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

C. Securitizations and asset disposalsC.1 SecuritizationsQualitative informationIn addition to its €1.7bn investment in the Quarzo securitization of Compassreceivables, Mediobanca S.p.A. has a portfolio of securities deriving fromsecuritizations by other issuers worth €328.1m (30/6/10: €417.3m). The mainmovements during the period involved acquisitions of €31.7m, disposals andrepayments totalling €116.5m (generating gains of €1.7m) and downwardadjustments at the period-end totaling €6.1m (€7.4m of which relating to thepartial writedown to the ELM security), €1.1m by way of increase in amortizedcost, and €0.2m in upward adjustment to fair value as at the reporting date; theimplicit loss on the fixed portfolio amounts to €20.6m. Over 70% of theacquisitions involved Italian-originated deals (in particular the securitization ofTelecom Italia commercial properties through vehicle company IMSER), and allrefer to the first half of the year when signs of recovery were apparent in both theprimary market (with new deals on European portfolios, and the launch of thefirst issue backed by Italian mortgages since the Lehman crisis) and thesecondary market (with investor interest focused on the mezzanine and juniorclasses which offer the highest returns). In the second half-year the marketslowed, among other things following the introduction of stricter regulations forissuers and investors, the latter shifting their focus to more efficient fundinginstruments (e.g. covered bonds).Mediobanca does not have on its books, and indeed never has had, anydirect credit exposures backed by subprime or Alt-A (Alternative – A, i.e.positions with underlying mortgages featuring incomplete documentation thatdoes not allow them to be classified). Neither does it have any exposures tomonoline insurers, i.e. insurance companies specializing in covering default riskon public and corporate bond issues, with the exception of one credit defaultswap worth a nominal $10m entered into with MBIA (Municipal Bond InsuranceAssociation), 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 tranches374 –