Rating action

Scope Ratings GmbH (Scope) has completed a monitoring review of the following notes issued by Maior SPV S.r.l.:

Class A (ISIN IT0005341125): EUR 250.4m: downgraded to CCC_SF from BB_SF

Class B (ISINIT0005341133): EUR 60.0m: not rated

Class J (ISINIT0005341141): EUR 26.9m: not rated

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

Transaction overview

Maior SPV S.r.l. is a static cash securitisation of a EUR 2.7bn portfolio by original gross book value (GBV) at closing of Italian non-performing loans originated by Unione di Banche Italiane S.p.A and IW Bank S.p.A. and serviced by Prelios Credit Servicing S.p.A. The transaction was closed on 1 August 2018. Scope does not rate class B and class J notes.

As of the July 2024 payment date, aggregate gross collections stood at EUR 542.0m, representing 59.4% of the original business plan expectation up to such date. The sources of total gross collections are judicial proceeds (59.8%), discounted pay-off (DPO) proceeds (23.6%), notesales proceeds (12.9%) and other proceeds (3.7%).

About 50.2% of gross collections (EUR 272.2m) came from closed debtors (i.e. debtors for which the recovery process is completed). Since closing, Scope estimates 29.8% of initial gross book value has been closed.

60.2% of the class A notes’ notional has amortised since closing. The last business plan (updated in 2023) reports lifetime expected gross recoveries which are 22.8% lower than the original business plan forecast. The net present value cumulative profitability ratio, computed for closed positions, stands at 98.1%, while the net proceeds cumulative collection ratio stands at 56.6%, which remains below the 90% threshold for class B interest subordination to class A principal repayment since the January 2022 payment date.

Rating rationale

The review addressed i) the collateral’s observed performance as of the July 2024 payment date; ii) Scope’s forward-looking assumptions, which incorporate expected macroeconomic conditions over the transaction’s remaining life; iii) updates to the transaction’s liability structure, liquidity and interest rate hedging; and iv) the issuer’s exposure to key transaction counterparties.

Key rating drivers

Key rating drivers are a significant shortfall in cumulative net collections relative to business plan and Scope’s initial expectations, and weaker than expected profitability relative to Scope’s initial expectations and to peer transactions. These drivers are aligned with those already disclosed in Scope’s previous rating action release dated March 12, 2024, but the magnitude of the shortfalls has widened and Scope does no longer consider that a significant reverse in trend is possible. Our view is also supported by the analysis of the latest business plan review.

Cumulative net collections¹ (negative). Aggregate collections to date are 31.1% behind Scope’s expectations under the B case scenario at closing. This has resulted in a much slower amortization of the senior notes than expected by Scope. Compared to the original business plan and the 2023 updated business plan, gross collections have fallen short of servicer expectations by 40.6% and 1.3% respectively. Additionally, collections received since the last review fell short of projected servicer collections in the updated business plan for the same period by 25.6%.

Deteriorating profitability¹ (negative). Profitability on secured closed borrowers has deteriorated since our previous monitoring review in March 2024 by approximately 4 percentage points, to 72% from 76% under Scope’s assumptions at closing. This could be attributed to the significant share of proceeds from closed positions emanating from discounted pay-off proceeds (66.3%) since the last review. Asset sales data analyzed by Scope is consistent with the profitability analysis on closed borrowers, as it also shows higher discounts than initially expected by Scope. Scope has factored in this review the deteriorating profitability by increasing our average security value haircut assumptions to 49% from 19% at closing, under a B case scenario.

Business plan review¹ (negative). As per the latest update to the servicer business plan, received, expected lifetime gross proceeds have been revised downwards by 22.8%, consistent with the weak profitability and downward trend in semi-annual collections observed.

Rating-change drivers

Positive. An improvement in pace of collections and secured closed positions’ profitability could positively impact the rating.

Negative. A continuous deterioration in transaction’s profitability, higher discounts on unsold assets, and a continuous slowdown in the pace of collections could negatively impact the rating of the notes.

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 recovery rate of 28.8% over a weighted average life of 4.4 years (from its closing value of 39.3% over 5.0 years).

Sensitivity analysis

Scope tested the resilience of the rating 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 would change compared to the assigned rating in the event of:

• 10% haircut to recoveries, minus one notch;
   
• a one-year recovery lag increase, minus zero 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 of the transaction with the use of Scope Ratings’ Cash Flow Model Version 2.0 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 rate and an expected weighted average life for the instruments based on the generated cash flows.

Methodology
The methodologies used for this Credit Rating, (Non-Performing Loan ABS Rating Methodology, 2 August 2024; Counterparty Risk Methodology, 10 July 2024; General Structured Finance Rating Methodology, 6 March 2024), are available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
The model used for this Credit Rating is (Cash Flow Model Version 2.0), available in Scope Ratings’ list of models, published under https://scoperatings.com/governance-and-policies/rating-governance/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 Rating: 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 the Credit Rating 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 Rating and it has no impact on the Credit Rating.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Rating and the principal grounds on which the Credit Rating are based. Following that review, the Credit Rating was not amended before being issued.

Regulatory disclosures
The Credit Rating is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Rating is UK-endorsed.
Lead Analyst: Elom Kwamin, Senior Analyst
Person responsible for approval of the Credit Rating: Antonio Casado, Managing Director
The Credit Rating was first released by Scope Ratings on 1 August 2018. The Credit Rating was last updated on 12 March 2024.

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, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties. 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.

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.