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

Class A (ISIN IT0005387904), EUR 1,096.6m: BBB+_SF

Class B (ISIN IT0005387912), EUR 80.0m: B-_SF

Class J (ISIN IT0005387920), EUR 30.0m: not rated

Prisma SPV S.r.l. is a static cash securitisation of a EUR 6,057m portfolio (at closing) of Italian non-performing loans originated by Unicredit S.p.A. and serviced by doValue S.p.A. The transaction closed on 18 October 2019.

The review took place on 13 October 2020 and was based on available payment and investor reports through the 5 May 2020 payment date (the first payment date since closing), as well as servicer reporting through 31 July 2020. 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

Net collections were above the business plan’s original projections through the first interest payment date of 5 May 2020 (31 March 2020 cut-off date). However, cumulative net collections from April through June were significantly below the business plan before positively increasing in the July collection period. As of the first semi-annual payment date, the reported cumulative net collection ratio is 112.9% of the original business plan, while profitability on closed positions is reported to be 102.4%. Aggregate realized gross collections amount to EUR 322.9m (13.3% of which is from closed positions).

Gross realized collections amount to 17.1% and 14.7% 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.)

Cumulative collections through 31 July 2020 are 6.9x higher than Scope’s expectations in the Class A analysis and 6.7x higher than our Class B analysis. This partially mitigates the initial negative effects of the Covid-19 pandemic and near-term uncertainty going forward.

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 17.1% and 14.7% of our expected lifetime collections considered in the initial analysis of the Class A and Class B notes, respectively. Reported profitability against the business plan on closed positions is 112.9%.

Borrowers are individuals: Recoveries from individual borrowers are generally higher than from corporates, given their lower average exposure, and since loans collaterals are residential properties, which are more liquid than commercial or industrial assets.

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.

Absence of detailed information on valuations’ techniques. At closing, 37.1% of the pools’ first-lien collateral was evaluated using statistical revaluations (i.e., indexed valuations) or based on open market value valuations (33.1%). However, detailed information regarding the valuation technique that was used was not provided to Scope. As a result, we continue to apply a higher haircut to these valuations to account for the risk of overstated valuations.

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 Rossella Ghidoni, Associate Director

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