Fitch affirms Mecenate RMBS Series

Global rating agency Fitch has affirmed eight tranches of Mecenate S.r.l. Series 2007 (Mecenate 2007), Series 2009 (Mecenate 2009) and Series 2011 (Mecenate 2011) RMBS deals.

Loans in arrears by more than three months in the series have remained stable, ranging from 0.6% to 1.8% of the current outstanding balance in the past 12 months.

Cumulative gross defaults stood at 4.4%, 6.3% (3.74% if considering the repurchased EUR12.7m of defaulted claims by the originator in July 2011) and 1.2% of the initial portfolios of Mecenate 2007, Mecenate 2009 and Mecenate 2011, respectively.

The three transactions define defaults as loans in arrears between six and 12 months, depending on the payment frequency or those loans that are classified as such by the servicer in accordance with the Bank of Italy's regulations. Mecenate 2009 was the worstperforming transaction in the series as it currently has the highest level of arrears and cumulative defaults.

Excess spreads generated by Mecenate 2007 and Mecenate 2009 were insufficient for provisioning all defaults, which has led to a delay in accelerating the principal payments to the senior noteholders according to the PDL structure. The outstanding PDL balances of the junior notes are currently at EUR1.9 million (Mecenate 2007) and EUR5.1 million (Mecenate 2009), 100% and 39.2% of the notional balance of the respective notes.

At present the credit support available to classes C and B of Mecenate 2007 and Mecenate 2009 is sufficient for these tranches to maintain their ratings, despite the outstanding PDL balances on the junior notes in the two transactions.

Due to a reporting error in Mecenate 2007, EUR89,000 of unprovisioned defaults was misallocated on the class C PDL which should be instead fully cleared by drawing the reserve fund, according to the transaction documents.

The issuer has proposed to correct this on the next interest payment date (IPD) in April 2013. Based on Fitch's estimation, Mecenate 2007 reserve fund will be 99.5% of the target amount in the April 2013 interest payment date.

Fitch expects the level of defaults on the upcoming payment dates to remain at similar levels seen in the past few quarters.