Scope has completed a monitoring review for Hestia Financing S.à r.l.
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 methodology/ies, including key rating assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.
Scope completed the monitoring review for Hestia Financing S.à r.l. on 24 November 2023. The credit rating remains as follows:
Class A notes (XS2409267254), EUR 286.2m outstanding: BBBSF
Class Z notes (XS2409266876), EUR 1,721.7m outstanding: not rated
Hestia Financing S.à r.l. is a Cypriot static cash securitisation of a portfolio of non-performing loans (NPLs) and real estate owned (REO) properties with a total adjusted pool value of EUR 2.06bn at closing (total adjusted exposure of non-performing loans and appraised value of REO properties). The portfolio was originated by Bank of Cyprus (originator) and is owned by Themis Portfolio Management Holdings Limited, a Cypriot Credit Acquiring Company (CyCAC), which was acquired by Oxalis Holdings S.à r.l (sponsor). The portfolio is serviced by Themis Portfolio Management Limited (Themis).
The review was conducted based on available payment and servicer reports reflecting performance up to the October 2023 interest payment date.
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
The portfolio has generated EUR 294m gross collections of which EUR 226m are cash collections and EUR 68m are REO sales. Current gross collections are equal to 322% of Scope’s B case scenario. The servicer has also repossessed EUR 84m worth of real estate assets in the last 12 months (October 2022-September 2023), increasing the open market value of currently managed REO to EUR 239m. Although the repossession pace has been relatively strong, the pace of collections and sales proceeds is 39% behind servicer’s initial expectations.
REO sales discounts (positive)
Observed REO sales discounts are better than Scope’s expectations, partly supported by broadly increasing property prices. However, recent interest rates hikes may have a potential negative impact on future market prices.
Activated cash sweep event (positive)
The structure features a cash sweep event triggering the fully sequential amortisation of class A notes, based on a target outstanding class A notional schedule. A cash sweep event has been triggered since the third IPD, as the outstanding balance of class A exceeded the notional schedule. Scope expects the notes will continue to benefit from the cash sweep, as the current balance of the notes (around 60% of the initial balance) remains well above (28%) the scheduled amortisation amount as of the last IPD.
Interest rate risk underhedged (negative)
Outstanding balance of class A notes is above the notional amount defined in the interest rate cap agreement. The hedging structure against Euribor only partially limits the exposure to interest rate risk for the class A notes.
Volatility of expenses (negative)
Expenses including all CyCAC and issuer expenses, and servicing fees amount to 25% of cumulative collection since issuance. However, the level of periodic expenses has been volatile, ranging between 16 to 51% of cumulative collections.
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 Leonardo Scavo, Senior Specialist
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