Rating action

The transaction comprises the following instruments:

Class A (ISIN IT0005351330), EUR 363.7m outstanding: downgraded to BB_SF from BB+_SF

Class B (ISIN IT0005351348), EUR 62.9m outstanding: not rated

Class J (ISIN IT0005351355), EUR 10.8m outstanding: not rated

Scope’s review was based on available payment information and servicer reporting through September 2021 along with investor reporting through March 2021.

Transaction overview

Aqui SPV S.r.l. is a static cash securitisation of a EUR 2,082m portfolio (as of closing) of Italian non-performing loans (NPLs) originated by BPER Banca S.p.A, Cassa di Risparmio di BRA S.p.A and Cassa di Risparmio di Saluzzo S.p.A. The transaction closed on 7 November 2018.

Through the 30 September 2021 collection period aggregate gross collections were EUR 269.0m, which represents 94.3% of the original business plan expectations of EUR 285.3m. Gross collections from the unsecured loan segment are 72.0% of the original business plan’s target through the latest payment date. The composition of gross collections consists of judicial (58.0%), DPO (27.0%), indemnity (7.2%), note sale (6.1%) and other (1.7%) collection types.

Closed borrowers (632) account for 35.9% (EUR 96.5m) of gross collections and 11.5% of the portfolio’s GBV at closing. The closed debtors’ gross collections stem from DPO (44.6%), judicial (29.9%), indemnity (20.1%), note sale (3.9%) and other (1.5%) collection types.

The transaction’s net cumulative collection ratio (i.e., considering expenses) and NPV profitability ratio stand at 98.1% and 107.2%, respectively, as of the October 2021 payment date. Class B interest is subordinated to class A principal if the metric drops below 95%. The net cumulative collection ratio is approximately 93.3% when removing note sale proceeds of EUR 12.5m that were realised in September 2021.

Servicing fees and costs are approximately 11.2% of gross collections to date, which is below our expectation of roughly 17%.

33.2% of class A’s notional balance has amortised since closing.

Rating rationale

The rating action is driven by the observed and expected performance of the transaction, as well as Scope’s updated modelling assumptions, which reflect the transaction’s performance, macro-economic factors, and peer analysis. Scope expects B rating category lifetime collections (including realised gross collections) to be 13.4% lower compared to the amount forecasted at closing.

Profitability on closed positions is 99.0% of Scope’s B rating scenario assumptions that were updated during Scope’s 2020 monitoring review. Profitability on closed secured and unsecured positions in the same B rating scenario is 86.4% and 165.4%, respectively.

Total gross cumulative collections are 195.9% of Scope’s B rating scenario, indicating a faster than expected collection pace. This figure drops to 184.0% when removing aggregate note sales of EUR 16.4m that have been collected to date. The strong collection pace is fully driven from the secured loan segment, which is at 271.8% of our expectation through the latest payment date. Conversely, total unsecured collections are below our B rating scenario expectation through the latest payment date, representing 73.9% of our total expected amount.

The reliance on EUR 12.5m in note sales prior to the 30 September 2021 cut-off date is not a positive development for the class A noteholders. Class B interest remains senior to class A principal as a result, and the strategy potentially results in lower collections than would have otherwise been realised through DPOs or judicial procedures.

All counterparties continue to support the ratings, as there have not been material changes on counterparty risk since closing.

Key rating drivers

Unsecured borrower profitability (positive). Profitability on closed unsecured borrowers (339) is 165.4% of Scope’s B rating scenario that was assumed at the previous rating action.¹

Secured borrower collection pace (positive). Total secured collections are 271.8% of Scope’s B rating scenario that was assumed at the previous rating action.¹

Servicing fees and costs (positive). Total servicing fees and costs are approximately 11.2% of gross collections to date, which is below Scope’s expectation of roughly 17%.

Secured borrower profitability (negative). Profitability on closed secured borrowers (293) is only 86.4% of Scope’s B rating scenario that was assumed at the previous rating action.¹

Unsecured borrower collection pace (negative). Total unsecured collections are only 73.9% of Scope’s B rating scenario that was assumed at the previous rating action.¹

Note sale strategy (negative). Notes sales typically result in lower-than-expected collections.

Rating-change drivers

Positive. Improved profitability on secured collections together with a faster than expected pace of collections could positively impact the rating.

Negative. Collection strategies that further sacrifice profitability or delay the collections may negatively impact the rating.

Quantitative analysis and assumptions

Scope analysed cash flows reflecting the transaction’s structural features to calculate each tranche’s expected loss and weighted average life. Scope analysed the assets to produce a rating-conditional cash flow projection of gross recoveries for the portfolio of defaulted loans.

Scope has updated its modelling assumptions to reflect our updated market value decline assumptions and the current performance of the transaction. Scope assumed a 31.1% gross recovery rate over a weighted average life of 4.0 years for the class A analysis.

Sensitivity analysis

Scope tested the resilience of the ratings to deviations in expected recovery rates and recovery timing. This analysis has the sole purpose of illustrating the sensitivity of the rating to input assumptions and is not indicative of expected or likely scenarios.

The following shows how the results for class A notes change compared to the assigned rating in the event of:

• 10% haircut to recoveries, three notch decrease;
   
• one-year recovery lag increase, two notch decrease.

Rating driver references
Transaction documents and reporting (Confidential)

Stress testing
Stress testing was performed by applying Credit-Rating-adjusted recovery rate assumptions.

Cash flow analysis
Scope Ratings performed a cash flow analysis of the transaction with the use of Scope Ratings’ Cash Flow SF EL Model Version 1.1. incorporating the relevant asset assumptions, taking into account the transaction’s main structural features, such as the notes’ priorities of payment, the notes’ size and coupons. The outcome of the analysis is an expected loss and an expected weighted average life for the notes.

Methodology
The methodologies used for these Credit Rating, (Non-Performing Loan ABS Rating Methodology, 6 August 2021; Methodology for Counterparty Risk in Structured Finance, 13 July 2021; General Structured Finance Rating Methodology, 14 December 2020), available on https://www.scoperatings.com/#!methodology/list.
The model used for these Credit Rating is (Cash Flow SF EL Model Version 1.1.), available in Scope Ratings’ list of models, published under https://www.scoperatings.com/#!methodology/list.
Scope Ratings GmbH and Scope Ratings UK Limited apply the same methodologies/models and key rating assumptions for their credit rating services, while Scope Hamburg GmbH’s methodologies/models and key rating assumptions are different from those of Scope Ratings GmbH and Scope Ratings UK Limited.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on https://www.scoperatings.com/#!governance-and-policies/rating-scale. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at https://www.scoperatings.com/#governance-and-policies/regulatory-ESMA. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at https://www.scoperatings.com/#governance-and-policies/rating-scale. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on https://www.scoperatings.com/#!methodology/list.

Solicitation, key sources and quality of information
The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
The following substantially material sources of information were used to prepare the Credit Rating: public domain, the Rated Entity, the Rated Entities’ Related Third Parties, third parties and Scope Ratings’ internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting this Credit Rating originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Scope Ratings has received a third-party asset due diligence assessment/asset audit at closing. The external due diligence assessment/asset audit/internal analysis was considered when preparing the Credit Rating and it has no impact on the Credit Rating.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Rating and the principal grounds on which the Credit Rating are based. Following that review, the Credit Rating was not amended before being issued.

Regulatory disclosures
This Credit Rating is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Rating is UK-endorsed.
Lead analyst: Thomas Miller-Jones, Associate Director
Person responsible for approval of the Credit Rating: David Bergman, Managing Director
The Credit Rating was first released by Scope Ratings on 7 November 2018. The Credit Rating was last updated on 5 November 2020.

Potential conflicts
See www.scoperatings.com under Governance & Policies/EU Regulation/Disclosures for a list of potential conflicts of interest related to the issuance of Credit Ratings.

Conditions of use / exclusion of liability
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