Scope has completed a monitoring review of the following notes issued by Credico Finance 18 S.r.l.:

Class A1 (IT0005391096), EUR 8.8m outstanding: AAA_SF

Class A2 (IT0005391146): EUR 200.0m outstanding: AAA_SF

Class J (Floating Rate Notes): EUR 229.4m outstanding: not rated

Credico Finance 18 S.r.l. is a static cash securitisation of a EUR 438.3m portfolio (EUR 519.4m at closing) comprised of secured and unsecured loans issued to Italian small- and medium-sized enterprises (SMEs). The loans were originated by 14 Italian cooperative banks (BCCs), who also individually service their respective loans in the securitised portfolio. The transaction closed on 5 December 2019.

The review took place on 4 December 2020 and was based on the latest available investor and payment reports through the 12 October 2020 payment date (the third payment date since closing), as well as servicer reporting and EDW loan-level data capturing performance through the 31 August 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

Class A1 credit enhancement has increased to 101.6% from 84.9% at closing, while Class A2 credit enhancement has increased to 55.0% from 46.4% since closing. This credit enhancement build-up is mainly driven by structural deleveraging due to portfolio amortisation (15.6%) since closing. An EUR 11.6m non-amortising reserve fund also serves as a form of credit enhancement, in addition to providing liquidity coverage for senior fees and interest.

Asset performance has generally been adequate considering the stressed macro-economic environment following the start of the Covid-19 pandemic in early March 2020. Total delinquencies as of the 31 May 2020 cut-off spiked to 9.5% from 4.2% three months prior. However, delinquencies appear to have normalised down to 2.1% as of the August month-end data. 90+ day delinquencies were at 1.0%. Strong liquidity coverage and considerable credit enhancement protect the rated notes in the event of any further macro-economic stresses that may impact underlying borrowers.

The BCCs have repurchased 1.0% of the portfolio as of closing, most of which occurred between March and May 2020.

No defaults have been reported, but this is mainly a function of transaction’s long, 12-month default definition.

All transaction counterparties continue to support the ratings.

CREDIT-POSITIVE (+)

Substantial credit enhancement: Class A1 and Class A2 have credit enhancement of 101.6% and 55.0% from a combination of subordination and a non-amortising reserve fund.

Liquidity coverage: The non-amortising reserve fund cover approximately 6.6 years of senior fees and interest based on the latest investor report.

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 downside risk is well mitigated by credit enhancement and the reserve fund.

The methodologies applicable for the reviewed rating, the SME ABS Rating Methodology (26 May 2020) and the Methodology for Counterparty Risk in Structured Finance (8 July 2020) are available at 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

Potential conflicts¹
Please see www.scoperatings.com for a list of potential conflicts of interest related to the issuance of credit ratings. A member of the Board of Trustees of Scope Foundation has a significant relationship with Société Generale SA, a related third party to this transaction. The Scope Foundation is a 20% shareholder of Scope Management SE, the general manager of Scope SE & Co KGaA (“Scope Group”). Scope Foundation has no financial or economic interest in Scope SE & Co KGaA and the main function of the foundation is to preserve the European identity of the shareholder structure of Scope Group.

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¹Editor's note: The 'Potential Conflicts' section was added on 28 September 2021.