OREANDA-NEWS. March 11, 2015. Fitch Ratings has upgraded Multi Lease AS S.r.l.'s EU270.1m class A notes to 'AA+sf' from 'A+sf'. The Outlook is Stable.

Multi Lease AS is a securitisation of receivables arising from performing lease contracts executed by Abf Leasing S.p.A. (ABF, representing 46.4% of the current pool balance) and Sardaleasing S.p.A. (Sarda, 53.6%) with Italian SMEs and, to a smaller extent, private individuals and professionals. Both the originators were unrated leasing companies and were part of Banca Popolare dell'Emilia Romagna (BB+/Negative/B). In mid-2014, ABF was merged by incorporation into Sarda, which has taken over the servicing of the entire portfolio. The claims consist of interest and principal instalments due by the lessees under the lease contracts and exclude any residual value component.

KEY RATING DRIVERS
Increased Credit Enhancement
The upgrade reflects the strong build-up of credit enhancement (CE) available to the class A notes, standing at 66.1% as of last payment date in December 2014 up from 51.9% as of our last review in March 2014, which is adequate to support a 'AA+sf' rating, in Fitch's view.

CE is provided by portfolio overcollateralisation via the full subordination of the unrated class B notes, a fully-funded cash reserve and available excess spread.

Stable Performance supported by Repurchases
The originator has been supporting the transaction so far by buying back delinquent and defaulted loans (as of December 2014, cumulative repurchases equaled 4.7% of the initial portfolio). Even assuming such loans as eventually defaulting in the transaction, the portfolio performance would still be in line with Fitch's initial expectations.

Unchanged PD Benchmarks
Fitch is maintaining annual average probability of default (PD) benchmarks for leases initially originated by ABF and Sarda at 5.0% and 5.5%, respectively (based on a 180 days past due definition). These benchmarks were derived from the originators' balance sheets when we first assigned ratings. In light of the performance of the portfolio since closing, Fitch considers these assumptions still correctly reflect default risk of the underlying portfolio.

Low Recovery Rate
As is typical in Italian leasing transactions, the originators transferred to the SPV the future receivables arising from the sale and/or re-lease of the underlying assets following a default of the debtors. However, as the ownership of the underlying leased assets is not transferred to the issuer, and no security has been created for the benefit of the issuer over the underlying assets, Fitch gave no credit to recoveries from the sale or re-lease of the assets when setting its expectations on recoveries. This has resulted in a base case recovery rate of about 9% for the overall portfolio.

RATING SENSITIVITIES
The class A notes' rating is capped by the highest achievable rating for structured finance transactions in Italy at 'AA+sf'. A rating action on the Italian sovereign (BBB+/Stable/F2) could result in a revision of the highest achievable structured finance rating, and hence a change in the notes' rating.

Applying a 1.25x default rate multiplier to all assets in the portfolio would result in a one-notch downgrade of the notes. Applying a 0.75x recovery rate multiplier to all assets in the portfolio would not affect the rating of the notes.

Initial Key Rating Drivers and Rating Sensitivity are further described in the New Issue report published on 3 May 2013 and available at www.fitchratings.com.