Due to an irrevocable payment delegation issued, according to the Italian Civil Code, by the Region of Umbria to the Italian Department for Civil Protection (the department), a division of the Central Government of the Republic of Italy, and following its acceptance by the department, the department is therefore legally bound to make these payments (which are equivalent to the scheduled issuer's two semi-annual instalments due on 30 of June and 31 of December) directly to the trustee (set up under a trust-deed between the issuer and JP Morgan Chase Bank - London Branch) for the benefit of the noteholders.
Following the payment delegation, which cannot be revoked by either the region or by the department once accepted by the department, the right to receive the payments has effectively been transferred from the region to the trustee for the benefit of the noteholders, and the payment obligations by the department constitute claims of the noteholders against the Republic of Italy. Therefore, payment obligations of the department constitute unsecured obligations of the Republic of Italy, ranking equally with all its other unsecured financial obligations.
If the department fails to make any payments, the trustee, on behalf of the noteholders, will be entitled to enforce payments against the Region of Umbria acting as a back-up obligor.
On 14 December 2012, the Republic of Italy was affirmed at Long-term foreign and local currency Issuer Default Ratings (IDR) 'A-', with Negative Outlook, and at Short-term foreign currency IDR 'F2' and the Country Ceiling at 'AAA' (see 'Fitch Affirms Italy at 'A-'; Negative Outlook' on www.fitchratings.com).