Scope completed a monitoring review of Juno 2 S.r.l. transaction:

Class A (ISIN IT0005363731), EUR 157,199,486 outstanding amount: BBB+_SF;

Class B (ISIN T0005363749), EUR 48,000,000 outstanding amount: not rated;

Class J (ISIN IT0005363756), EUR 12,754,736 outstanding amount: not rated

Juno 2 S.r.l. is a static cash securitisation of a EUR 968m portfolio (at closing) of Italian non-performing loans (NPLs) extended to companies and individuals in Italy. The loans were originated by Banca Nazionale del Lavoro S.p.A.. The portfolio is serviced by Prelios Credit Solutions S.p.A. The transaction closed on 8 February 2019.

The review took place on 25 January 2021 and was based on available payment information and investor and servicer reporting as of 31 July 2020, covering three interest payment dates 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

The transaction exhibits collections that are above Scope original expectations for Class A analysis and above business plan original forecasts, at gross level.

As of 31 July 2020, cumulative gross collections represent 107.7% of the cumulative business plan gross expectations. Cumulative net collections (net of recovery expenses) stand at 112.5% of business plan cumulative net forecasts.

Cumulative gross collections represent 113.7% of Scope’s total gross expectations and 18.4% of Scope’s expected lifetime collections considered for the class A analysis.

Gross collections are mainly related to open debtors (i.e., debtors for which the recovery process is still ongoing), for a share of 88% of total proceeds. They are classified into judicial proceeds (79.9%), DPO proceeds (16.8%), note sales (3.3%).

The net profitability ratio on resolved debtors (as reported in the servicer report) is 99.4%, the same ratio reported by the monitoring agent stands at 97.5%. The profitability ratio is currently under verification since there is a disagreement between the servicer and the monitoring agent on the reference date to be used for the calculation. The misalignment of the net profitability ratio between the servicer’s and monitoring agent’s report was first reported in the context of the previous monitoring of the transaction (dated 5 February 2020) and it is still unresolved. Scope will closely monitor the evolution of the disagreement, as it is becoming increasingly more relevant since the ratio is approaching the trigger for the underperformance event (95%).

No interest subordination event has occurred, since both the cumulative gross collections ratio and the cumulative profitability ratio (107.7% and 99.4%, respectively) are above the 85% trigger level.

CREDIT-POSITIVE (+)

Cumulative collections compared to Scope’s expectations. Observed collections are outperforming Scope’s original expectations for the class A analysis, being 113.7% of Scope’s expectations on a cumulative gross basis. With respect to the original business plan, observed collections are 107.7% of the original servicer’s projections on a cumulative gross basis.

Credit enhancement. The credit enhancement for class A note has increased from 82.3% to 86% since closing.

CREDIT-NEGATIVE (-)

Italian economy. The Italian economy faces a deep recession in 2021 fueled by the Covid-19 pandemic in 2020. Despite governmental support measures, increased collateral liquidity risk and weakened borrower’ affordability positions could negatively affect the recovery prospects.

Profitability on resolved borrowers. Resolved borrowers represent 1.7% of the portfolio GBV as of the closing date. Profitability on resolved borrowers stands at 90% versus the business plan and at 69% versus Scope’s assumptions for Class A analysis. If the profitability trend will continue, it might negatively affect long-run recoveries.

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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