Fitch as­signs Pon­tormo SME Notes 'Aasf' rat­ings

The Pak Banker - - 6BUSINESS -

Global rat­ing agency Fitch has as­signed Pon­tormo SME S.r.l.'s notes fi­nal rat­ings. The rat­ings ad­dress the like­li­hood of in­vestors re­ceiv­ing in­ter­est pay­ments in ac­cor­dance with the terms of the le­gal doc­u­men­ta­tion and full re­pay­ment of prin­ci­pal by le­gal fi­nal ma­tu­rity in Novem­ber 2079.

The rat­ings are based on col­lat­eral qual­ity, avail­able credit en­hance­ment and trans­ac­tion struc­tural features. The class A1, A2 and A3 notes ben­e­fit from 40.6% credit en­hance­ment pro­vided by the sub­or­di­na­tion of the un­rated class B1, B2 and B3 notes, col­lec­tions re­ceived from the pool cut-off date (30 Novem­ber 2012) to 14 Fe­bru­ary 2013, and two cash re­serves fully funded at clos­ing for an over­all amount of 2.7% of the ini­tial pool bal­ance. The first cash re­serve is amor­tis­ing (sub­ject to a floor of 0.4% of the ini­tial pool bal­ance) and pro­vides liq­uid­ity to cover any short­fall of in­ter­est on the rated notes and se­nior ex­penses. The sec­ond cash re­serve is ac­cret­ing as it cap­tures all amounts re­leased as a re­sult of the amor­ti­sa­tion of the first cash re­serve and pro­vides the se­nior note hold­ers with a sec­ond layer of pro­tec­tion against credit losses aris- ing from the col­lat­eral pool.

Fitch de­ter­mined an an­nual av­er­age prob­a­bil­ity of de­fault (PD) bench­mark of 5.9% (based on a 180 days past due def­i­ni­tion) for the orig­i­na­tors' bal­ance sheet. Fitch's for­ward-look­ing five-year an­nual av­er­age PD ex­pec­ta­tion for the port­fo­lio is 5.6%, which sig­nals a mar­ginal de­gree of pos­i­tive se­lec­tion re­sult­ing from the pool's el­i­gi­bil­ity cri­te­ria and the orig­i­na­tors' in­ter­nal rat­ing sys­tem.

A large por­tion of the col­lat­eral port­fo­lio (71.8%) con­sists of loans backed by a first rank­ing mort­gage guar­an­tee, the cur­rent weighted av­er­age (WA) LTV of which is 45.0% (orig­i­nal WA LTV, 54.6%), sug­gest­ing good loan-level re­cov­ery prospects. How­ever, Fitch capped the as­sumed re­cov­ery rates for loans orig­i­nated by BCC For­nacette and BP La­jatico, due to the his­tor­i­cal per­for­mance data pro­vided by the orig­i­na­tors.

Sin­gle obligor con­cen­tra­tion is lim­ited with the largest obligor group ac­count­ing for 1.05% of the pool bal­ance and the largest 10 groups rep­re­sent 7.7% of the port­fo­lio. In­dus­try con­cen­tra­tion is also not par­tic­u­larly high with real es­tate the largest in­dus­try and ac­count­ing for 34.8% of the pool, while the largest five in­dus­tries rep­re­sent 65.5% of the port­fo­lio. Re­gional con­cen­tra­tion is high with 99% of the port­fo­lio con­sist­ing of ex­po­sure to­wards Ital­ian SMEs based in the re­gion of Tuscany.

The three orig­i­na­tors and ser­vicers are un­rated by Fitch but ser­vic­ing dis­con­ti­nu­ity risk is mit­i­gated by the pres­ence of a liq­uid­ity re­serve and back-up ser­vic­ing ar­range­ments.

The prin­ci­pal de­fi­ciency ledger (PDL) mech­a­nism en­vis­aged in the trans­ac­tion im­plies that avail­able ex­cess spread is trapped for the ben­e­fit of the se­nior note­hold­ers, to ex­tent there are de­faulted loans in port­fo­lio or losses aris­ing from com­min­gling or set-off risk.

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