Scope completed a monitoring review of PoP NPLs 2019 S.r.l. transaction:

Class A (ISIN IT0005396061), EUR 145,765,986 outstanding amount : BBB_SF;

Class B (ISIN IT0005396079), EUR 25,000,000 outstanding amount : CCC_SF;

Class J (ISIN IT0005396087), EUR 5,000,000 outstanding amount: not rated

PoP NPLs 2019 S.r.l. is a static cash securitisation of a EUR 826.7m portfolio (at closing) of Italian non-performing loans originated by 12 banks. The portfolio is serviced by Prelios Credit Solutions S.p.A. and Fire S.p.A. as special servicers and Prelios Credit Services S.p.A as master servicer. The transaction was closed on 23 December 2019.

The review took place on 18 December 2020 and was based on available payment information and investor and servicer reporting as of 31 July 2020, covering one interest payment date since closing. The review resulted in no action on both the Class A and Class B ratings. Scope does not rate the 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

The transaction’s collections are above Scope original expectations for class A and class B analysis and they are also above business plan original forecasts, both at gross and net levels.

Aggregate gross collections since the cut-off date amount to EUR 31.5m (of which 76% relates to open debtors, i.e., debtors for which the recovery process is still ongoing). This figure represents about 13% of Scope’s expected lifetime collections considered for the analysis of the class A notes.

The reported net profitability on fully resolved debtors (i.e., positions for which the recovery procedure was closed) is above initial business plan’s projections, standing at 119%. Profitability is below Scope’s expectations for class A and B notes. However, given that resolved borrowers are still a limited portion of transaction’s total borrowers (5.2% of total borrowers), the impact of the profitability on these positions is currently non material for the transaction. Scope will closely monitor the evolution of resolved borrowers’ profitability over time.

CREDIT-POSITIVE (+)

Transaction performance: Transaction performance is above Scope original expectations for class A and B analysis, with gross collections being 163% of Scope’s expectations for class A and B analysis, based on Scope’s estimated ramp-up period for the portfolio. With respect to the original business plan, observed collections are 121% of the original servicer’s projections at gross level, as of 31 July 2020 (i.e. one collection period since closing).

Credit Enhancement: The credit enhancement for both class A and class B notes have increased to 81.6% and 78.4% from 79.1% and 76.0% respectively since closing, as of the first interest payment date.

CREDIT-NEGATIVE (-)

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

Profitability on closed borrowers: Fire and Prelios have achieved different levels of profitability on closed borrowers, 108.17% and 167.47%, respectively. On the other hand, their cumulative net collection ratios stand at 146.14% and 100.25%, respectively. This might signal that Fire is overperforming in terms of volumes but experiencing higher than expected discounts, while Prelios is collecting at a slower pace but with better profitability on closed borrowers. If this trend continues, total portfolio’s profitability might worsen over time.

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 Rossella Ghidoni, Associate Director

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