Italian leasing asset-backed securities (ABS) performance deteriorated in the three-month period leading to January 2012, according to the latest index report published by Moody's Investors Service.
Moody's net default index increased only slightly to 2.84% in January 2012, from 2.76% in November 2011. The total delinquencies index, as of current pool balance, ended at 5.14% in January 2012. This represented a quarter-on-quarter rise from 4.8% in November 2011 and an approximate 40% year-over-year increase from January 2011.
The Italian Banking Association has also move forward with the third extension of the payment holiday scheme. The scheme allows small and medium-sized enterprise (SME) borrowers to request the suspension of their principal payment for up to 12 months (six months for non-real estate leasing contracts). It was first introduced in August 2009 and has been extended until the end of 2012.
The payment holiday framework is seen as an overall credit negative for Italian structured finance transactions that contain SME loans/leases because it may delay in defaults for weaker borrower that take advantage of the suspension of payment scheme, according to Moody's. "Looking at the delinquency trend, we see a decrease between January 2010 and the third quarter of 2011 in most vintages, which could be partially attributed to the implementation of the payment holiday scheme," explained analysts at Moody's in a report.
The payment holiday framework is seen as an overall credit negative for Italian structured finance transactions that contain SME loans/leases because it may delay in defaults for weaker borrower that take advantage of the suspension of payment scheme, according to Moody's.
However, the extension of the scheme is unlikely to affect structured finance ratings of the country's SME securitizations, according to a Fitch Ratings report. The ratings agency said in the report today that they did not anticipate taking any downgrade action in the future because of this risk. "If there were to be a much larger take-up of the scheme, there could be rating implications," analysts said in the report.
Issuers of ABS notes are not allowed to directly participate in the scheme but most lenders implementing the PPHS have managed to introduce the scheme in the securitizations where they act as servicers, according to the Fitch report.