Neil Unmack

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Pain in Italy

July 22, 2009

Ouch! Moody’s has just downgraded some Italian asset-backed debt parcelling leases made by UniCredit to its clients, called F-E Gold. One of the downgraded bonds took a rather nasty dive from A3 to Ba1, but aside from that the rating cuts aren’t too brutal. Moody’s report does give a quick snapshot of how corporate Italy is faring in the economic downturn. (Leasing is a core source of funding for the small and medium-sized companies that make up the economy’s backbone.)
So far about four percent of the companies that borrowed by leasing real estate or equipment have defaulted since the deal was sold three years ago –  the same amount Moody’s was expecting over the life of the deal. The agency has now doubled its default assumption to 8.6 percent — let’s hope it’s just being conservative.