct 25, 2018 Downgraded to Aa3 (sf)
....EUR 19.1M Class C Asset Backed
Floating Rate Notes due July 2044, Upgraded to Aa3 (sf); previously
on Oct 25, 2018 Affirmed A1 (sf)
RATINGS RATIONALE
The rating action is prompted by an increase in credit enhancement for
the affected tranche.
Increase in Available Credit Enhancement
Sequential amortization led to the increase in the credit enhancement
available in this transaction. The reserve fund is currently equal
to EUR 2.77 million close to the floor of EUR 2.56 million.
Amortization of the Class A Notes has been accelerated through application
of Class D Notes interest, subject to conditions being met.
The credit enhancement for the Class C Notes increased from 22%
to 26% since the last rating action in October 2018, leading
to the rating being upgraded. Because Class A and B Notes are capped
at Italy's local currency bond ceiling of Aa3, the increase in credit
enhancement for these Notes causes no improvement in the ratings for these
classes.
No Revision of Key Collateral Assumptions
As part of the rating action, Moody's reassessed its lifetime loss
expectation for the portfolio reflecting the collateral performance to
date.
The performance of the transaction has continued to be overall stable
since last rating action in October 2018. 90 days plus arrears
currently stands at 1.11% of current pool balance and cumulative
defaults at 8.89% of original pool balance up from 8.78%
in July 2018. Moody's maintained the expected loss assumption at
5.48% as a percentage of original pool balance.
Moody's has also assessed loan-by-loan information as a
part of its detailed transaction review to determine the credit support
consistent with target rating levels and the volatility of future losses.
As a result, Moody's has maintained the MILAN CE assumption
at 12.5%.
Today's rating actions took into consideration the Notes'
exposure to relevant counterparties, such as servicer, account
banks or swap providers.
The principal methodology used in these ratings was "Moody's Approach
to Rating RMBS Using the MILAN Framework" published in June 2019.
Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
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) an increase in available credit enhancement;
(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.
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.
Sara Santagostino
Analyst
Structured Finance Group
Moody's Italia S.r.l
Corso di Porta Romana 68
Milan 20122
Italy
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Gaby Trinkaus, CFA
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's Italia S.r.l
Corso di Porta Romana 68
Milan 20122
Italy
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
