Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the case of sovereigns, sub-sovereigns and supranational organisations.

Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodologies, including key rating assumptions and models. Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for 4mori Sardegna S.r.l. on 13 December 2021. The credit ratings remain as follows:

Class A (ISIN IT0005337446), EUR 160,234,914: BBB+_SF

Class B (ISIN IT0005337479), EUR 13,000,000: B_SF

Class J (ISIN IT0005337487), EUR 8,000,000: not rated

4Mori Sardegna S.r.l. is a static cash securitisation of secured and unsecured non-performing loans (NPLs) that were extended to companies and individuals in Italy. The loans were originated by Banco di Sardegna S.p.A.. The portfolio is serviced by Prelios Credit Servicing S.p.A (‘Prelios’). The transaction closed on 22 June 2018 and the legal maturity is in January 2037. Scope does not rate the class J notes.

The review was conducted considering available servicer reports, payment reports and investor reports up to June 2021 payment date. This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated rating history can be found on www.scoperatings.com.

Key rating factors

Year-on-year transaction observed and expected performance is consistent with Scope´s assumptions, which were last revised upon a downgrade of the notes on December 2020.

As of 30 September 2021, aggregate gross collections were EUR 111.2m, which is 63.8% of the original business plan gross expectations up to that date (EUR 174.4m). Sources of gross collections are discounted pay-off (‘DPO’) proceeds (40%), judicial proceeds (29%), note sale proceeds (21%) and other non-specified type of collections (10%).

Around 47% of the total gross collections come from open debtors (i.e., borrowers for which the recovery process is still ongoing). The servicer has closed debtors for a total gross book value of 12% of the transaction’s initial gross book value.

Class A has amortised by 31% since the issuance date. A subordination event has occurred since the December 2020 interest payment date, and is continuing. As of the latest interest payment date (June 2021), the Net Cumulative Collection Ratio and the Net Present Value Cumulative Profitability Ratio stood at 73.5% (above the 90% threshold) and 109.1%, respectively.

CREDIT-POSITIVE (+)

Above-average collateralisation. The class A and class B notes benefit from credit enhancement levels of 81.9% and 80.4% respectively (calculated as a percentage of gross book value) which are high compared to those in peer transactions rated by Scope.

Liquidity protection. The cash reserve target amount is set at 4.9% of the outstanding notes, representing 5.2% of class A. This is among the highest for Italian NPL transactions. It protects the liquidity of senior noteholders, covering senior expenses and interest on class A notes for about 3.5 payment dates.

CREDIT-NEGATIVE (-)

Property sales. The special servicer has managed to sell 755 properties via auction since closing of the transaction, mostly linked to open borrowers. The aggregated sale amount is significantly lower than the market value of the related properties and such gap should be monitored in the context of future property sales.

Cumulative collections against business plan. Aggregate gross collections are 36.2% below the original business plan’s estimate

The methodologies applicable for the reviewed rating (General Structured Finance Rating Methodology, published on 14 December 2020; Non-Performing Loan ABS Methodology, published on 6 August 2021; Methodology for Counterparty Risk in Structured Finance, published on 13 July 2021) 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: Cyrus Mohadjer, Senior Analyst.

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