Rating action

Scope has completed a monitoring review of the following notes issued by Ibla S.r.l.:

Class A (ISIN IT0005342891), EUR 39.7m outstanding: upgraded to BBB+_SF from BBB_SF

Class B (ISIN IT0005342909), EUR 9.0m outstanding: affirmed at B_SF

Class J (ISIN IT0005342917), EUR 3.5m outstanding: not rated

Scope’s review was based on servicer, investor and payment reporting as of October 2022 payment date.

Transaction overview

Ibla S.r.l. is a static cash securitisation of an Italian NPL portfolio worth EUR 349m by gross book value. The pool is comprised of both secured (67.2%) and unsecured (32.8%) loans. The loans were extended to companies (74.4%) and individuals (25.6%) and were originated by Banca Agricola Popolare di Ragusa S.C.p.A.. Secured loans are backed by residential and non-residential properties (57.8% and 42.2% of property value, respectively). The transaction is serviced by doValue S.p.A.. The transaction closed on 6 September 2018 and the legal maturity is 30 April 2037.

Rating rationale

Key rating drivers continue to be aligned with those disclosed on our initial rating action release, dated September 6, 2018. Scope has updated its recovery estimates assumptions considering the transaction-specific performance, developments in macroeconomic fundamentals, and peer transaction benchmarks.

Specific 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 review also addressed the risk of a slowdown of the Italian economy driven by persistent inflationary pressures combined with tighter monetary policy, and the potential deterioration of liquidity conditions which could impair servicers’ performance on collections. Furthermore, the ratings consider the issuers’ exposure to key counterparties, the legal and structural protection provided to the notes, the liquidity protection and the interest rate hedging agreements.

Rating factors

Faster than expected collections (positive)¹. Aggregate gross and net collections amount to EUR 68.6m and EUR 61.9 respectively, whereas class A amortised by EUR 45.3mn. Total gross collections are split between DPO (52.4%), judicial proceeds (42.4%), credit sales (4.5%) and other type of collections (0.7%). Aggregate net collections are above Scope’s expectation at B case rating. Based on the servicer business plan, aggregate net collections are 72.6% of original expectations.

Hedging (positive)¹. The transaction implements a cap hedging agreement which mitigates the risk of increased liabilities on the notes due to rising Euribor rate on class A. As per the October 2022 interest payment date, cap notional is 76.7% higher than class A outstanding amount.

Above expectation profitability of secured closed positions (positive)¹. Gross collections from closed borrowers represent 25.2% of cumulative collections. They are split between DPO (80.2%), credit sales (15.7%), judicial proceeds (3.9%) and other type of collections (0.2%). With reference to secured borrowers only, based on Scope’s analysis, closed debtors account for around 8.0% of the transaction’s initial gross book value. The profitability on these debtors stands at 105% and is above Scope’s updated expectations under the B case scenario.

High recovery expenses (negative)¹. Recovery expenses amount at 9.8% of cumulative gross collections, which is above Scope closing assumption.

Rating-change drivers

Positive. Improving performance on closed borrowers’ profitability could positively impact the ratings.

Negative. Recovery expenses showed an increasing trend. If confirmed, this the net collection volumes.

Quantitative analysis and assumptions

Scope analysed cash flows reflecting the transaction’s structural features to calculate each tranche’s expected loss and weighted average life. Scope analysed the assets to produce a rating-conditional cash flow projection of gross recoveries for the portfolio of defaulted loans.

Scope has updated its modelling assumptions to reflect the current performance of the transaction. At the B case, Scope assumed a lifetime gross recovery rate of 50.9% over a remaining weighted average life of 1.8 years. By portfolio segment, Scope assumed a lifetime gross recovery rate of 61.6% and 20.1% for the secured and unsecured portfolios, respectively.

Sensitivity analysis

Scope tested the resilience of the ratings to deviations in expected recovery rates and recovery timing. This analysis has the sole purpose of illustrating the sensitivity of the rating to input assumptions and is not indicative of expected or likely scenarios.

The following shows how the results for class A notes change compared to the assigned rating in the event of:

• 10% haircut to recoveries, zero notches;
   
• a one-year recovery lag increase, zero notches.

The following shows how the results for class B notes change compared to the assigned rating in the event of:

• 10% haircut to recoveries, zero notches;

• a one-year recovery lag increase, zero notches.

References
1. Transaction documents and reporting - Confidential
2. Scope research

Stress testing
Stress testing was performed by applying Credit-Rating-adjusted recovery rate assumptions.

Cash flow analysis
Scope Ratings performed a cash flow analysis of the transaction with the use of Scope Ratings’ Cash Flow SF EL Model Version 1.1 incorporating the relevant asset assumptions, taking into account the transaction’s main structural features, such as the notes’ priorities of payment, the notes’ size and coupons. The outcome of the analysis is an expected loss and an expected weighted average life for the notes.

Methodology
The methodologies used for these Credit Ratings, (Non-Performing Loan ABS Rating Methodology, 5 August 2022; Methodology for Counterparty Risk in Structured Finance, 14 July 2022; General Structured Finance Rating Methodology, 25 January 2023), are available on https://www.scoperatings.com/ratings-and-research/structured-finance/methodologies.
The model used for these Credit Ratings is (Cash Flow SF EL Model Version 1.1), available in Scope Ratings’ list of models, published under https://www.scoperatings.com/ratings-and-research/structured-finance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at https://scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.

Solicitation, key sources and quality of information
The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
The following substantially material sources of information were used to prepare the Credit Ratings: public domain, the Rated Entity, the Rated Entities’ Related Third Parties, third parties and Scope Ratings’ internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Scope Ratings has received a third-party asset audit. The external asset audit was considered when preparing the Credit Ratings and it has no impact on the Credit Ratings. Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and the principal grounds on which the Credit Ratings are based. Following that review, the Credit Ratings were not amended before being issued.

Regulatory disclosures
These Credit Ratings are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings are UK-endorsed.
Lead analyst: Vittorio Maniscalco, Specialist
Person responsible for approval of the Credit Ratings: Antonio Casado, Executive Director
The Credit Ratings were first released by Scope Ratings on 6 September 2018.

Potential conflicts
See www.scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest related to the issuance of Credit Ratings.

Conditions of use / exclusion of liability
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