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 29 November 2023. The credit ratings remain as follow:

Class A1 (ISIN XS2306848479): EUR 19.6m: BBB+_SF

Class A2 (ISIN XS2306849287): EUR 77.0m: BBB-_SF

Class B (ISIN XS2306849956): EUR 34.0m: B-_SF

Class C (ISIN XS2306850459): EUR 15.0m: CCC_SF

Class D1 (ISIN XS2306856571): EUR 10.0m: not rated

Class D2 (ISIN XS2306857207): EUR 10.0m: not rated

Class D3 (ISIN XS2306858197): EUR 10.0m: not rated

Class E (ISIN n/a): EUR 54.0m: not rated

This review was conducted considering available servicer reports, payment reports and investor reports up to the October 2023 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

Rating factors assessed during the monitoring review include realised profitability on sold properties, the timing of cumulative collections and the amount of recovery expenses, against Scope’s expectations. Additionally, the review addressed Scope’s expected macroeconomic changes over the transaction’s remaining life. 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 agreement.

Relatively strong profitability on residential properties (positive). Most of the sold properties (ca. 64% of total sales) are residential assets and they have been sold with a weighted average premium of 2% versus Scope’s original market value assumptions under the B case.

Strong interest rate protection (positive). The base rate due on the notes is capped throughout the life of the transaction. There is an interest rate cap agreement, effective until April 2026, which provides interest risk protection to all rated notes. The transaction is currently over-hedged. Upon maturity of the cap, the Euribor component for the rated notes will be structurally capped at 1% for the class A1 and A2 notes and 0% for the class B and class C notes.

Low profitability on non-residential properties (negative). Non-residential sold assets (36% of total sales) have been sold with a weighted average discount of 14% versus Scope’s original market value assumptions under the B case.

High expenses (negative). Cumulative expenses (recovery expenses and fees), at 32% of cumulative gross collections, are above Scope’s updated lifetime assumption (23%). If costs won’t decrease in the short to medium term, Scope might furtherly review its lifetime assumption.

The methodologies applicable for the reviewed ratings (General Structured Finance Rating Methodology, 25 January 2023; Non-Performing Loan ABS Rating Methodology, 3 August 2023; Counterparty Risk Methodology, 13 July 2023) 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

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