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 two Italian NPL transactions on 19 June 2023. The credit ratings remain as follow:

Sirio NPL S.r.l.

Class A (ISIN IT0005431074), EUR 290.0 original balance, EUR 145.0m current balance: BBB_SF

Class B (ISIN IT0005431116), EUR 35.0m original balance, EUR 35.0m current balance: not rated

Class J (ISIN IT0005431124), EUR 9.9m original balance, EUR 9.9m current balance: not rated

Iseo SPV S.r.l.

Class A (ISIN IT0005395352), EUR 335.0m original balance, EUR 179.8m current balance: BBB-_SF

Class B (ISIN IT0005395360), EUR 25.0m original balance, EUR 25.0m current balance: not rated

Class J (ISIN IT0005395378), EUR 13.5m original balance, EUR 13.5m current balance: not rated

The reviews were conducted considering available servicer reports, payment reports and investor reports up to January 2023 for Iseo SPV S.r.l. and up to March 2023 for Sirio NPL 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.

Rating factors

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. Additionally, the review 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 borrowers’ affordability conditions which could impair servicers’ performance on collections. The ratings also 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.

Sirio NPL S.r.l.

Faster-than-expected cumulative collections (positive). Aggregate gross and net collections amount to EUR 181.7m and EUR 163.4m respectively. Total gross collections are split between judicial proceeds (44.9%), discounted pay-offs proceeds (36.4%), credit sales (0.5%) and other type of collections (18.2%). Aggregate net collections have outpaced Scope’s timing assumptions. Based on the servicer business plan, aggregate net collections are 229.2% of original expectations.

Recovery expenses (negative). Recovery expenses are approximately 10.1% of gross collections to date, which is above Scope assumption of 9% at closing.

Low profitability of secured closed positions (negative). Total gross collections from closed borrowers are 38.8% of cumulative collections and were mainly obtained through discounted pay-offs (64.7%), judicial collections (8.8%), credit sales (1.3%) and other type of collections (25.2%). Based on Scope’s calculations, closed secured debtors account for around 12.6% of the transaction’s initial secured gross book value. The profitability on these debtors, at 92.5%, is below Scope’s expectations under the B case assumptions at closing.

Iseo SPV S.r.l.

Faster-than-expected cumulative collections (positive). Aggregate gross and net collections amount to EUR 185.4m and EUR 174.5m respectively. Aggregate net collections have outpaced Scope’s timing assumptions. Based on the servicer business plan, aggregate net collections are 96.7% of original expectations.

Recovery expenses (positive). Recovery expenses are approximately 5.9% of gross collections to date, which is below Scope assumption of 9%.

Low profitability of secured closed positions (negative). Total gross collections from closed borrowers are 30.4% of cumulative collections and were mainly obtained through discounted pay-offs. Based on Scope’s calculations, closed secured debtors account for around 12.2% of the transaction’s initial secured gross book value. The profitability on these debtors, at 82.0%, is below Scope’s expectations under the B case assumptions at closing.

The methodologies applicable for the reviewed ratings (General Structured Finance Rating Methodology, 25 January 2023; 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 analysts:
Davide Nesa, Director - Sirio NPL S.r.l.
Elom Kwamin, Analyst - Iseo SPV S.r.l.

Potential Conflict
See www.scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest related to the issuance of Credit Ratings. A member of the Board of Trustees of Scope Foundation has a significant relationship with Société Generale SA, a related third party to this transaction. The Scope Foundation is a 20% shareholder of Scope Management SE, the general manager of Scope SE & Co KGaA (“Scope Group”). Scope Foundation has no financial or economic interest in Scope SE & Co KGaA and the main function of the foundation is to preserve the European identity of the shareholder structure of Scope Group.

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