Rating action

Scope Ratings GmbH (Scope) has taken the following rating action on the instruments issued by Olympia SPV S.r.l.:

• Class A (ISIN IT0005468365), EUR 109.3m floating-rate notes: upgraded to BBB+_SF from BBB_SF
   
• Class B (ISIN IT0005468373), EUR 26.1m floating-rate notes: not rated
   
• Class J (ISIN IT0005468381), EUR 2.9m variable return notes: not rated

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

Transaction overview

Olympia SPV S.r.l. is a static cash securitisation of a EUR 2,168m portfolio (as of closing) by gross book value of Italian non-performing loans originated by Unicredit S.p.A. The transaction closed on 25 November 2021 and the notes have a final maturity on 31 July 2044. A detailed description of the transaction features and analytical assumptions, at closing, can be found in the transaction´s rating report, available on Scope´s website.

As of July 2024, total gross collections amounted to EUR 216.8 million, representing 41.0% of the last updated servicer business plan. The breakdown of collections is as follows: discounted pay-off (DPO) proceeds (58.8%), judicial proceeds (33.2%), note sales proceeds (7.8%) and other (0.2%).

Class A notes have amortised 58.1% since closing. The transaction cumulative net proceeds collection ratio (CCR) stands at 189.3% and the cumulative net present value (NPV) profitability ratio for closed positions is 126.3%. The collection ratios are well above 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 remain broadly aligned with those disclosed in Scope’s initial rating action release dated 25 November 2021.

Beyond the key rating drivers, the main analytical considerations addressed during this review are:

• Fast deleveraging (positive)¹. Class A notes have amortised 58.1% three years after closing. This is faster than Scope’s initial projections and, therefore Scope now assumes lower senior costs compared to closing expectations.
   
• Strong hedging (positive)¹. Notwithstanding the reduction in the cap spread notional schedule effected in January 2024, the class A notes are currently strongly overhedged. As per the January 2025 interest payment date, the cap notional is 52.9% higher than class A notes’ outstanding amount. In addition, the cap schedule is not amortising for the next six years, providing the class A notes with a strong coverage until most of their remaining expected life.
   
• High recovery expenses (negative)¹. In the last updated business plan, the servicer is still expecting high recovery expenses for the remaining collections, standing at 12.4%, which is higher than the historical average of Italian NPLs transactions.
   
• Unlikely class B interest subordination event (negative)¹. The servicer CCR at the first interest payment date was 341.4%; these early collections have created a cushion that will maintain the CCR level above the class B subordination trigger (90%) for the foreseeable future, even if the servicer should start underperforming its initial recovery expectations. As a result, part of available collections are diverted from class A notes’ principal repayments to service class B notes’ interest payments.

Rating-change drivers

A change to the transaction’s modelling assumptions based on observed performance or new data sources, significant changes to the transaction’s collateral and structural features, and a change in Scope’s credit views regarding the transaction’s key rating drivers could impact the rating.

The ‘Sensitivity analysis’ section below provides an indication of the impact of variations in Key CFM Parameters on the CFM quantitative results.

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 the class A notes would change compared to the assigned rating in the event of:

• 10% haircut to recoveries: zero notches
   
• 1 year increase of the recoveries lag: zero notches

Quantitative analysis

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 defaulted loans.

Scope has updated its modelling assumptions to reflect the transaction’s current performance. At the B case, Scope assumed a lifetime gross recovery rate of 24.1% over a weighted average life of 4.4 years (from its closing value of 24.7% over 6.4 years).

Rating driver references
1. Transaction 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 relevant asset assumptions and taking into account the transaction’s main structural features, such as the instruments’ priority of payments, the instruments’ 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. The external due diligence assessment 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: Davide Nesa, Senior Director
Person responsible for approval of the Credit Rating: Benoit Vasseur, Managing Director
The Credit Rating was first released by Scope Ratings on 25 November 2021. The Credit Rating was las updated on 6 February 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.

Conditions of use / exclusion of liability
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