23.11.2012 17:50
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Moody's downgrades to Baa1 (sf) one class of Berica 6 RMBS notes

London, 23 November 2012 -- Moody's Investors Service has today downgraded the class B notes issued by Berica 6 Residential MBS S.r.l. to Baa1(sf) from A3(sf), due to the revised analysis of the notes' exposure to set-off risk (using the updated methodology for analysing set-off risk in Italian transactions) and the revision of key collateral assumptions.

Today's rating action also concludes the rating review of four other italian RMBS notes, initiated following the release of the methodology update ""Moody's Approach to Set-Off Risk in Italian Structured Finance and Covered Bonds Transactions",11 June 2012. (http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF285617). Moody's has taken no rating action on the Berica 6's class D notes, Asti Finance S.r.l.'s class B notes, Cassa Centrale Securitisation S.r.l.'s class B notes and VELA HOME S.r.l. - Series 3's class C notes because of sufficient credit enhancement.

All five notes remain on review for downgrade pending the re-assessment of required credit enhancement to address country risk exposure. In addition, the class B notes in Berica 6 Residential MBS S.r.l. and Cassa Centrale Securitisation S.r.l. remain on review because of strong linkage to weak counterparties acting as issuer account banks.

A detailed list of the affected ratings is provided towards the end of this press release.

RATINGS RATIONALE

Today's downgrade of the class B notes of Berica 6 Residential MBS S.r.l. reflects the insufficient levels of credit enhancement following Moody's revised analysis of the notes' set-off exposure using the updated methodology as well as the revised the key collateral assumptions. Moody's has taken no rating action on the class D notes due to sufficient credit enhancement which compensated for the changes in the methodology and assumptions.

Since the review date, Moody's has not received updated loan-by-loan information on the set-off exposure in the Berica 6 pool. As such, the set-off exposure Moody's has assumed in its analysis (1) is in line with previous set-off exposures observed in loan-by-loan data received from various Italian originators in the past; and (2) reflects the methodology update "Moody's Approach to Set-Off Risk in Italian Structured Finance and Covered Bonds Transactions",11 June 2012.

In addition, Moody's has increased its key collateral assumptions as a result of pool performance deterioration. As of October 2012, cumulative defaults in Berica 6, as a percentage of the original portfolio balance, amounted to 7.5% and loans delinquent by more than 90 days remained around 3.8% of the current portfolio balance. After considering the current amount of realised defaults and completing a roll-rate and severity analysis for the non-defaulted portion of the portfolio, Moody's has changed its lifetime default assumption for Berica 6 to 11.1% from 8.6% and revised the recovery rate assumption to 55% from 65%. The expected loss assumption for the portfolio has consequently increased to 6.1% from 4.7% of the original portfolio balance.

The rating agency also revised Berica 6's MILAN CE assumptions to 15% from 11.5% to take into account the updated EL assumption and the minimum credit enhancement.

-- RATING REVIEW REFOCUSES ON CREDIT ENHANCEMENT TO ADDRESS COUNTRY RISK EXPOSURE

All five notes remain on review for downgrade pending the incorporation of country risk exposure across the capital structure. Moody's continues to consider the impact of the deterioration of the Italian sovereign's financial condition and the resulting asset portfolio deterioration on tranches of structured finance transactions.

In addition, the class B notes issued by Berica 6 and Cassa Centrale Securitisation remain on review for downgrade also because of their strong linkage to the issuer account banks. The issuer account bank of Berica 6 and Cassa Centrale Securitisation is Deutsche Bank SpA a subsidiary of Deutsche Bank AG (A2/P-1 stable).

-- OTHER DEVELOPMENTS MAY NEGATIVELY AFFECT THE NOTES FUTURE

On 2 July 2012, Moody's released a Request for Comment seeking market feedback on proposed adjustment to its modelling assumptions. These adjustments are designed to account for the temporary use of cash in structured finance transactions. If the adjusted approach is implemented as proposed, the rating of the class B notes in Berica 6 and Cassa Centrale Securitisation may be negatively affected. See "The Temporary Use of Cash in Structured Finance Transactions: Eligible Investment and Bank Guidelines", (http://www.moodys.com/research/The-Temporary-Use-of-Cash-in-Structured-Finance-Transactions-Eligible--PBS_SF289341) for further details regarding the implications of the proposed methodology changes on Moody's ratings.

On 21 August 2012, Moody's released an additional Request for Comment seeking market feedback on proposed adjustments to its modelling assumptions. These adjustments are designed to account for the impact of rapid and significant country credit deterioration on structured finance transactions. If the adjusted approach is implemented as proposed, the rating of the notes affected by today's rating action may be negatively affected. See "Approach to Assessing the impact of a Rapid Country Credit Deterioration on Structured Finance Transactions", (http://www.moodys.com/research/Approach-to-Assessing-the-Impact-of-a-Rapid-Country-Credit--PBS_SF294880) for further details regarding the implications of the proposed methodology changes on Moody's ratings.

In reviewing the impact of the updated set-off methodology, Moody's used ABSROM to model the cash flows and determine the loss for each tranche. The cash flow model evaluates all default scenarios that are then weighted considering the probabilities of the lognormal distribution assumed for the portfolio default rate. In each default scenario, the corresponding loss for each class of notes is calculated given the incoming cash flows from the assets and the outgoing payments to third parties and noteholders. Therefore, the expected loss or EL for each tranche is the sum product of (1) the probability of occurrence of each default scenario; and (2) the loss derived from the cash flow model in each default scenario for each tranche.

As such, Moody's analysis encompasses the assessment of stressed scenarios.

LIST OF AFFECTED RATINGS

Issuer: Berica 6 Residential MBS S.r.l.

....EUR42.8M B Notes, Downgraded to Baa1 (sf) and Remains On Review for Possible Downgrade; previously on Jun 11, 2012 A3 (sf) Placed Under Review for Possible Downgrade

The principal methodology used in this rating was Moody's Approach to Rating RMBS in Europe, Middle East, and Africa published in June 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Moody's approach to country risk ceilings is described in "Local-Currency Country Risk Ceiling for Bonds and Other Local Currency Obligations" (http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_140182), published on 16 August 2012.

Moody's approach to set-off risk in Italian structured finance transactions is described in the Rating Implementation Guidelines "Moody's Approach to Set-Off Risk in Italian Structured Finance and Covered Bonds Transactions", published 8 June 2012 ( http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF285617)

The rating considerations described in this press release complement the principal rating methodologies applicable to each of the Italian RMBS transactions affected by today's rating action.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides relevant 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 relevant 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 relevant 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.

The rating has been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

Information sources used to prepare the rating are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's did not receive or take into account a third-party assessment on the due diligence performed regarding the underlying assets or financial instruments related to the monitoring of this transaction in the past six months.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning the ratings is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Moody's Investors Service may have provided Ancillary or Other Permissible Service(s) to the rated entities or their related third parties within the two years preceding the credit rating action. Please see the special report "Ancillary or other permissible services provided to entities rated by MIS's EU credit rating agencies" on the ratings disclosure page on our website www.moodys.com for further information.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

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.

Sebastian Hoepfner Analyst Structured Finance Group Moody'sInvestors Service Ltd. One Canada SquareCanary WharfLondon E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Barbara Rismondo Senior Vice President Structured Finance Group JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Releasing Office: Moody's Investors Service Ltd. One Canada SquareCanary WharfLondon E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 (C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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