As of the latest payment date, in January 2012, leasing receivables in arrears for more than 30 days composed 2.3% of the performing pool--up from 1.2% as of the January 2011 payment date. Cumulative gross default levels have flattened and, since the January 2011 payment date, have been stable at 0.82% of the initial balance. Recoveries have reached 40% of the cumulative gross defaults.
In line with this performance, the reserve fund is currently at its target level and the transaction is releasing a significant amount of excess spread (3.0% of the average collateral balance, on the most recent four payment dates.
We previously took rating action in this transaction on July 4, 2011 (see “Ratings List Resolving European Structured Finance Counterparty CreditWatch Placements-July 4, 2011 Review”). Our review of the transaction documents indicated that the language relating to the swap provider, Intesa Sanpaolo SpA, is not consistent with our 2010 counterparty criteria. To account for this in our cash flow analysis, we tested--for each class of notes--additional scenarios where we gave no benefit to the swap. Specifically, we identified and sized the basis risk that could arise from a mismatch between the index on which interest is earned on the assets and the index on which interest is calculated for the notes.
We deem the credit enhancement available to the class C notes (equal to 25%, which would cover the top 17 borrowers) and the overcollateralization in the transaction (19.1%) to be sufficient to mitigate the credit and cash flow risks to a ‘AA (sf)’ rating level, without giving credit to the swap agreement. Based on these structural features, we have raised our rating on the class C notes.
Taking into account the current levels of credit enhancement, and without giving credit to the swap agreement, our analysis indicates that our ‘AA+ (sf)’ ratings on the class A and B notes remain appropriate. Accordingly, we have affirmed our ratings on these classes of notes.
STANDARD & POOR‘S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011.
If applicable, the Standard & Poor’s 17g-7 Disclosure Report included in this credit rating report is available at
-- European Structured Finance Scenario And Sensitivity Analysis: The Effects Of The Top Five Macroeconomic Factors, March 14, 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-July 4, 2011 Review, July 4, 2011
-- Nonsovereign Ratings That Exceed EMU Sovereign Ratings: Methodology And Assumptions, April 8, 2011
-- Principles Of Credit Ratings, Feb. 16, 2011
-- Counterparty And Supporting Obligations Update, Jan. 13, 2011
-- Counterparty and Supporting Obligations Methodology and Assumptions, Dec. 6, 2010
-- Methodology: Credit Stability Criteria, May 3, 2010
-- Criteria Update: Rating Leasing Securitizations In Italy, May 3, 2006
Tricolore Funding S.r.l.
EUR301.753 Million Asset-Backed Floating-Rate Notes
C AA (sf) A+ (sf)
A AA+ (sf)
B AA+ (sf)