LONDON & MILAN--(BUSINESS WIRE)--Fitch Ratings has affirmed Adriano Finance 2 srl (Adriano 2) and Adriano Finance Ter srl (Adriano 3), two Italian RMBS transactions comprising residential mortgages loans originated by Intesa Sanpaolo (ISP; 'A'/Negative Outlook/F1). The rating actions are as follows:
Adriano Finance 2 Srl
Class A (ISIN IT0004446495): affirmed at
'AAAsf'; Outlook Stable;
Adriano Finance Srl - Series 3
Class A (ISIN IT0004513112):
affirmed at 'AAAsf'; Outlook Stable;
The affirmations reflect the sufficient credit support available to the notes, as well as the stable performance of the pools, which remains within Fitch's expectations.
The senior notes of Adriano 2 and 3 benefit from the subordination provided by the class B notes. The non-amortising reserve funds (Adriano 2 EUR150m and Adriano 3 EUR75m) can only be used to cover for senior expenses and interest shortfalls; which is why they have not been included in Fitch's credit enhancement calculations.
Loans in arrears by more than three months stand at 1.1% and 1.8% of the current portfolio of Adriano 2 and 3 respectively, showing a stable trend since closing. Meanwhile, defaulted loans have shown an upward trend since inception with cumulative gross defaults as of the last interest payment date (IPD) at 1.5% and 2.7% of the initial pool balance of Adriano 2 and 3, respectively. The structures of the deals include an implicit principal deficiency ledger (PDL). Gross period defaults are allocated to this PDL, and are cleared using excess revenue generated during the interest payment period.
At closing, for both transactions, the notes (Class A and the junior notes) were issued in excess of the collateral balance and the excess spread generated by the structure was supposed to be used to the cover the mismatch between notes and portfolio. However, as at the most recent payment date, the notes were still exceeding the collateral by EUR46m and EUR62m for Adriano 2 and 3, respectively. In Fitch's view, combined with the cumulative balance of un-provisioned defaults, the implicit PDL amounts to 0.6% and 1.5% of the outstanding note balance of Adriano 2 and 3, respectively. Having considered the impact of the PDL on the credit support available to the class A notes, Fitch deems the current credit enhancement as sufficient to maintain the current ratings.
A portion of the asset included in Adriano 2 and Adriano 3's pools benefit from some flexibility on the loans' terms, which may include: payment holiday schemes, reduction of the margin/coupon, change in payment frequency or an extension or reduction of loan maturity. The risk arising from the short-term reduction in liquidity due to loans entering payment holidays has been mitigated by the swap agreement, which includes such loans in the swap notional amount.
Additional information is available at www.fitchratings.com.
The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Sources of information - in addition to those mentioned in the applicable criteria, the sources of information used to assess these ratings were Investor and Servicer Reports.
Applicable criteria, 'EMEA Residential Mortgage Loss Criteria', dated 16 August 2011 and 'EMEA Criteria Addendum - Italy - Mortgage Loss and Cash Flow Assumptions', dated 11 August 2011 are available at www.fitchratings.com.
Applicable Criteria and Related Research:
EMEA Residential Mortgage
Loss Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=649450
EMEA
Criteria Addendum - Italy - Mortgage Loss and Cash Flow Assumptions
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=642749
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