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

total approx. €32.1m, and chiefly involve mezzanine tranches in Italian mortgageloans (Bpm Securitisation Srl, €4.7m) and UK mortgage receivables (RMAC PLC(€3.9m) as well as commercial properties (IMSER, €18.1m); the other tranchesinvolve junior positions in securitizations of mortgage receivables implementedby BCC Mortgages PLC (€1.5m), Loggi (€1.4m) and Casaforte (€2.4m). Thesevaluations have been made based on prices supplied by the leading financialinformation providers, i.e. Reuters, Bloomberg and Mark-it, giving priority tomarked-to-market data rather than fair value models (which have been used onlyfor certain unlisted positions), and for the most part made using a pricing modelsupplied by the main rating agencies.Some 85% of the portfolio has a rating consistent with securities of highcredit standing attributed by at least one of the main credit rating agencies(Standard & Poor’s, Moody’s and Fitch) and is eligible for refinancing with theEuropean Central Bank. During the period under review no particular action wastaken by any of the rating agencies, apart from the odd adjustment made as aresult of the stricter rating criteria. The only positions which are either unrated orhave non-performing assets underlying them are in deals where Mediobancaplayed an active role in the securitization, e.g. as sponsor, manager, etc.The main individual areas of activity underlying the securities held by theGroup performed as follows during the period under review:— mortgage loans: the prospects of low interest rates have helped delinquencyand default rates to stabilize (albeit at historically high levels), but also reflectan increase in average duration (forecasts of stable interest rates are adisincentive to prepayment on existing mortgages, with the ratio remaining at5–6%); introduction of the “plan for families” has helped keep down delays inshort-term payment (30 days), even though long-term delays (above 90 days)are increasing;— state-owned and Italian commercial properties: these reflect the wideningreturns on Italian securities and the related credit default swaps; there wereno downgrades during the period, although sales of properties were belowexpectations, and hence the timescale for repayment is bound to increase.– 375