OREANDA-NEWS. Fitch Ratings has upgraded five tranches of three Italian RMBS originated and serviced by UniCredit S.p.A. (BBB+/OutS/F2). The affected transactions are F-E Mortgages Srl Series 1 (FEMO1), F-E Mortgages Srl Series 2005 (FEMO2) and Heliconus.

FEMO1:
Class A1 (ISIN IT0003575039) affirmed at 'AA+sf'; Outlook Stable
Class B (ISIN IT0003575070) upgraded to 'AA+sf' from 'A+sf'; Outlook Stable
Class C (ISIN IT0003575088) upgraded to 'Asf' from 'BBB-sf'; Outlook Stable

FEMO2:
Class A (ISIN IT0003830418) affirmed at 'AA+sf'; Outlook Stable
Class B (ISIN IT0003830426) upgraded to 'AA+sf' from 'A+sf'; Outlook Stable
Class C (ISIN IT0003830434) upgraded to 'BBB+sf' from 'BBB-sf'; Outlook Stable

Heliconus:
Class A (ISIN IT0003383855) affirmed at 'AA+sf'; Outlook Stable
Class B (ISIN IT0003383871) upgraded to 'AAsf' from 'A+sf'; Outlook Stable

KEY RATING DRIVERS
Strong Credit Support
Credit support available to the notes has increased over the past 12 months as a result of swift portfolio amortisation, which has averaged between 10.5% (FEMO1 and 2) and 11.5% (Heliconus), and the fully sequential pay-down structure in all transactions. Pro rata redemption is no longer possible in the FEMO series due to irreversible breach of triggers. Fitch's analysis shows that current credit enhancement is sufficient to support higher ratings for the mezzanine and junior rated notes of all transactions, leading to today's upgrades.

Stable Asset Performance
The volume of late stage arrears, defined as loans with at least three monthly instalments overdue, range between 2.6% of the current pool in Heliconus and 3.6% in FEMO1, compared with a 3.3% in FEMO1 and 3.9% in Heliconus a year ago. Meanwhile, the pipeline of defaulted loans (defined as mortgages with eight monthly payments overdue in the FEMO series and 12 monthly instalments unpaid in Heliconus) has seen limited increases of 20bp in each transaction and is now reported at between 3.5% (Heliconus) and 5.4% (FEMO2), compared with Fitch Italian RMBS cumulative default index at 4.3% as of end-April 2015.

In Fitch's view the high average seasoning, between 120 (FEMO2) and 145 (Heliconus) months, and low current loan-to-value (CLTV) ratios, between 44% (Heliconus) and 50% (FEMO2), suggest that going forward the asset performance will remain stable with limited losses on defaulted claims.

Adequate Liquidity
Fitch notes that the available liquidity reserves in Heliconus and FEMO1 and the cash reserve in FEMO2 provide sufficient liquidity. In its analysis the agency found that, in case of a servicing disruption event, they can cover senior and swap payments as well as notes' interest for at least 2 payment dates under stressed Euribor.

RATING SENSITIVITIES

Changes to Italy's Long-term Issuer Default Rating (BBB+/Stable) and the rating cap for Italian structured finance transactions, currently 'AA+sf', could trigger rating changes on the notes currently rated at this level.

Deterioration in asset performance beyond Fitch's assumptions for the three portfolios could also trigger negative rating actions.

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.

DATA ADEQUACY
Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pools and the transactions. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.

Fitch did not undertake a review of the information provided about the underlying asset pools ahead of the transactions' initial closing. The subsequent performance of the transactions over the years is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable.

Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.

SOURCES OF INFORMATION
The information below was used in the analysis:
-Loan-by-loan data provided by European Data Warehouse at end-March 2015 for Heliconus and FEMO2 and at beginning of April 2015 for FEMO1.
-Transaction reporting provided by UniCredit as of July 2015 for Heliconus and FEMO2 and as of June 2015 for FEMO1.