(The following statement was released by the rating agency)
Oct 01 - OVERVIEW -- We have reviewed the performance of Agri Securities' series 2008 notes.
-- We have lowered our rating on the class B notes to 'B- (sf)' from 'BBB- (sf)' to reflect our opinion on the increased likelihood of the cumulative net defaults ratio triggering an interest deferral on the class B notes.
-- We have affirmed our rating on the class A notes at 'AA+ (sf)' following our credit and cash flow analysis of the transaction.
-- Agri Securities 2008 is an Italian lease receivables ABS transaction.
Standard & Poor's Ratings Services today lowered its credit rating on Agri Securities S.r.l.'s series 2008 class B notes to 'B- (sf)' from 'BBB- (sf). At the same time, we affirmed our rating on the class A notes at 'AA+ (sf)'.
Today's rating actions follow our review of the performance of Agri Securities' series 2008 notes.
Delinquencies have increased considerably since June 2011. Mortgage loans in arrears for more than 90 days comprised 5.1% of the performing pool on the last payment date in September 2012, up from 3.2% in March 2012 and 2.8% in June 2011.
In September 2012, cumulative gross defaults reached 11.0% of the portfolio at the beginning of the amortization period in March 2010, up from 7.1% in September 2011.
The transaction features an interest-deferral trigger for the class B notes, based on the cumulative net defaults ratio. We define this ratio as cumulative defaulted receivables, minus cumulative recoveries on the initial portfolio, plus subsequent purchases in the first 18-month revolving period. In September 2012, the cumulative net defaults ratio reached 6.8%, up from 5.0% in September 2011.
According to the transaction documents, when the net defaults ratio exceeds 7.8%, the interest on the class B notes is not paid, and the equivalent amount is deferred to repay principal on the class A notes. Having the trigger based on the net cumulative defaults means that an improvement in performance could reduce the trigger level as cumulative defaults are offset by recoveries.
The credit enhancement level available for the class B notes is currently 10.8%, up from 7.8% in June 2011--that can potentially offset the increasing amount of net defaults. Nevertheless, today's rating action on the class B notes is driven by the interest deferral trigger. We believe that the likelihood of the cumulative net defaults ratio reaching the trigger level has increased in the past year, and consequently also the likelihood that the interest on the class B notes will not be paid. We have therefore lowered our rating on the class B notes to 'B- (sf)' from 'BBB- (sf)'.
Today's affirmation of the rating on the class A notes follows our credit and cash flow analysis. The relevant legal and counterparty analysis has not changed since our previous review on June 3, 2011, and the swap agreement is not in line with the replacement language described in our 2012 counterparty criteria (see "Counterparty Risk Framework Methodology And Assumptions," published on May 31, 2012). Consequently, we have run additional sensitivity tests without the benefit of the swap to test the rating on the class A notes.
The increase in arrears and defaults is offset by the increase in credit enhancement available for the class A notes, which rose to 38.6% in September 2012 from 27.0% in June 2011. We have therefore affirmed our rating on the class A notes at 'AA+ (sf)'.
Agri Securities 2008 is an Italian lease receivables asset-backed securities (ABS) transaction, originated by Iccrea BancaImpresa SpA (formerly Banca Agrileasing SpA). Iccrea BancaImpresa is a bank specialized in providing corporate financing in Italy. It is a member of the Iccrea Group and it is closely associated with the Banche di Credito Cooperativo, the Italian co-operative banking network.
RELATED CRITERIA AND RESEARCH
-- Iccrea Banking Group Ratings Lowered To 'BBB-/A-3' On Increased Credit Risk For Italian Banks; Outlook Negative, Aug. 3, 2012
-- Economic Research: The Curse Of The Three Ds: Triple Deleveraging Drags Europe Deeper Into Recession, July 30, 2012
-- Counterparty Risk Framework Methodology And Assumptions, May 31, 2012
-- European Structured Finance Scenario And Sensitivity Analysis: The Effects Of The Top Five Macroeconomic Factors, March 14, 2012
-- European Structured Finance Rating Actions Following Eurozone Sovereign Rating Actions, Jan. 23, 2012
-- Global Structured Finance Scenario And Sensitivity Analysis: The Effects Of The Top Five Macroeconomic Factors, Nov. 4, 2011
-- Ratings List Resolving European Structured Finance Counterparty CreditWatch Placements, June 3, 2011
-- Principles Of Credit Ratings, Feb. 16, 2011 -- Methodology: Credit Stability Criteria, May 3, 2010 -- New Issue: Agri Securities S.r.l., Aug. 15, 2008 -- Criteria Update: Rating Leasing Securitizations In Italy, May 3, 2006 -- European Legal Criteria For Structured Finance Transactions, Aug. 28, 2008 RATINGS LIST Class Rating To From Agri Securities S.r.l. EUR1.014 Billion Asset-Backed Floating-Rate Notes And Unrated Notes Series 2008 Rating Lowered B B- (sf) BBB- (sf) Rating Affirmed A AA+ (sf) ((Bangalore Ratings Team, Hotline: +91 80 4135 5898, Bhanu.firstname.lastname@example.org, Group id: BangaloreRatings@thomsonreuters.com, Reuters Messaging: Bhanu.Priya.email@example.com))