One of the most problematic deals ever to hit the European market took yet another downturn last week. Italian media group Cecchi Gori's L465 million ($231 million) transaction, called Finance for an Italian Library of Movies (Films), has finally had its BBB-minus rating withdrawn by Fitch, following the consistent failure of the company to provide the ratings agency with timely and accurate performance information.

The Films deal, arranged by Merrill Lynch, came to market in February 1998 and is backed by revenues from Cecchi Gori's own film library. For the first eighteen months, it seemed that the transaction was performing to expectations, but in November 1999 it became apparent that the company had missed two rental payments to the SPV. On top of that, the overcollateralization level required as credit support by Fitch had fallen below the stipulated 1.56%.

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