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

Class A (ISIN IT0005394454), EUR 196.8m: BBB+_SF

Class B (ISIN IT0005394462), EUR 23.4m: BB_SF

Class J (ISIN IT0005394751), EUR 16.8m: not rated

Marathon SPV S.r.l. is a static cash securitisation of a purely unsecured EUR 5,027m portfolio (at closing) of Italian non-performing loans. The portfolio was originally acquired by Hoist Finance Group, through two special purpose vehicles (Marte SPV S.r.l. and Pinzolo SPV S.r.l.) from 17 financial institutions (the original lenders) and was transferred to Marathon SPV S.r.l. The transaction closed on 5 December 2019.

The review took place on 2 December 2020 and was based on the latest available investor and payment reports through the 30 October 2020 payment date (the fourth payment date since closing), as well as servicer reporting through the 30 September 2020 cut-off date. 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

Cumulative collections are above the business plan’s original projections through the fourth payment date (30 September 2020 cut-off date). The latest cumulative collection ratio (net of recovery costs) is 107.2% of the original business plan. Aggregate gross collections total EUR 128.4m, which is 22.9% of the business plan’s lifetime expected collections.

Gross collections amount to 27.6% and 24.5% 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 compared Scope’s expectations through 30 September 2020 are 107.2% in the context of our Class A analysis, and 96.5% in the context of our Class B analysis.

The 28.2% recovery rate (as a percentage of GBV) on closed loans (1,193) is well above the 7.0% and 7.9% Scope anticipated in our Class A and Class B analysis, respectively.

No Class B interest subordination triggers or servicer underperformance events 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 been relatively consistent and in line with Scope’s closing expectations and currently represent 27.6%% and 24.5% of our expected lifetime collections considered in the initial analysis of the Class A and Class B notes. The recovery rate on closed loans is 28.2%.

Repayment plans: Approximately 32% of loans at closing (as a share of GBV) were guaranteed by promissory notes and were on active repayment plans. Since closing, 67.7% of collections have come from this segment, which is in line with the proportion of lifetime collections anticipated in the business plan.

CREDIT-NEGATIVE (-)

Italian economy: The Italian economy faces a deep recession fuelled by the Covid-19 pandemic. Despite government support measures, economic prospects have weakened for borrowers. This is particularly acute for reperforming and non-performing unsecured debt. Scope notes that collections from reperforming borrowers slightly decreased in absolute terms and relative to the business plan between the 30 April payment date and the 30 October payment date. However, this decrease is consistent across most NPL transactions that Scope rates, and in relative terms the dip was much less pronounced compared to most deals.

Liquidity protection: The cash reserve only covers close to two interest payment dates. The reserve is equal to 3% of the Class A notes and has no floor. Coverage is on the lower end of Italian NPLs rated by Scope.

The methodologies applicable for the reviewed rating (Non-Performing Loan ABS Rating 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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