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Italian Government Deal May Be On Hold

The Italian Treasury's third jumbo real estate securitization, already in the works for the better part of a year, could be on ice until next year as the issuer copes with negative rating action on its second deal and investors re-consider the risks in similar transactions.

The Italian Treasury’s third jumbo real estate securitization, already in the works for the better part of a year, could be on ice until next year as the issuer copes with negative rating action on its second deal and investors re-consider the risks in similar transactions. Barclays Capital, Mediobanca, and UBS were mandated early in the year on the new deal. Tiziana Mazzarocchi, an official responsible for securitization at the Italian Treasury in Rome, declined comment on plans for the transaction, which would be known as Societa Cartolarizzazione Immobili Pubblici 3 (SCIP-3), before the end of November. Large asset-backed investors add they have not yet been approached by underwriters about the deal.  

The treasury’s second jumbo real estate securitization got hit last week by rating action from Fitch Ratings, which placed SCIP-2 on rating watch negative after the latest performance report catalogued a worsening absolute shortfall in asset sales and collections versus expectations.

Investors should stop viewing SCIP-2 as a traditional residential mortgage-backed securitization, said one Dutch investor, pointing out the risk in the transaction lies mainly with the servicer and its abilities to meet expectations for asset sales and collections. This makes any future transaction in the same vein as SCIP-2 more akin to a non-performing loan transaction than an RMBS deal and thus subject to greater risks, he added.

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