Rating action

Scope Ratings GmbH (Scope) has completed a monitoring review of the following notes issued by Bela 2022 S.r.l.:

Class A (ISIN IT0005493330): EUR 31.9m: downgraded to BB-_SF from BB+_SF

Class B (ISIN IT0005493348), EUR 10.0m: not rated

Class J (ISIN IT0005493355), EUR 4.1m: not rated

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

Transaction overview

Bela 2022 S.r.l. is a static cash securitisation of an Italian non-performing loan (NPL) portfolio with a gross book value of around EUR 475m at closing. The portfolio was sold by illimity Bank S.p.A and is serviced by Cerved Credit Management S.p.A. as special servicer and by Cerved Master Services S.p.A. as master servicer. The transaction closed on 13 April 2022 and the legal maturity of the notes is January 2043. Scope does not rate the class B and J notes.

As of the July 2024 payment date, aggregate gross collections stood at EUR 35.3m, representing 77.8% of the original business plan expectation up to such date. The sources of total gross collections are judicial proceeds (29.5%), discounted pay-off (DPO) proceeds (24.0%), note sales proceeds (12.3%) and others (34.2%). About 63.5% of gross collections (EUR 22.4m) came from closed debtors (i.e. debtors for which the recovery process is completed). Scope estimates 25% of initial gross book value has been closed.

Class A notes have amortised 46.8% since closing. The net present value cumulative profitability ratio, computed for closed positions, stands at 82.1%, while the net proceeds cumulative collection ratio stands at 79.5%, which is below the 90% threshold for class B interest subordination to class A principal repayment.

Rating rationale

The review addressed i) the collateral’s observed performance up to 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 remain broadly aligned with those disclosed in Scope’s last rating action release dated December 22, 2023. The current rating action considered the following factors:

Weak profitability¹. Profitability on closed borrowers has improved since the previous monitoring review to 70% from 63%, however, it is still materially below Scope’s closing expectations at B case. The average property sale discount for open and closed borrowers has worsened since Scope’s last monitoring, now at 59%. Open borrowers accounted for most of this trend.

No business plan update¹. An updated business plan has not been approved by the monitoring agent and investor committee since closing.

Slow class A deleveraging¹. Class A amortisation pace drastically slowed in the last two payment dates. Reported amortisation was only 7% in the last two payment dates. The amortisation pace is now below the one for peer transactions rated by Scope.

PV Cumulative Profitability ratio calculation error¹. The PV Cumulative Profitability Ratio was miscalculated for two consecutive payment dates (July 2023 and January 2024). Considering the correct ratio, a class B interest deferral trigger would have been reported since July 2023. Class B interest paid on these two payment dates was approximately EUR 1million.

Rating-change drivers

Positive. An improvement in profitability could positively impact the rating.

Negative. A further deterioration in transaction’s profitability, unavailability of business plan updates, and a 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 17.2% over a weighted average life of 4.1 years (from its closing value of 20.6% over 4.8 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 two notches;
   
• a one-year recovery lag increase, minus one notch.

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: Stefano Bracchi, Specialist
Person responsible for approval of the Credit Rating: Paula Lichtensztein, Senior Representative
The Credit Rating was first released by Scope Ratings on 19 April 2022. The Credit Rating was last updated on 22 December 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, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use / exclusion of liability
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