Scope completed a monitoring review of Iseo SPV S.r.l. transaction:

Class A (ISIN IT0005395352), EUR 291,174,464 outstanding amount: BBB_SF;

Class B (ISIN IT0005395360), EUR 25,000,000 outstanding amount: not rated;

Class J (ISIN IT0005395378), EUR 13,459,000 outstanding amount: not rated

Iseo SPV S.r.l. is a static cash securitisation of a EUR 857m portfolio (at closing) of Italian non-performing loans originated by Unione di Banche Italiane S.p.A and serviced by doValue S.p.A. The transaction was closed on 16 December 2020.

The review took place on 3 December 2020 and was based on available payment information and investor and servicer reporting as of 30 July 2020, covering one interest payment date since closing. The review resulted in no action on class A rating. Scope does not rate class B or class J. 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

As of 30 June 2020, aggregate gross collections were EUR 47.5m, which represents 83.3% of the original business plan expectations of EUR 57.1m. Most collections (around 98%) come from open debtors (i.e. debtors for which the recovery process is still ongoing), while only 2% comes from resolved borrowers. Total gross collections are split between judicial proceeds (75%) and discounted pay-off (‘DPO’) proceeds (25%).
Compared to Scope’s original expectations, the EUR 47.5m available gross collections are 60% higher than Scope’s expected collections for the first payment date and represent around 11% of Scope’s expected lifetime collections under the analysis of the class A notes. However, the observed recovery rate on closed positions was below Scope’s base case (B rating category) recovery rate expectation (34% observed recovery rate vs 40% expected recovery rate). However, given that resolved borrowers are a limited portion of transaction’s total gross book value (0.2%), the impact of their profitability is currently not material for the transaction. Scope will closely monitor the evolution of resolved borrowers’ profitability over time.
In terms of net collections (gross collections reduced by the amount of recovery expenses), aggregate net collections amount to EUR 46.6m, which represents 83.0% of the original servicer’s net expectations. The net profitability on resolved debtors (as reported in the servicer report) is above the servicer’s expectation, standing at 118.5%.
Interest on class B may be subordinated to payment of class A principal if one of the net cumulative collection ratio or the NPV profitability ratio falls below 90%. As per last investor report dated July 2020, a class B interest subordination occurred as the net cumulative collection ratio stands at 83%.

CREDIT-POSITIVE (+)
Cumulative collections compared to Scope’s expectations. Observed collections are outperforming Scope’s original expectations for class A analysis, being 160% of Scope’s gross expectations. With respect to the original business plan, observed collections are 83% of the original servicer’s projections.

Credit enhancement. The credit enhancement for class A note has increased since closing, from 61% to 66%, as of the first payment date.
Tight performance triggers. The triggers protect senior noteholders. For as long as the special servicer does not meet at least 90% of the business plan’s collection schedule, class B interest payments will remain subordinated below class A principal.

CREDIT-NEGATIVE (-)
Italian economy. The Italian economy faces a deep recession in 2020 fueled by the Covid-19 pandemic. Despite governmental support measures, increased collateral liquidity risk and weakened borrower liquidity positions could negatively affect the recovery prospects.

Underperforming on closed positions. Recovery rate on closed positions is lower than Scope’s base case expectations at closing (34% observed recovery rate vs 40% Scope’s expected recovery rate at closing).

Scope Ratings reviews its ratings on an ongoing basis. Scope performs monitoring reviews to determine whether outstanding ratings remain proportionate. Monitoring reviews are conducted either by performing a portfolio review in terms of the applicable methodologies, latest developments, and the rated entity’s financial and operational aspects relative to similarly rated peers; or through targeted reviews on an individual credit. Scope publicly announces the completion of each monitoring review on its website.

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 Leonardo Scavo, Senior Analyst

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.

© 2020 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Analysis GmbH, Scope Investor Services GmbH and Scope Risk Solutions GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5 D-10785 Berlin. Scope Ratings GmbH, Lennéstraße 5, 10785 Berlin, District Court for Berlin (Charlottenburg) HRB 192993 B, Managing Director: Guillaume Jolivet.

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