Fitch assigns Pontormo SME Notes 'Aasf' ratings
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.