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 Retiro Mortgage Securities DAC on 20 January 2023. Credit ratings remain as follows:

Class A1 (ISIN: XS2306848479), EUR 111,869,424.74: rated BBB+_SF

Class A2 (ISIN: XS2306849287), EUR 77,000,000: rated BBB-_SF

Class B (ISIN: XS2306849956), EUR 34,000,000: rated B-_SF

Class C (ISIN: XS2306850459), EUR 15,000,000: rated CCC_SF

Class D1 (ISIN: XS2306856571), EUR 10,000,000: not rated

Class D2 (ISIN: XS2306857207), EUR 10,000,000: not rated

Class D3 (ISIN: XS2306858197), EUR10,000,000: not rated

Class E (ISIN: N/A), EUR 54,000,000: not rated

Retiro Mortgage Securities DAC is a cash securitisation of a EUR 396.2m portfolio of REO assets and a EUR 678.4m portfolio of Spanish NPLs (at closing) originated by Banco Sabadell, Bankia, Caja De Ahorros De Valencia, Castellon Y Alicante (Bancaja), Caja De Ahorros Layetana, Caja De Ahorros La Rioja, Caixa D´Estalvis Laietana, and Deutsche Bank.

The review was conducted based on available investor report information and performance reporting as of the 28 October 2022 interest 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 the 28 October 2022 payment date, aggregate gross collections were EUR 223.8m, which represents around 65% of the original business plan expectations of EUR 342.2m up to the same period. In terms of net collections (gross collections reduced by the amount of recovery expenses and servicing fees), realised aggregate collections amount to EUR 146.7m, which represents 58% of the servicer’s original net expectations.

As per last investor report dated October 2022, gross collections had fallen below the minimum cash flow threshold (defined as 80% of expected gross cash flows from respective sub-portfolio in the business plan), for the Normandia and Tambo sub-portfolio. Therefore, loan and REO servicing fees component for the sub-portfolios were subordinated to all rated notes. Gross collections were above the minimum cash flow threshold for all other sub-portfolios.

The ratings consider the issuer’s exposure to key counterparties.

Credit-positive (+)

Strong interest rate protection. The structure features an interest rate cap agreement, effective from the closing date until (and including) the note payment date in April 2026, which provides an interest risk hedge for all rated notes. Together with a coupon cap embedded in the terms and conditions of the rated notes (effective upon the interest rate cap agreement’s maturity), the payable base rate is capped through the life of the notes.

Credit-negative (-)

Timing of recoveries. As of the 28 October 2022 interest payment date, gross collections are 35% below business plan and 17% below Scope’s B case original expectations. Persistent delay in collections would lead to delayed amortisation of all the rated notes.

High total expenses. Total cumulative expenses (servicing fees and recovery expenses) at 34% of cumulative collections, are above Scope’s lifetime assumption but below business plan expectations.

The methodologies applicable for the reviewed rating (General Structured Finance Rating Methodology, 25 January 2023; 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 analyst: Rossella Ghidoni, Director
Person responsible for the approval of the monitoring note: David Bergman

Potential conflicts
See www.scoperatings.com under Governance & Policies/EU Regulation/Disclosures for a list of potential conflicts of interest related to the issuance of Credit Ratings. Scope Ratings provided the following Other Services to the Rated Entity and/or its Related Third Parties within the two years preceding this Credit Rating action: Credit Estimate.

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