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      Scope has completed a monitoring review for EIB SME Initiative for Italy (BP Bari) - SME SRT

      No action has been taken following the monitoring review.

      Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the case of sovereigns, sub-sovereigns and supranational organisations.

      Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

      Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodologies, including key rating assumptions and model. Scope publicly announces the completion of each monitoring review on its website.

      Scope completed the monitoring review for the senior tranche of EIB SME Initiative for Italy (BP Bari) on 03 August 2022.

      Senior tranche, EUR 6.25m*: AAASF

      *Outstanding amounts reflect amortisation and defaults as of 31 March 2022.

      The financial guarantee provided by the European Investment Fund (EIF) to Banca Popolare di Bari (BP Bari, the protection buyer) is an EU-sponsored risk transfer transaction of Italian SME credit rights, in the context of the European Investment Bank (EIB) Group SME Initiative for Italy. The credit rights were originated and will be serviced by BP Bari. The EIF has the right to terminate the guarantee in case the service process does not comply with initially agreed procedures and policies. Under the financial guarantee, 50% of losses incurred from the reference portfolio can be claimed by BP Bari from the EIF. BDO Italia Spa, as external verification agent, will review the accuracy of the loss claims. The guarantee splits into five tranches of risk cover. Scope only assigned a rating to the senior risk cover. The guarantee terminates on 30 November 2035.

      As of 31 March 2022, 90-days-past-due and defaulted loans collectively represent 4.8% of the initial reference portfolio, which is better than Scope’s expectation. The protection buyer has removed EUR 12.2m of portfolio notional from the reference portfolio. The reference portfolio amortisation is in line with Scope’s expectation.

      This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated rating history can be found on www.scoperatings.com

      Key rating factors

      Increased credit enhancement (positive). The high level of credit enhancement provides a strong buffer against potential adverse reference portfolio performance and mitigates the build-up of obligor concentrations. The senior tranche credit enhancement increased to 74.5%, from 60.0% as at the previous monitoring (adjusted for expected losses).

      Alignment of interests and transaction process supervision (positive). BP Bari must maintain a minimum economic interest of 5% in each exposure it has assigned to the SME Initiative. In addition, the guarantee can be terminated if BP Bari deviates materially from its internal credit and collection policies.

      Efficient guarantee mechanics (positive). Loss claims under the guarantee are based on an expected loss calculation, which minimises cash flows between BP Bari and the EIF and significantly reduces the counterparty risk exposure to BP Bari.

      Asset credit quality (negative). Scope assumes the average credit quality of the portfolio to be commensurate with B. This reflects the high lifetime default rate, partially offset by our recovery expectations.

      Significant obligor concentration (negative). The already high share of top obligors (exposure at more than 0.5%) in the portfolio further increased to 65.0% as of 31 March 2022 from 58.0% as of 30 June 2021.

      Italy’s economic uncertainty (negative). Besides Covid-19, the prolonged Russia-Ukraine war and increased inflation would continue to impact the Italian economy. The growth prospects would even be worse were it not for the EU’s significant and very timely recovery funds. 

      The methodologies applicable for the reviewed rating, (SME ABS Rating Methodology, 16 May 2022; Counterparty Risk Methodology, 14 July 2022; General Structured Finance Rating Methodology, 17 December 2021), are available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
      This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
      Lead analyst Guang Yang, Analyst

      © 2022 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Analysis GmbH, Scope Investor Services GmbH, and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5 D-10785 Berlin. 

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