Current ratings on the transaction are available here.

Scope Ratings has reviewed the performance of Red Sea SPV S.r.l. and no rating action is warranted. The rating of class A continues to be supported by the structural protection provided to the notes, the absence of equity leakage provisions, liquidity protection and interest rate hedging agreements. Scope’s review was based on available payment information as of April 2019 and investor and servicer reporting as of 31 March 2019.

Red Sea SPV S.r.l. is a static cash securitisation of secured and unsecured non-performing loans (NPLs) that were extended to companies and individuals in Italy. The loans were originated by Banco BPM S.p.A. and Banca Popolare di Milano S.p.A. The transaction closed on 15 June 2018 and the class A legal maturity is in October 2038.

Aggregate net collections since the cut-off date (EUR 346.8m as of 31 March 2019) are above servicer’s expectations at 135% of the initial business plan. Profitability on closed positions, at 103%, is also slightly outperforming the level in the initial business plan. Additionally, the timing of collections has outpaced Scope’s expectations. As a result, class A credit enhancement relative to the portfolio’s outstanding gross book value has increased to 71.2% from 67.6%.

On the other hand, the average recovery rate on closed positions was below Scope’s base case expectation (53.6% vs 58.8%). Based on Scope’s analysis, closed positions since the cut-off date represent around 2.7% of the portfolio’s gross book value. At this stage, Scope does not consider the underperformance in terms of profitability to have a material impact on the rated notes.

The transaction continues to rely on i) Prelios Credit Servicing S.p.A., acting as master and special servicer; ii) Securitisation Services S.p.A., which acts, inter alia, as noteholders’ representative, calculation agent, monitoring agent and back-up master servicer; iii) Bank of New York Mellon SA/NV, Milan branch as account bank, cash manager and paying agent; iv) Banco BPM S.p.A. as operating bank; v) Banco Santander SA (rated AA-/S-1+ by Scope) and Mediobanca S.p.A. as the interest rate cap providers. All counterparties continue to be supportive for the rating.

Scope continuously monitors Red Sea SPV S.r.l.

Ratings and research are freely available at www.scoperatings.com.