Moody's determines no negative rating impact on Consumer One S.r.l. following changes in several triggers and definitions
Frankfurt am Main, November 26, 2012 -- Moody's has determined that the proposed action (the "Proposal") to: (i) amend the swap agreements by lowering the rating downgrade triggers which require the swap counterparty to post collateral and get a replacement counterparty or guarantor; (ii) amend the account bank trigger and create an interim collection account; (iii) amend the definition of eligible investments; and (iv) lower the servicer trigger to identify a back-up servicer should not, if implemented, in and of itself at this time result in a reduction or withdrawal of the current ratings of the notes issued by Consumer One S.r.l. (the "Issuer"). Moody's does not express an opinion as to whether the Proposal may be considered to have negative effects in any other respect.
Moody's has assessed the Proposal to amend the swap agreements which - in brief - envisions lowering the rating downgrade triggers which require UniCredit SpA (Baa2/P-2) as swap counterparty to post collateral and get a replacement counterparty or guarantor. The collateral trigger changes from loss of A2 or P-1 to loss of Baa3 or, in the absence of a long-term rating, P-3 while the replacement / guarantor trigger changes from loss of A3 or P-2 to loss of Baa3 or, in the absence of a long-term rating, P-3. Moody's has assessed the probability and impact of a default of the swap counterparty on the ability of the Issuer to meet its obligations under the transaction, including the impact of the loss of any benefit from the swaps according to its methodology.
Moody's has also further assessed the Proposal to (i) create an "interim collection account" to be established in the name of the Issuer with an interim account bank rated at least Baa3 or, in the absence of a long-term rating, P-3 and on which all collections and recoveries received pursuant to the servicing agreement will be paid and (ii) transfer on a monthly basis the balance of the interim collection account to the collection account, (iii) amend the eligible institution definition so that the rating triggers for all accounts of the Issuer (including the collection account) are A2 or, in the absence of a long-term rating, P-1, instead of P-1 only as currently documented. On the date of implementation of the proposal, it is envisaged that the interim collection account will be opened with UniCredit SpA and all other accounts of the Issuer will be opened with BNP Paribas Securities Services (A2/P-1), Milan branch. Moody's has also assessed the Proposal to change the eligible investment definition for investments with a maturity of less or equal to 1 month to Baa3 or, in the absence of a long-term rating, P-3 and for investments with a maturity of between 1 and 3 months to Baa2 or, in the absence of a long-term rating, P-2. For the avoidance of doubt, Eligible Investments continue to have a maturity which needs to fall before the then following payment date. Moody's has assessed the probability and impact of a default of the interim account bank and eligible investment counterparties on the ability of the Issuer to meet its obligations under the transaction, including the impact of the loss of any cash held by the interim account bank should it default and any loss that may be incurred after that time due to any delay in redirecting payments to a new account or taking any other appropriate action.
Furthermore Moody's has also assessed the proposal to appoint a back-up servicer at loss of Baa3 or, in the absence of a long-term rating, P-3 instead of Baa2 or P-3, as currently documented.
Investors should note that, although it does not have a negative rating impact on the current notes, the Proposal further exposes the ratings of the notes of the transaction to the credit risk of the swap counterparty, the interim account bank, the account bank and the eligible investments respectively.
The principal methodology used in this rating was Moody's Approach to Rating Consumer Loan ABS Transactions published in October 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.
Other factors used in this rating are described in The Temporary Use of Cash In Structured Transactions: Eligible Investment Guidelines published in December 2008, Global Structured Finance Operational Risk Guidelines: Moody's Approach to Analyzing Performance Disruption Risk published in June 2011, and the Framework for De-Linking Hedge Counterparty Risks from Global Structured Finance Cashflow Transactions published in October 2010.
Moody's noted that on 2 July 2012, it released two Requests for Comment, in which the rating agency has requested market feedback on potential changes to its rating implementation guidance for its "Approach to Assessing Linkage to Swap Counterparties in Structured Finance Cashflow Transactions" and to its rating implementation guidance for the temporary use of cash in structured finance transactions. If the revised rating implementation guidances are implemented as proposed, the rating on the Notes should not be negatively affected. Please refer to Moody's Requests for Comment, entitled "Approach to Assessing Linkage to Swap Counterparties in Structured Finance Cashflow Transactions: Request for Comment" and "The Temporary Use of Cash in Structured Finance Transactions: Eligible Investment and Bank Guidelines: Request for Comment" for further details regarding the implications of the proposed methodology changes on Moody's ratings.
On 21 August 2012, Moody's released a Request for Comment seeking market feedback on proposed adjustments to its modeling 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 rating action may be negatively affected. See "Approach to Assessing the Impact of a Rapid Country Credit Deterioration on Structured Finance Transactions" for further details regarding the implications of the proposed methodology changes on Moody's ratings.
Moody's will continue to monitor the ratings. Any change in the ratings will be publicly disseminated by Moody's through appropriate media.
Sebastian Schranz Analyst Structured Finance Group Moody'sDeutschland GmbH An der Welle 5 Frankfurt am Main 60322 Germany JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Alex Cataldo Associate Managing Director Structured Finance Group Telephone:+39-02-9148-1100 Releasing Office: Moody's Deutschland GmbH An der Welle 5 Frankfurt am Main 60322 Germany 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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