Scope has completed a monitoring review of the following notes issued by Ibla S.r.l.:

Class A (ISIN IT0005342891), EUR 68.2m: BBB_SF

Class B (ISIN IT0005342909), EUR 9.0m: B_SF

Class J (ISIN IT0005342917), EUR 3.5m: not rated

Ibla S.r.l. is a static cash securitisation of a EUR 349m portfolio (at closing) of Italian non-performing loans originated by Banca Agricola Popolare di Ragusa S.C.p.A. and serviced by Italfondiario S.p.A. The transaction closed on 6 September 2018.

The review took place on 8 September 2020 and was based on available payment information, investor reports and servicer reporting through 31 July 2020, covering three interest payment dates since closing. The review resulted in no action on the assigned ratings. Scope does not rate the Class J notes. This monitoring note does not constitute a rating action nor does it indicate the likelihood of a credit rating action in the short term. The latest information on the credit ratings in this monitoring note along with the associated rating history can be found at www.scoperatings.com.

Key rating factors

Collections flows have been fairly consistent with business plan expectations and significantly faster than Scope’s original base case expectations, which outweighs the deterioration of the sector outlook following the Covid-19 pandemic. Profitability on closed positions is slightly below Scope’s initial expectations, while largely exceeding business plan expectations.

As of the third semi-annual payment date, the reported cumulative gross collection ratio is 90.5% of the original business plan, while profitability on closed positions is 155.7%. Aggregate realized gross collections amount to EUR 27.8m (21.3% of which is from closed positions). This amounts to 18.5% and 15.0% of Scope’s expected lifetime collections considered in the initial analysis of the Class A and Class B notes, respectively.(Scope’s rating-conditional rating approach applies increasing levels of stress as the target rating of an instrument increases.)

Profitability on closed borrowers is 113.1% and 96.1% based on the analysis of the Class A and Class B notes, respectively.

No Class B margin subordination triggers have been breached to date and the cash reserve is fully funded. All transaction counterparties continue to support the ratings.

CREDIT-POSITIVE (+)

Performance: Collections have come in much faster than Scope’s closing expectations and currently represent 18.5% and 15.0% of our expected lifetime collections considered in the initial analysis of the Class A and Class B notes, respectively. Profitability on closed positions is 113.1% in Class A rating scenario and 96.1% in the Class B rating scenario. Reported profitability against the business plan on closed positions is 155.7% and has consistently been above 133.0% since closing.

Credit enhancement: As a percentage of GBV, Class A credit enhancement has increased to 81.5% from 77.4% at closing. Class B’s credit enhancement has increased to 78.9% from 74.9%.

Liquidity protection: The cash reserve, which is 7.5% of the outstanding Class A notes, covers the transaction’s senior expenses, legal costs and Class A notes’ interest for about 4.8 payment dates.

CREDIT-NEGATIVE (-)

Italian economy: The Italian economy faces a deep recession in 2020 fuelled by the Covid-19 pandemic. Despite government support measures, increased collateral liquidity risk and weakened borrower liquidity positions negatively affect recovery prospects.

Geographic concentration: Most of the portfolio is concentrated in eastern Sicily. This lack of geographical diversification exposes the transaction to specific local risks. These risks include the possible weak performance of the economy and its impact on property prices, slow court resolution timelines, and the impact of seismic activity, all of which potentially affect the realisation of value of the properties securing the loans. Scope accounted for these unique transaction characteristics in its analysis by applying recovery timelines and recovery amounts that were more conservative than usual.

Pool audit: At closing the pool audit reported more errors than are normally seen in peer transactions. Here again, Scope’s conservative, deal-specific collection adjustments capture potential uncertainties that may arise during the loan workout process (e.g., incorrect lien position and/or incorrect court procedure, among others).

The methodologies applicable for the reviewed rating (Non-performing loan ABS methodology, published on 9 September 2020, Methodology for counterparty risk in structured finance, published on 8 July 2020) are available on https://www.scoperatings.com/#!methodology/list.

This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.

Lead analyst Thomas Miller-Jones, Associate Director

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