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 of Series 3, 4, 5, 7 and 8 of Marzio Finance S.r.l. on 12 September 2022. The credit rating remains as follows:

Series 3-2018 Class A notes, EUR 41.7m outstanding: AAA_SF

Series 4-2018 Class A notes, EUR 74.0m outstanding: AAA_SF

Series 4-2018 Class B notes, EUR 54.2m outstanding: A+_SF

Series 5-2019 Class A notes, EUR 128.8m outstanding: AAA_SF

Series 7-2019 Class A notes, EUR 196.4m outstanding: AAA_SF

Series 8-2020 Class A notes, EUR 193.3m outstanding: AAA_SF

Marzio Finance S.r.l. has established a EUR 10bn securitisation programme of notes backed by payroll-deductible loans (CQS) extended to borrowers in Italy and originated by IBL – Istituto Bancario del Lavoro S.p.A. (IBL Banca, BBB by Scope). CQS loans are collateralised by the debtor’s salary or pension and, in most cases, by any accrued severance amount (Trattamento di Fine Rapporto). Instalments cannot exceed the borrower’s net monthly salary or pension by 20% for Cessione del Quinto loans and 50% for Delegazione di Pagameto loans.

Under the programme, several series of notes may be issued, and each series may consist of class A, class B and class J notes. Each series will be issued as an independent transaction, for the purpose of financing the purchase of a static portfolio of receivables originated by IBL Banca.

The notes of each series are backed by segregated, specific and independent pools of loans. Each series under the programme differ from the other series in terms of capital structure, note interest rates, liquidity reserves and additional reserves. All the securitised portfolios are highly granular, and all the underlying loans are insured against life and employment events.

The review was conducted based on available servicer reports, payment reports and investor reports reflecting performance through the 31 May 2022 collection date (28 June 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

CREDIT-POSITIVE (+)

Underlying asset type with low historical losses. CQS loans incur lower losses than standard unsecured consumer loans, primarily because the loans are fully insured, and instalments are withheld by the borrower’s employer and paid directly to the lender. This is well reflected in the low cumulative net default ratios. The observed cumulative net default ratios and seven-instalment delinquency rates are respectively:

• Series 3-2018: 0.9% and 3.4%
   
• Series 4-2018: 1.1% and 2.1%
   
• Series 5-2019: 1.1% and 1.6%
   
• Series 7-2019: 1.0% and 1.5%
   
• Series 8-2020: 0.8% and 1.3%

Credit enhancement. Senior notes across the series have amortised over time, leading to a build-up of credit enhancement (including support from liquidity reserves and additional reserves) since closing. The observed credit enhancement levels are respectively:

• Series 3-2018 Class A notes: 60.7% from 13.3% at closing
   
• Series 4-2018 Class A notes: 52.3% from 21.3% at closing
   
• Series 4-2018 Class B notes: 17.4% from 5.4% at closing
   
• Series 5-2019 Class A notes: 20.4% from 11.5% at closing
   
• Series 7-2019 Class A notes: 17.3% from 10.5% at closing
   
• Series 8-2020 Class A notes: 15.2% from 10.4% at closing

Excess spread. The current portfolio yield is very high compared to the rate payable in the rated notes across all series. Scope expects that net excess spread will remain high, currently 3-4% across the series, even after accounting for potential yield compression and stressed servicing fees.

Experienced originator. IBL Banca is one of the most experienced CQS loan originators in Italy, with a record of above-average performance for its loan book.

CREDIT-NEGATIVE (-)

Weak macro-economic outlook. The post-pandemic macro-economic outlook has deteriorated relative to Scope’s view at closing.

Exposure to public entities. A large portion of the portfolio is exposed to public entities that pay salaries or pensions to borrowers (above 80% for all series). Such a high concentration increases vulnerability to sovereign default.

The methodologies applicable for the reviewed rating (General Structured Finance Rating Methodology, 17 December 2021; Consumer and Auto ABS Rating Methodology, 3 March 2022; Counterparty Risk Methodology, 14 July 2022) available on https://www.scoperatings.com/ratings-and-research/structured-finance/methodologies
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst Shashank Thakur, Analyst

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