Scope has completed a monitoring review for Popolare Bari NPLs 2017 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 methodology/ies, including key rating assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.
Scope completed the monitoring review for Popolare Bari NPLs 2017 S.r.l. on 18 January 2023 and considered the servicer reporting up to September 2022 collection date. The credit ratings remain as follows:
Class A (ISIN IT0005316275), EUR 62.6m outstanding: CCSF
Class B (ISIN IT0005316283), EUR 10.1m outstanding: CSF
Class J (ISIN IT0005316291), EUR 13.5m outstanding: not rated
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.
Senior notes’ liquidity protection (positive): A cash reserve is available to cover the senior costs and the interest on the class A notes, providing liquidity protection to senior noteholders. The balance of the cash reserve is currently at target equal to 4.0% of the class A notes’ principal amount. Based on Scope’s analysis, the current reserve level covers at least one payment date of senior costs and class A interests.
Cumulative collections versus Scope’s expectations (negative): Cumulative gross collections are only 23.9% of Scope’s B rating scenario at closing. The transaction’s underperformance is strongly increasing the issuer’s senior costs (e.g. the GACS fee and interests). The current Class A pool factor is 77.4%, which is high compared to peer transactions.
Weak servicer performance (negative): Total gross recoveries expected in the servicer updated business plan are lower than Class A current outstanding balance. The current servicer business plan forecasts gross recoveries that are 29.8% lower than the initial business plan. In addition, recoveries over the last two interest payment dates were approximately 56.6% below the current business plan forecasts. The servicer’s cumulative collection ratio on the original business plan is currently 40.2%.
The methodologies applicable for the reviewed rating (General Structured Finance Rating Methodology, 17 December 2021; Non- Performing Loan ABS Rating 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 analyst Davide Nesa, Director
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