Scope has completed a monitoring review of BCC NPLs 2018 S.r.l. – Italian NPL ABS
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 BCC NPLs 2018 S.r.l. on 6 May 2022. The credit ratings remain as follow:
Class A (ISIN IT0005338717), EUR 188,522,348 current balance: B+SF
Class B (ISIN IT0005338741), EUR 31,400,000 current balance: CSF
Class J (ISIN IT0005338758), EUR 10,460,000 current balance: not rated
BCC NPLs 2018 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 21 Italian cooperative banks coordinated by Iccrea S.p.A. and two banks belonging to ICCREA Banca S.p.A. The transaction closed on 10 July 2018 and the legal maturity is in June 2038.
The review was conducted considering available servicer reports, payment reports and investor reports up to the December 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
As of 31 December 2021, aggregate gross collections were EUR 128.9m, which is 66.6% of the original business plan gross expectations up to that date (EUR 193.5m). Total gross collections are split between judicial proceeds (42.9%), discounted payoff proceeds (22.2%), note sales proceeds (33.9%) and other types of collections that are not yet classified (1%). Around 39.3% of the total gross collections stem from open debtors (i.e. debtors for which the recovery process is still ongoing).
Interest on class B is subordinated to payment of class A principal if either the net cumulative collection ratio falls below 90% of the servicers’ business plan target or the net present value profitability ratio falls below 90%. This ratio is curable, and once is cured, all accrued and unpaid interest are distributed senior to class A principal payments. As per the last payment date, the class B interest subordination event occurred, as the net cumulative collection ratio and the net present value profitability ratio were at 67.2% and 89.4%, respectively. Class A amortised by 33.2 % since the issuance date.
The ratings consider the issuer’s exposure to key counterparties.
Cumulative collections. Aggregate gross and net collections have outpaced Scope’s timing expectations under class A analysis.
Recovery Expenses. Recovery expenses stand about 6% of gross collections, below Scope original assumptions.
Closed debtors’ profitability based on Scope’s assumptions: The servicer has closed a material share of borrowers accounting for 26% (of the transaction’s initial GBV) with a low profitability of 59.3% relative to Scope’s original B case assumptions.
Inflation induced economic slowdown: High inflation on the back of soaring energy and commodity prices combined with tighter monetary policy could see recession risk increase substantially. Thus, deteriorated liquidity conditions could reduce the servicer’s performance on collections. Scope has recently reduced its growth projections for Italian economy in 2022 from 4.5% to 4.1%.
The methodologies applicable for the reviewed rating (General Structured Finance Rating Methodology, 17 December 2021; Non-Performing Loan ABS Methodology, 6 August 2021; Methodology for Counterparty Risk in Structured Finance, 13 July 2021) are available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst Rossella Ghidoni, Director
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