Rating action

Scope Ratings GmbH (Scope) has assigned the following ratings on the issued instruments:

Series 17-2025 Class A (ISIN: IT0005656001), floating rate notes, EUR 328.0m: new rating of AAA_SF

Series 17-2025 Class B (ISIN: IT0005656019), fixed rate notes, EUR 13.1m: new rating of A-_SF

Series 17-2025 Class J (ISIN: IT0005656027), variable rate notes, EUR 42.0: not rated

Transaction overview

Series 17-2025 is the 17th transaction issued by the Marzio Finance S.r.l. The EUR 10bn securitisation programme permits the issuance of several series of notes, each series structured as an independent transaction, with no cross-collateralisation, and for the purpose of financing the purchase of a static portfolio of payroll-deductible loans extended to individual borrowers in Italy and originated by Istituto Bancario del Lavoro S.p.A. (IBL Banca, rated BBB / S-2 by Scope). The securitised loans are collateralised by the debtor’s salary or pension and, in most cases, by any accrued severance amount (‘Trattamento di Fine Rapporto’). Instalments cannot exceed 20% of the borrower’s net monthly salary or pension for CQS loans (‘cessione del quinto dello stipendio’) and 50% for DP loans (‘delegazione di pagamento’). Series 17-2025’s underlying portfolio is composed of CQS (80.6%) and DP (19.4%) loans extended either to employees working for the public administration (20.6%), the central state administration (49.7%) or the private sector (9.9%), or to pensioners (19.8%). The portfolio is highly granular and has a weighted average seasoning of 1.9 years. All the underlying loans are insured against life events, while 82.3% are insured against employment events.

The main structural features are: i) three classes of notes with fully sequential principal amortisation: senior class A, mezzanine class B, and junior class J notes; ii) initial credit enhancement levels of 14.8% for class A and 11.3% for class B, from subordination and fully funded reserves; iii) a dedicated reserve that provides liquidity support to both class A and B notes; iv) an additional reserve offering liquidity support to class A and B notes, and credit protection specifically to class A notes; v) a cash-trapping mechanism, along with the subordination of class B notes’ interest payments to class A notes’ principal in the event cumulative net defaults exceed 3%; vi) an implicit principal deficiency ledger mechanism, whereby the notes amortise up to a target redemption amount, resulting in excess spread being applied to cover defaults before any distribution to junior noteholders; vii) an interest rate swap to mitigate interest rate risk, given that the underlying assets pay a fixed rate while the senior notes bear a floating rate.

The noteholders are exposed to the following key counterparties: i) IBL Banca as originator, servicer, calculation agent, and collection account bank; ii) Citibank N. A., Milan Branch as transaction bank and paying agent; and iii) Crédit Agricole Corporate and Investment Bank as swap counterparty.

Rating rationale

The assigned ratings reflect the base case quantitative results. Counterparty risk is immaterial, relative to the assigned rating levels. One or more key drivers of the credit rating action are considered an ESG factor.

Key rating drivers:

Experienced originator (positive)¹. IBL Banca is one of the most experienced CQS loan originators in Italy and its loan book has performed above-average (ESG factor).

Low historical losses of the underlying asset type (positive)¹. CQS loans generally incur lower losses than standard unsecured consumer loans, primarily because the loans are fully insured and instalments are withheld by the borrower’s employer and paid directly to the lender.

Liquidity and credit protection (positive)². A fully funded liquidity reserve (EUR 3.6m at closing date) will provide liquidity protection to the class A and B notes (for the latter only as long as the cumulative net default ratio does not exceed 3%) during the life of the transaction. An additional reserve (EUR 6.5m at closing date) will provide liquidity support and ongoing credit protection to the rated notes. Both reserves can be utilised to repay the rated notes at maturity.

Public sector concentration (negative)^1,3. Most of the portfolio is exposed to the public sector (90.1% at closing date). While such borrowers typically exhibit lower default rates compared to borrowers employed in the private sector, this high concentration increases the transaction’s exposure to sovereign risk. Scope’s analysis accounts for this risk through the application of a sovereign stress scenario.

Insurance company concentration (negative)¹. At closing date, the top two life insurance companies account for 73.2% of the total portfolio while the top two insurance companies covering employment events account for 58.2% of the non-retired pool. A failure by these insurers to honour obligations would negatively impact the portfolio recovery rate.

Key analytical assumptions:

• The portfolio´s lifetime default rate which follows an inverse gaussian distribution.
   
• Rating-level conditional recovery rates.

The analytical assumptions factor in the historical performance of assets of similar nature to those of the securitised portfolio, considering the originator’s performance data or peer transaction benchmarks. They may also reflect qualitative judgments based on various factors, including a) the originator´s credit policies, b) Scope´s macroeconomic expectations, and c) the credit committee´s asset class outlook over the transaction´s lifetime.

Details on these assumptions and other parameters are provided under the section ‘Quantitative analysis’ below.

Key data sources:

The key data sources used to derive the key analytical assumptions are: i) default, recovery and prepayment vintage data from the originator covering the period from Q2 2015 to Q1 2025; ii) dynamic delinquency data from the originator covering the period from Q2 2015 to Q1 2025; iii) pool stratification tables and loan-by-loan data; and iv) collateral performance data of peer Italian CQS transactions.

Rating-change drivers

A change to the levels or parameters of the transaction’s key analytical 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 ratings.

The sensitivity analysis below provides an indication of the resilience of the credit ratings against deviations in key analytical assumptions.

Sensitivity analysis

This analysis is solely intended to illustrate the sensitivity of the credit ratings to the assumed parameters and, all else being equal, is not reflect expected or likely scenarios.

Class A notes

• 50% increase of mean lifetime default rate: zero notches.
   
• 50% decrease of recovery rates: zero notches.

Class B notes

• 50% increase of mean lifetime default rate: minus five notches.
   
• 50% decrease of recovery rates: minus one notch.

Quantitative analysis

This section provides a non-exhaustive list of relevant quantitative parameters:

• Default rate (DR) distribution parameters: cumulative mean DR of 6% with a coefficient of variation of 40%, implying annualised mean and distressed marginal default rates of 1.4% and 3.8%, respectively.
   
• Rating-level conditional recovery rates: ranging from 80.0% at ‘B’, through 76.4% at ‘BBB’, to 46.1% at ‘AAA’.
   
• Base case constant prepayment rate: 5% for the first and second year, 25% for the third year and 10% thereafter.
   
• Senior fees and expenses: 0.50% of non-defaulted pool balance and floored at EUR 100k p.a.

Rating driver references
1. Loan-by-loan data tape of the securitised pool and originator’s historical data (Confidential)
2. Transaction documentation (Confidential)
3. Scope’s rating on Republic of Italy (BBB+/Stable)

Stress testing
Stress testing was considered in the quantitative analysis by considering scenarios that stress factors, like defaults and Credit-Rating-adjusted recoveries, contributing to sensitivity of Credit Ratings and consider the likelihood of severe collateral losses or impaired cash flows. The impact on the rated instruments is weighted by the assumptions of the likelihood of the events in such scenarios occurring.

Cash flow analysis
Scope Ratings performed a cash flow analysis of the transaction with the use of Scope Ratings’ Cash Flow Model Master Waterfall Version 1.0 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 these Credit Ratings (Consumer and Auto ABS Rating Methodology, 3 March 2025; General Structured Finance Rating Methodology, 13 February 2025; Counterparty Risk Methodology, 10 July 2024), are available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
The models used for these Credit Ratings are (Cash Flow Model Master Waterfall Version 1.0; Portfolio Model Version 1.1), 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 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. 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: Leonardo Scavo, Associate Director
Person responsible for approval of the Credit Ratings: Benoit Vasseur, Managing Director
The Credit Ratings were first released by Scope Ratings on 25 June 2025.
 
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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