Scope completed a monitoring review of Maior SPV S.r.l. transaction:

Class A (ISIN IT0005341125), EUR 491.2m: BBB_SF;

Class B (ISIN IT0005341133), EUR 60m: not rated;

Class J (ISIN IT0005341141), EUR 26.9m: not rated

Maior SPV S.r.l. is a static cash securitisation of a EUR 2.7bn portfolio (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.

The review took place on 22 July 2020 and was based on available payment information and investor and servicer reporting as of 31 January 2020, covering three interest payment dates since closing. The review resulted in no action on Class A rating. Scope does not rate Class B or Class J. This monitoring note does not constitute a rating action nor does it indicate the likelihood of a credit rating action in the short term. The latest information on the credit ratings in this monitoring note along with the associated rating history can be found at www.scoperatings.com.

Key rating factors

The transaction exhibits a performance that is above Scope original expectations for class A analysis and above business plan original forecasts. It shows cumulative net collections that are 121% of Scope original expectations under the class A analysis, and a cumulative net collection ratio of 111.9% with respect to the original business plan. Aggregate gross collections since the cut-off date amount to EUR 182.6m (of which 71% related to open debtors, i.e., debtors for which the recovery process is still ongoing). This figure represents about 18% of Scope’s expected lifetime collections considered for the analysis of the class A notes.

The reported net profitability on fully resolved debtors (i.e., positions for which the recovery procedure was closed) is above the servicer’s expectation, standing at 125%. Profitability is below Scope base case expectations. However, given that resolved borrowers are a limited portion of transaction’s total borrowers (4.6%), the impact of their profitability is currently not material for the transaction. Scope will closely monitor the evolution of resolved borrowers’ profitability over time.

Scope has observed a misalignment in the definition of the net present value cumulative profitability ratio in transaction’s documents, as the numerator is not aligned with the denominator regarding the date which is referenced for discounting purposes. The documentation envisages that the numerator is computed using the transaction’s economic effective date (1 January 2018), while the denominator is computed with reference to the transaction’s transfer date (20 July 2018). The ratio provided by the monitoring agent at the third interest payment date, equal to 121.3% is calculated based on its definition in transaction’s documents, described above. This differs from the ratio computed by the servicer (125%) that is based on discounting rules using the transfer date for both numerator and denominator.

According to documentation, the NPV cumulative profitability ratio is defined as the ratio of the sum of NPV of net collections of all debt relationships, which are exhausted debt relationships and (ii) the sum of the target price of all debt relationships, which are exhausted debt relationships. Transactions’ cash flows are to be discounted at the economic effective date, the target price is computed with reference to the transfer date.

Contractual definitions have not been reviewed yet by the securitisation counterparties. However, Scope acknowledges that the different parties involved in the transaction are aware of this inconsistency and are actively seeking a solution. The impact is currently not material for the transaction.

CREDIT-POSITIVE (+)

Cumulative collections: Observed collections are outperforming Scope original expectations for class A analysis, being 129% and 121% of Scope expectations at gross and net level. With respect to the original business plan, observed collections are 108% and 114% of the original servicer’s projections at gross and net level, as of 31 January 2020 (i.e. three collection periods since closing).

Credit Enhancement. The credit enhancement for class A note has increased since closing, from 77% to 82%, as of the third interest payment date.
Performance on peculiar borrowers. At closing, there were borrowers with missing documentation or with already concluded bankruptcy proceedings, amounting to 430mn in terms of original gross book value (GBV). The servicer has registered collections that were above Scope base case expectations of fully resolved borrowers.

CREDIT-NEGATIVE (-)

Property sales: Scope has analysed 1024 properties that were sold since closing. Their aggregated sale amount is significantly lower than their open market value; the registered discount between the two is higher than Scope’s assumptions used for the Class A analysis and it will be monitored in the context of future property sales.

Performance on shared borrowers. At closing there were shared borrowers (for 796mn in terms of original GBV), for which only part of the total exposure was sold to the issuer, the rest being retained by the seller. The servicer has registered collections that were below Scope base case expectations of fully resolved borrowers.

Recovery expenses: Observed recovery expenses amount to 7.9% of cumulative gross collections, this ratio is among the highest of peer transactions rated by Scope.

Scope Ratings reviews its ratings on an ongoing basis. Scope performs monitoring reviews to determine whether outstanding ratings remain proportionate. Monitoring reviews are conducted either by performing a portfolio review in terms of the applicable methodologies, latest developments, and the rated entity’s financial and operational aspects relative to similarly rated peers; or through targeted reviews on an individual credit. Scope publicly announces the completion of each monitoring review on its website.

The methodologies applicable for the reviewed rating (Non-performing loan ABS methodology, published on 3 September 2019, Methodology for counterparty risk in structured finance, published on 24 July 2019) are available on https://www.scoperatings.com/#!methodology/list.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst Rossella Ghidoni, Associate Director

Potential conflicts*
Please see www.scoperatings.com for a list of potential conflicts of interest related to the issuance of credit ratings. 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.

*Editor's note: The 'Potential Conflicts' section was added on 28 September 2021.

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