Annual Accounts and Report as at 30 June 2011 Draft - Mediobanca

C. Securitizations and asset disposalsC.1 SecuritizationsQualitative informationNo new securitizations were implemented during the financial year, exceptfor the €1.7bn renewal of the Quarzo deal (Compass receivables), subscribed forin full by Mediobanca S.p.A..The Group has a portfolio of securities deriving from securitizations by otherissuers which is worth €360.3m (30/6/10: €444.5m). The main movements duringthe period involved acquisitions of €52.8m, disposals and repayments totalling€132.2m (generating gains of €1.8m), and downward adjustments as at thereporting date amounting to €6.6m (€7.4m of which relating to the partialwritedown to the ELM security), €1.2m by way of increase in amortized cost, and€1.3m in downward adjustment to fair value as at the reporting date; the implicitloss on the fixed portfolio amounts to €20.6m. Over 70% of the acquisitionsinvolved Italian-originated deals (in particular the securitization of Telecom Italiacommercial properties through vehicle company IMSER), and all refer to the firsthalf of the year when signs of recovery were apparent in both the primary market(with new deals on European portfolios, and the launch of the first issue backedby Italian mortgages since the Lehman crisis) and the secondary market (withinvestor interest focused on the mezzanine and junior classes which offer thehighest returns). In the second half-year the market slowed, among other thingsfollowing the introduction of stricter regulations for issuers and investors, thelatter shifting their focus to more efficient funding instruments (e.g. coveredbonds).Mediobanca does not have on its books, and indeed never has had, anycredit exposures backed by subprime or Alt-A (Alternative – A, i.e. positions withunderlying mortgages featuring incomplete documentation that does not allowthem to be classified). Neither does it have any exposures to monoline insurers,i.e. insurance companies specializing in covering default risk on public andcorporate bond issues, with the exception of one credit default swap worth anominal $10m entered into with MBIA (Municipal Bond Insurance Association),with a positive fair value of €0.7m (minus €4.6m at 30 June 2010).The portfolio is still concentrated (more than 85%) on securities withdomestic underlying assets: over 40% mortgage receivables, around 30% stateownedproperties and the remainder leasing receivables plus a restructuredsecuritization formerly promoted by Capitalia (Entasi). The other deals involve asynthetic security (ELM), UK mortgage loans (Permanent and RMAC) andGerman mortgage loans (E-MAC). Holdings in junior and mezzanine tranchestotal approx. €32.1m, and chiefly involve mezzanine tranches in Italian mortgage168 –