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 Ratings completed the monitoring review for Siena NPL 2018 S.r.l. on 10 June 2022.

The credit ratings remain as follow:

Class A (ISIN IT0005331472), EUR 1,412,915,281 current outstanding amount: BBB+_SF;

Class B (ISIN IT0005319139), EUR 878,790,036 outstanding amount: not rated;

Class J (ISIN IT0005319147), EUR 565,000,000 outstanding amount: not rated.

Siena NPL 2018 S.r.l. is a static cash securitisation of a EUR 24.1bn portfolio (at closing) of Italian non-performing loans originated by Banca Monte dei Paschi di Siena S.p.A., MPS Capital Services Banca per le Imprese S.p.A. and MPS Leasing & Factoring S.p.A. The portfolio is serviced by four special servicers: Gardant S.p.A (previously Credito Fondiario S.p.A, also the master servicer), Italfondiario S.p.A., Juliet S.p.A. and Prelios Credit Servicing S.p.A. The class A was rated on 10 May 2018 and the legal maturity is in January 2033. Scope does not rate class B or class J.

The review was conducted considering available servicer reports, payment reports and investor reports up to the May 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 since cut-off date amount to EUR 3.146.0, which represents 54.0% of the initial business plan expectations and 84.9% of the updated business plan (with new projections starting from June 2019). Aggregate gross collections since transfer date amount to EUR 2,489.0m and are split between judicial proceeds (64%), discounted pay-off proceeds (30%), credit sale proceeds (4%) and other types of collections (2%).

Around 19.5% of gross collections since transfer date (EUR 613.5m) come from closed debtors, whose gross book value represents around 9.3% of transaction’s initial gross book value. The gross profitability on closed debtors (as reported in the servicer report) is slightly below the servicers’ expectation, standing at 95.8%.

Interest on class B may be subordinated to payment of class A principal if cumulative gross collections fall below 50% of the initial business plan expectations. As per the May 2022 payment date, no class B interest subordination had occurred, and the cumulative gross collections stand at 54.0%.

All transaction counterparties continue to support the rating.

CREDIT-POSITIVE (+)

Credit enhancement: The transaction was structured at closing with an above-average level of credit protection, which has mitigated poor servicer performance both in terms of profitability and collection speed.

Reduced carry cost. Class A has materially amortised since closing, which reduces liability costs over the life of the transaction (interests and GACS fees). The current class A pool factor is 48.4%.

Portfolio servicing. The fact that the pool is serviced by four different special servicers mitigates the risk of a complete servicer disruption. In the event of a servicer disruption, the master servicer will assist the issuer in finding a suitable replacement.

CREDIT-NEGATIVE (-)

Cumulative collections. Aggregate gross and net collections have not met Scope’s timing expectations under class A analysis.

Weak profitability. Profitability on secured closed borrowers is around 89% of Scope’s current expectations at the B case.

Below-average liquidity protection. Liquidity available in the structure would remain a constraining rating factor, even if collateral performance were to improve. The structure contains a cash reserve equivalent to 3.5% of the outstanding class A balance, covering six to nine months of interest on class A and items senior thereto. This liquidity coverage is lower than peer Italian NPL transactions.

Economic slowdown. High inflation on the back of soaring energy and commodity prices combined with tighter monetary policy could see recession risk increase substantially. Deteriorated liquidity conditions could further 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 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 Davide Nesa, Director

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