Scope completed a monitoring review of the following notes issued by Hefesto STC S.A. - Guincho Finance:

Class A (ISIN PTHEFZOM0001), current balance EUR 53.4m: BBB-_SF

Class B (ISIN PTHEF1OM0004), EUR 14m: B-_SF

Class J (ISIN PTHEF2OM0003), EUR 25m: not rated

Hefesto STC S.A. - Guincho Finance is a static cash securitisation of a EUR 482m portfolio (as of closing) of Portuguese non-performing loans (NPLs) originated by Banco Santander Totta S.A. The transaction closed on 16 November 2018.

The review took place on 5 November 2020 using transaction data through May 2020, resulting in no action on the assigned ratings. 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 robust performance with a cumulative collection ratio of 233.2% of the business plan through the third interest payment date (31 May 2020). The profitability ratio is 214.1% through the same period. Aggregate realised gross collections amount to EUR 40.1m. Scope’s review was based on available payment information, investor reports and servicer reports as of November 2020.

Gross realised collections amount to 35.6% and 30.6% of Scope’s expected lifetime collections considered in the initial analysis of the Class A and Class B notes, respectively. (Scope’s rating-conditional rating approach applies increasing levels of stress as the target rating of an instrument increases.)

Cumulative collections through 30 April 2020 are 3.31x higher than Scope’s expectations in the Class A analysis and 1.23x higher than our Class B analysis. This partially mitigates the initial negative effects of the Covid-19 pandemic and near-term uncertainty going forward.

No interest subordination event has occurred, since both the cumulative collections ratio and the cumulative profitability ratio (233.2% and 214.1%, respectively) are above the 90% trigger level.

CREDIT-POSITIVE (+)

Performance: Collections have come in much faster than Scope’s closing expectations and currently represent 35.6% and 30.6% of our expected lifetime collections considered in the initial analysis of the Class A and Class B notes, respectively.
Interest rate cap: The transaction benefits from an interest rate cap which mitigates the interest rate risk between the asset recoveries and the floating rate on the notes. Class A is strongly over hedged with the cap notional being at EUR 100m whereas class A is only EUR 53.4m outstanding.

CREDIT-NEGATIVE (-)

Portuguese economy: The pandemic has halted Portugal’s improving trends in growth and public finances resulting in a recession. Despite government support measures, increased collateral liquidity risk and weakened borrower liquidity positions negatively affect recovery prospects.

The methodologies applicable for the reviewed rating (Non-performing loan ABS methodology, published on 9 September 2020, Methodology for counterparty risk in structured finance, published on 8 July 2020) 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 Martin Hartmann

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