Rating action

Scope Ratings GmbH (Scope) has reviewed the performance of the notes issued by Marathon SPV S.r.l.. The rating actions are as follows:

Class A (ISIN IT0005394454), EUR 2.5m: upgraded to A+_SF from A_SF

Class B (ISIN IT0005394462), EUR 1.1m: affirmed at BBB_SF

Class J (ISIN IT0005394751), EUR 16.9m: not rated

Scope’s review was based on servicer, investor and payment reporting as of the April 2024 payment date.

Transaction overview

Marathon SPV S.r.l. is a static cash securitisation of an Italian NPL portfolio worth at closing around EUR 5,027m by gross-book value (GBV). The portfolio was originally acquired by Hoist Finance Group, through two special purpose vehicles (Marte SPV S.r.l. and Pinzolo SPV S.r.l.) from 17 financial institutions. The pool is fully unsecured and composed at closing of three major types of receivables: consumer loans (30.8%), loans guaranteed by promissory notes (19.6%) and unsecured banking loans (49.6%). The transaction is serviced by Hoist Italia S.r.l., a subsidiary of Hoist Finance AB. The transaction closed on 5 December 2019 and the notes’ legal maturity is October 2034.

Rating rationale

The review addressed i) performance observed performance until the April 2024 payment date; ii) Scope’s forward-looking assumptions, which incorporate expected macroeconomic changes over the transaction’s remaining life; iii) updates to the transaction’s liability structure and liquidity; and iv) the issuer’s exposure to key transaction counterparties.

Key rating drivers

Beyond the key rating drivers addressed in the initial rating action release dated 5 December 2019, following we detail the main analytical considerations addressed during the current monitoring review. Class A and B notes’ pool factor sharply decreased to 0.9% and 3.3%, respectively. According to Scope’s analysis, both notes are expected to be repaid by the end of the year. Notwithstanding, the ratings are constrained at their current level mainly driven by the transaction’s below average liquidity protection (i.e. a cash reserve equal to 3% of the class A notes, with no floor).

On 19 April 2024, Marathon SPV S.r.l. sold part of the portfolio perimeter (with a GBV of EUR 1,269m) for a price of ca. EUR 21m. In agreement with all the transaction counterparties, this amount was paid by Marathon SPV S.r.l. to Marte SPV S.r.l. as a prepayment of the deferred purchase price, outside the priority of payments, at an ad-hoc payment date on 26 April 2024. Scope made a full analysis considering the reduced portfolio without the sold perimeter.¹

Rating-change drivers

Positive. Improvement of servicer performance and of the note’s liquidity could positively impact the ratings.

Negative. Collection strategies with low profitability and/or delayed collections may negatively impact the ratings.

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 also 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 13% over a weighted average life of 3.1 years (from its closing value of 12% over 3.2 years).

Sensitivity analysis

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

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

• 10% haircut to recoveries, zero notches
   
• Extending the recovery by one year, zero notches

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

• 10% haircut to recoveries, zero notches
   
• Extending the recovery by one year, two notches

Rating driver references
1. Transaction documents and reporting (Confidential)

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

Cash flow analysis
Scope Ratings performed a cash flow analysis for the transaction using Scope Cash Flow Structured Finance Expected Loss Model Version 1.2. This incorporated the relevant asset assumptions, taking into account the transaction’s main structural features, such as the notes’ priorities of payment, size, and coupons. The outcome of the analysis is an expected loss rate and an expected weighted average life for the instruments based on the generated cash flows.

Methodology
The methodologies used for these Credit Ratings, (Non-Performing Loan ABS Rating Methodology, 3 August 2023; Counterparty Risk Methodology, 13 July 2023; General Structured Finance Rating Methodology, 6 March 2024), are available on https://www.scoperatings.com/ratings-and-research/structured-finance/methodologies.
The model used for these Credit Ratings is (Cash Flow Structured Finance Expected Loss Model Version 1.2), 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 due diligence assessment/asset audit at closing. The external due diligence assessment/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: Stefano Bracchi, Associate Analyst
Person responsible for approval of the Credit Ratings: Antonio Casado, Managing Director
The Credit Ratings were first released by Scope Ratings on 5 December 2019. The Credit Ratings were last updated on 23 June 2023.

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

Conditions of use / exclusion of liability
© 2024 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5 D-10785 Berlin.