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 reviews of 4 Italian NPL transactions on 7 November 2022. The credit ratings remain as follow:

Juno 2 S.r.l.

Class A (ISIN IT0005363731), EUR 204.0m original balance, EUR 95.7m current balance: BBB+_SF

Class B (ISIN IT0005363749), EUR 48.0m original balance, EUR 48.0m current balance: Not rated

Class J (ISIN IT0005363756), EUR 12.7m original balance, EUR 12.7m current balance: Not rated

Ortles 21 S.r.l.

Class A (ISIN IT0005473464), EUR 340.0m original balance, EUR 292.6m current balance: BBB_SF

Class B (ISIN IT0005473563), EUR 40.0m original balance, EUR 40.0m current balance: Not rated

Class J (ISIN IT0005473571), EUR 14.3m original balance, EUR 14.3m current balance: Not rated

Summer SPV S.r.l.

Class A (ISIN IT0005432445), EUR 85.4 original balance, EUR 64.8m current balance: BBB_SF

Class B (ISIN IT0005432452), EUR 10.0m original balance, EUR 10.0m current balance: Not rated

Class J (ISIN IT0005432460), EUR 1.0m original balance, EUR 1.0m current balance: Not rated

Yoda SPV S.r.l.

Class A (ISIN IT0005429169), EUR 1,010.0m original balance, EUR 721.6m current balance: BBB_SF

Class B (ISIN IT0005429201), EUR 210.0m original balance, EUR 210.0m current balance: Not rated

Class J (ISIN IT0005429219), EUR 20.0m original balance, EUR 20.0m current balance: Not rated

The reviews were conducted considering available servicer reports, payment reports and investor reports up to April 2022 for Summer SPV S.r.l. and Ortles 21 S.r.l. and up to July 2022 for Yoda SPV S.r.l. and Juno 2 S.r.l.

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 actions connected with this monitoring note along with the associated rating history can be found on www.scoperatings.com.

Key rating factors

Key rating factors assessed during the monitoring review include realised profitability on closed positions, the timing of cumulative collections and the amount of recovery expenses, against Scope’s expectations. The ratings also consider the issuers’ exposure to key counterparties, the structural protection provided to the notes, the liquidity protection and the interest rate hedging agreements. The review considered the risk of recession in Italy driven by high inflation on the back of soaring energy and commodity prices combined with tighter monetary policy. Deteriorated liquidity conditions could reduce the servicers’ performance on collections.

Juno 2 S.r.l.

Servicer performance (positive). Collections are consistent with the servicer’s business plan and have exceeded Scope’s expectations in terms of timing under Scope’s stressed assumptions, applied for the analysis of the class A notes. The servicer’s cumulative collection ratio and NPV cumulative profitability ratio are 97.4% and 111.5% respectively.

Low recovery expenses (positive). Recovery expenses amount to 4.3% of cumulative gross collections, which is below Scope’s assumption of 9%. In addition, the servicer revised down the total legal expenses in the updated business plan from 3.9% to 3.5%.

Class A amortisation (positive). 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 46.9% three and a half years after closing.

Low profitability of closed positions (negative). Based on Scope’s analysis, closed debtors account for around 7.5% of the transaction’s initial gross book value. Profitability on these debtors stands at 93.5%, below Scope’s expectations under the B case scenario.

Ortles 21 S.r.l.

Faster-than-expected cumulative collections (positive). Aggregate gross and net collections amount to EUR 50.8m and EUR 49.0m respectively. Total gross collections are split between judicial proceeds (19%) and discounted pay-off (DPO) proceeds (18%). The remaining share of collections (63%) refers to ad-interim proceeds and payments not yet classified by the servicers. Aggregate net collections, which represent 195% of the original servicer’s expectations, have outpaced Scope’s timing expectations under the class A rating scenario.

Interest rate risk hedged (positive). Resilient cap spread hedging structure with the upper bound embedded in the class A Euribor component that mitigates exposure to large amounts of Euribor stress.

No closed debtors after the first collection period (negative). Profitability on closed debtors is not available since no positions were closed by the servicers in the first collection period. This, combined with concerns around the current macro-economic outlook, advised against a positive rating action in the short term.

Summer SPV S.r.l.

Faster-than-expected cumulative collections (positive). Aggregate gross and net collections amount to EUR 27.4m and EUR 25.7m respectively. Total gross collections are split between DPO proceeds (83.8%), judicial proceeds (14.4%), and notesales (1.8%). Aggregate net collections, which represent 396% of the original servicer’s expectations, have significantly outpaced Scope’s timing expectations.

Interest rate risk hedged (positive). Resilient cap spread hedging structure with the upper bound embedded in the class A Euribor component that mitigates exposure to large amounts of Euribor stress.

Low profitability of secured closed positions (negative). Gross collections from closed borrowers represent 50.2% of cumulative collections and were mainly obtained through DPOs (88.2%). With reference to secured borrowers only, based on Scope’s analysis, closed debtors account for around 10.3% of the transaction’s initial gross book value. The profitability on these debtors, at 88.9%, is below Scope’s expectations under the B case scenario.

Yoda SPV S.r.l.

Faster-than-expected cumulative collections (positive). Aggregate gross and net collections amount to EUR 381.2m and EUR 370.9m respectively. Total gross collections are split between judicial proceeds (44%), DPO proceeds (24%), other sources of collections (24%) and notesales proceeds (8%). Aggregate net collections, which represent 106% of the original servicer’s expectations, have outpaced Scope’s timing expectations.

Low profitability of closed positions (negative). Gross collections from closed borrowers represent 24% of cumulative collections and were mainly obtained through DPO proceeds (37%), notesales proceeds (28%), judicial procedures (11%) and other sources of collections (24%). Based on Scope’s analysis, closed debtors account for around 5% of the transaction’s initial gross book value. Profitability on these debtors, at 92%, is below Scope’s expectations under the B case scenario.

The methodologies applicable for the reviewed ratings (General Structured Finance Rating Methodology, 17 December 2021; Non-Performing Loan ABS Methodology, 5 August 2022; Counterparty Risk Methodology, 14 July 2022) 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 analysts:
Elom Kwamin, Specialist for Yoda SPV S.r.l.
Leonardo Scavo, Senior Specialist for Summer SPV S.r.l. and Ortles 21 S.r.l.
Davide Nesa, Director for Juno 2 S.r.l.

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