roof cee 2006- 1 transaction rating agency...
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Tycjan BieleckiAVP- Analyst Structured Finance Group
ROOF CEE 2006ROOF CEE 2006-- 1 transaction1 transaction
Rating agency perspectiveRating agency perspective
Friday, May 16 2008Friday, May 16 2008
BratislavaBratislava
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Transaction Tranching
New Issue Report published on March 23rd 2006
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Strengths of the transaction
KfW as swap counterparty;
Elimination of country, foreign exchange risk and legal transfer issues;
Benefit of synthetic excess spread;
Only obligors with an internal bank rating of 3.5 or better may be included in the reference portfolio;
High level of borrower diversity;
A 50% minimum level of collateral for the reference portfolio is covenanted by the protection buyers.
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Weaknesses and mitigants of the transaction
Synthetic structure
KfW as intermediary protection buyer
Defined termination events
Originator’s risk management developed and monitored on group level
Both originators and major shareholder unrated nor guaranteed by rated entity
Existence of some regional and industry concentrations within each country
Using additional data such as historical delinquency and loan loss provisioning
Limited availability of data on losses and recoveries
MitigantRisk
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Weaknesses and mitigants of the transaction cont.
As a result of modelling gross recovery rate has been reduced by accrued interest and associated workout costs
Realised loss includes also interest accrued and enforcement costs
Eligibility and replenishment criteria
Early amortisation triggers
Minimum WA margin criterion
Possibility of portfolio change as result of structure (replenishment)
MitigantRisk
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Moody’s Analysis
Lognormal distribution assumed to model default rate pattern on individual sub-portfolios
Sub-pools individually assessed and modelled
Timing of default: a default rate implied idealised timing of default curve used per sub-pool
Amortisation of the portfolio
Recovery Recovery rates: fixedrates: fixedLiability side Liability side
modelling in modelling in line with line with documentationdocumentation
Calculation of the Calculation of the expected loss expected loss on the on the tranchestranches and and derivation of derivation of the ratingthe rating
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