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RPT-Fitch Affirms F-E Gold
April 16, 2014 / 11:22 AM / 4 years ago

RPT-Fitch Affirms F-E Gold

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April 16 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has affirmed F-E Gold S.r.l.’s (F-E Gold) notes, as follows:

EUR134.3m class A2 notes affirmed at ‘A+sf’; Outlook Negative

EUR26.9m class B notes affirmed at ‘BBBsf’; Outlook Negative

EUR4.9m class C notes affirmed at ‘BBsf’; Outlook revised to Stable from Negative

F-E Gold is a securitisation of performing leases on real estate, auto and equipment assets originated in 2006. To date, the real estate pool accounts for 99.6% of the collateral. The leases pay mainly floating rate with monthly or quarterly instalments. The notes pay quarterly at a floating rate based on Euribor.

KEY RATING DRIVERS

Since Fitch’s last review in May 2013, the transaction has begun to show signs of stabilisation. Annual defaults are 2% of the outstanding pool (compared with 4.8% in 2012) and losses realised are 0.15% due to the continuing inflow of recoveries. In addition, the transaction cleared its outstanding principal deficiency ledger in April 2013 and has not had a shortfall since. The transaction has continued to build up credit enhancement (CE) from the static EUR15m reserve fund, albeit at a much slower pace due to the pro rata pay down of the notes. Fitch believes the current stabilisation in the pool performance supports the affirmation of the notes.

However, should the stable performance continue, the transaction will continue to amortise pro rata. This leaves the senior and mezzanine notes more vulnerable to potential tail risk compared with the junior notes, hence the Outlook on the class A and B notes remains Negative. As it is less of an issue for the class C notes, their Outlook has been revised to Stable.

RATING SENSITIVITIES

In Fitch’s rating sensitivity analysis, expected remaining defaults were assumed at 4% per annum with a weighted average life of three years, in line with Fitch’s negative view on the Italian SME sector. Based on the original principal balance plus new purchases, this would result in an updated lifetime expectation of 10%.

Expected impact upon the note ratings of increased defaults (class A2/B/C): Current rating: ‘A+sf’/‘BBBsf’/‘BBsf’

Increase base case defaults by 10%: ‘A+sf’/‘BB+sf’/‘BB-sf’

Increase base case defaults by 25%: ‘A-sf’/‘BBsf’/‘B+sf’

Expected impact upon the note ratings of reduced recoveries (class A/B/C):

Current rating: ‘A+sf’/‘BBBsf’/‘BBsf’

Reduce base case recovery by 10%: ‘A+sf’/‘BB+sf’/‘BBsf’

Reduce base case recovery by 25%: ‘A+sf’/‘BB+sf’/‘BB-sf’

Expected impact upon the note ratings of increased defaults and reduced recoveries (class A/ B/C):

Current rating: ‘A+sf’/‘BBBsf’/‘BBsf’

Increase default base case by 10%; reduce recovery base case by 10%: ‘Asf’/‘BB+sf’/‘BB-sf’

Increase default base case by 25%; reduce recovery base case by 25%: ‘A-sf’/‘BB-sf’/‘CCCsf’

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