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/or 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 models. Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for Buonconsiglio 3 S.r.l. on 25 August 2023. The credit rating remains as follow:

Class A (ISIN IT0005428138), EUR 154m original balance, EUR 103.9m current balance: BB+_SF

Class B (ISIN IT0005428146), EUR 21m original balance, EUR 21m current balance: Not rated

Class J (ISIN IT0005428153), EUR 4.5m original balance, EUR 4.5m current balance: Not rated

The review was conducted considering available servicer reports, payment reports and investor reports up to July 2023.

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 actions connected with this monitoring note along with the associated rating history can be found on www.scoperatings.com.

Rating factors

Rating factors assessed during the monitoring review include realised profitability on closed positions, the timing of cumulative collections and the amount of recovery expenses, against Scope’s expectations. Additionally, the review addressed the risk of a slowdown of the Italian economy driven by persistent inflationary pressures combined with tighter monetary policy, and the potential deterioration of borrowers’ affordability conditions which could impair servicers’ performance on collections. The rating also considers the issuers’ exposure to key counterparties, the legal and structural protection provided to the notes, the liquidity protection and the interest rate hedging agreement.

Faster than expected cumulative collections (positive). Aggregate gross collections amount to EUR 73.7m. Total gross collections are split between judicial proceeds (65.9%), DPO proceeds (21.7%), note sales (6.5%) and other sources of collections (5.9%). Aggregate net collections, which represent 142% of the original servicer’s expectations, have outpaced Scope’s timing expectations under the B case.

Profitability of closed positions (negative). Total gross collections from closed borrowers are 50.6% of cumulative collections and were obtained through DPOs (38.6%), judicial proceeds (38.5%), note sales (11.7%) and other sources of collections (11.2%). Based on Scope’s analysis closed secured debtors account for 19.5% of the transaction’s initial secured gross book value. The profitability on these debtors, at 93.4%, is below Scope’s expectations under the B case.

High recovery expenses (negative). Cumulative recovery expenses, at 13.9% of cumulative collections, are highly above the average of peer transactions rated by Scope. High legal costs eroded available proceeds, resulting into a below average amortisation pace of the class A notes.

The methodologies applicable for the reviewed rating (General Structured Finance Rating Methodology, 25 January 2023; Non-Performing Loan ABS Methodology, 3 August 2023; Counterparty Risk Methodology, 13 July 2023) 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 Rossella Ghidoni, Director

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