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 POP NPLs 2018 S.r.l. on 19 May 2022. The credit ratings remain as follow:

Class A (ISIN IT0005351884), EUR 290,035,121 current balance: BB_SF

Class B (ISIN IT0005351892), EUR 50,000,000 current balance: CCC_SF

Class J (ISIN IT0005351900), EUR 15,780,000 current balance: not rated

POP NPLs 2018 S.r.l. is a static cash securitisation of secured and unsecured non-performing loans extended to companies and individuals in Italy worth EUR 1,578m by gross book value at closing. The portfolio was originated by 17 Italian banks and is serviced by Cerved Credit Managament S.p.A. The transaction was closed on 16 November 2018 and the legal maturity is in December 2033. Scope does not rate the class J notes.

The review was conducted considering available servicer reports, payment reports and investor reports up to the April 2022 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 March 2022, aggregate gross collections were EUR 196.8m, which is 101% of the original business plan’s gross expectations up to that date (EUR 196.4m). Total gross collections are split between judicial proceeds (47.4%), discounted payoff proceeds (24.9%), credit sale proceeds (7.7%) other types of collections or not classified yet (20.0%).

Around 66.0% of the total gross collections stem from open debtors (i.e., debtors for which the recovery process is still ongoing). Based on Scope’s analysis, closed debtors account for around 10% of the transaction’s initial gross book value, registering a profitability that is below Scope’s expectation for the B case scenario.

In April 2021, the servicer reviewed downward the transaction’s original business plan. The lifetime business plan projections have been reduced by ca. 11%.

Class B interest will be subordinated to the payment of class A principal if either the cumulative net collection ratio falls below 90% of the servicers’ business plan target or the net present value profitability ratio falls below 90%. The class B interest subordination event is curable, and if cured, all accrued and unpaid interest are distributed senior to class A principal payments. At last payment date, no class B interest subordination event occurred as the two ratios were at 103.6% and 112.6%, respectively. Class A amortised by 32% since the issuance date.

The rating considers the issuer’s exposure to key counterparties.

CREDIT-POSITIVE (+)

Pace of collections. Aggregate gross and net collections have outpaced Scope’s timing expectations under class A analysis.

Cumulative expenses. Cumulative recovery expenses are around 5% of cumulative collections, below Scope legal costs assumption.

CREDIT-NEGATIVE (-)

Closed debtors’ profitability. Profitability on closed debtors stands at 86% of Scope’s expectation for the B case scenario.

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 the Italian economy in 2022 from 4.5% to 4.1%.

The methodologies applicable for the reviewed ratings (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 Leonardo Scavo, Senior Analyst

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