DBRS Ratings GmbH (DBRS Morningstar) confirmed its rating on the Class A Notes issued by Maior SPV S.r.l. (the Issuer) at BBB (low) (sf) and assigned a Negative trend. At the same time, DBRS Morningstar removed the Under Review with Negative Implications status from the notes, which was assigned on 8 May 2020.
The transaction represents the issuance of Class A, Class B, and Class J notes (collectively, the Notes). The rating on the Class A notes addresses the timely payment of interest and ultimate payment of principal. DBRS Morningstar does not rate the Class B or Class J Notes.
The notes were backed by a EUR 2.75 billion gross book value (GBV) portfolio consisting of Italian unsecured and secured nonperforming loans (NPLs) originated by Unione di Banche Italiane S.p.A. (UBI) and IWBank S.p.A. (IWB; collectively with UBI, the Originators). Prelios Credit Servicing S.p.A. (Prelios or the Servicer) services the receivables. A backup master servicer, Securitisation Services S.p.A., was appointed and will act as a servicer if the appointment of Prelios is terminated.
The rating confirmation follows a review of the transaction and is based on the following analytical considerations:
-- Transaction performance: assessment of portfolio recoveries as of 30 June 2020, focusing on: (1) A comparison between actual collections and the Servicer’s initial business plan forecast; (2) The collection performance observed over the past six months, including the period following the outbreak of the Coronavirus Disease (COVID-19); and (3) a comparison between the current performance and DBRS Morningstar’s expectations.
-- The Servicer’s updated business plan: received in November 2019 and compared with the Servicer’s initial collection expectations.
-- Portfolio characteristics: loan pool composition as of June 2020 and evolution of its core features since issuance.
-- Transaction liquidating structure: the order of priority entails a fully sequential amortisation of the notes – i.e. the Class B notes will begin to amortise following the full repayment of the Class A notes and the Class J notes will amortise following the repayment of the Class B notes. Additionally, interest payments on the Class B notes become subordinated to principal payments on the Class A notes if the Cumulative Gross Collection Ratio or Net Present Value (NPV) Cumulative Profitability Ratio are lower than 90%. These triggers were not breached on the July 2020 interest payment date, with the actual figures being 104.6% and 125.7%, respectively, according to the Servicer.
-- Liquidity support: the transaction benefits from an amortising cash reserve providing liquidity to the structure covering against potential interest shortfall on the Class A notes and senior fees. The cash reserve target amount is equal to 4.0% of the Class A notes principal outstanding and is currently fully funded.
According to the latest payment report of July 2020, the principal amount outstanding of the Class A, Class B, and Class J notes was equal to EUR 457.8 million, EUR 60.0 million, and EUR 26.9 million, respectively. The balance of the Class A notes has amortised by approximately 27.2% since issuance. The current aggregated transaction balance is EUR 544.7 million.
As of June 2020, the transaction was performing above the Servicer’s initial expectations. The actual cumulative gross collections equal EUR 226.4 million, whereas Prelios’ initial business plan estimated cumulative gross collections of EUR 222.0 million for the same period. Therefore, as of June 2020, the transaction was overperforming by EUR 4.4 million compared with the Servicer’s initial expectations (+2.0%).
At issuance, DBRS Morningstar estimated cumulative gross collections for the same period of EUR 132.4 million at the BBB (low) (sf) stressed scenario. Therefore, as of June 2020, the transaction is performing above DBRS Morningstar’s stressed expectations. However, DBRS Morningstar assigned a Negative trend to the Class A Notes as it continues to closely monitor the performance as well as the development of the macroeconomic and real estate scenarios within the current market environment.
With respect to the calculation of the NPV Cumulative Profitability Ratio, DBRS Morningstar notes the existing discrepancy between the Servicer’s and the Monitoring Agent’s approach. As of April 2020, the Monitoring Agent (Securitisation Services S.p.A.), presented in its report that the NPV Cumulative Profitability Ratio calculated by the Servicer was not consistent with the executed transaction documents and that the agreed-upon calculation would be 3.8 percentage points lower than the one presented by the Servicer on 31 December 2019. At present, this discrepancy is not material enough to affect the rating analysis but in any case DBRS Morningstar will monitor this aspect and its consequences once the securitisation parties agree to a solution.
In November 2019, Prelios provided DBRS Morningstar with a revised business plan. In this updated business plan, Prelios assumed lower recoveries compared with the Servicer’s initial expectations. The total cumulative gross collections from the updated business plan account for EUR 982.1 million, which is 2.5% lower compared with the EUR 1,007.2 million expected in the initial business plan.
Without including actual collections, the expected future collections from July 2020 are now accounting for EUR 758.6 million (EUR 785.2 million in the initial business plan). DBRS Morningstar’s BBB (low) (sf) rating stress assumes a haircut of 22.6% to the Servicer’s updated business plan, considering future expected collections.
The final maturity date of the transaction is 31 July 2040.
DBRS Morningstar analysed the transaction structure using Intex DealMaker.
The Coronavirus Disease (COVID-19) and the resulting isolation measures have caused an economic contraction, leading to sharp economic contraction, increases in unemployment rates and reduced investment activities. DBRS Morningstar anticipates that collections in European NPL securitisations will be disrupted in coming months and that the deteriorating macroeconomic conditions could negatively affect recoveries from NPLs and the related real estate collateral. The rating is based on additional analysis and adjustments to expected performance as a result of the global efforts to contain the spread of the coronavirus. For this transaction, DBRS Morningstar assumed reduced collections for the next two quarters and incorporated its revised expectation of a moderate medium-term decline in residential property prices, albeit partial credit to house price increases from 2023 onwards is given in noninvestment grade scenarios.
The DBRS Morningstar Sovereign group released on 16 April 2020 a set of macroeconomic scenarios for the 2020-22 period in select economies. These scenarios were last updated on 22 July 2020. For details see the following commentaries: https://www.dbrsmorningstar.com/research/364318/global-macroeconomic-scenarios-july-update and https://www.dbrsmorningstar.com/research/359903/global-macroeconomic-scenarios-application-to-credit-ratings. DBRS Morningstar analysis considered impacts consistent with the moderate scenario in the referenced reports.
For more information on DBRS Morningstar considerations for European NPL transactions and Coronavirus Disease (COVID-19), please see the following commentaries: https://www.dbrsmorningstar.com/research/362326 and https://www.dbrsmorningstar.com/research/360393
For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.
For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the rating is: “Master European Structured Finance Surveillance Methodology” (22 April 2020).
DBRS Morningstar has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.
A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent rating action.
Other methodologies referenced in this transaction are listed at the end of this press release.
These may be found at: http://www.dbrsmorningstar.com/about/methodologies.
For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to “Appendix C: The Impact of Sovereign Ratings on Other DBRS Morningstar Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrsmorningstar.com/research/364527/global-methodology-for-rating-sovereign-governments.
The sources of data and information used for these ratings include the Issuer and/or its agents, which comprise the updated business plan received in November 2019, updated data tape as of June 2020, detailed servicer report as of June 2020, and investor report dated 31 July 2020.
DBRS Morningstar did not rely upon third-party due diligence in order to conduct its analysis.
At the time of the initial rating DBRS Morningstar was supplied with third-party assessments. However, this did not impact the rating analysis.
DBRS Morningstar considers the data and information available to it for the purposes of providing this rating to be of satisfactory quality.
DBRS Morningstar does not audit or independently verify the data or information it receives in connection with the rating process.
The last rating action on this transaction took place on 6 August 2020, when DBRS Morningstar maintained the Under Review with Negative Implications status on the Class A notes.
The lead analyst responsibilities for this transaction have been transferred to Sebastiano Romano.
Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available on www.dbrsmorningstar.com.
To assess the impact of changing the transaction parameters on the rating, DBRS Morningstar considered the following stress scenarios, as compared to the parameters used to confirm the rating (the Base Case):
-- Recovery Rates Used: Cumulative base case recovery amount of approximately EUR 813.8 million at the BBB (low) (sf) stress level, a 5% and 10% decrease in the base case recovery rate.
-- DBRS Morningstar concludes that a hypothetical decrease of the Recovery Rate by 5%, ceteris paribus, would lead to a downgrade of the Class A notes to BB (high) (sf).
-- DBRS Morningstar concludes that a hypothetical decrease of the Recovery Rate by 10%, ceteris paribus, would lead to a downgrade of the Class A notes to B (high) (sf).
Generally, the conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar’s outlooks and ratings are monitored.
For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.
Ratings assigned by DBRS Ratings GmbH are subject to EU and U.S. regulations only.
Lead Analyst: Sebastiano Romano, Senior Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 1 August 2018
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The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrsmorningstar.com/about/methodologies.
-- Rating European Non-Performing Loans Securitisations (13 May 2020),
-- Master European Structured Finance Surveillance Methodology (22 April 2020),
-- Rating European Consumer and Commercial Asset-Backed Securitisations (13 January 2020),
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda (14 July 2020), https://www.dbrsmorningstar.com/research/363998/master-european-residential-mortgage-backed-securities-rating-methodology-and-jurisdictional-addenda
-- European CMBS Rating and Surveillance Methodology (13 December 2019),
-- Operational Risk Assessment for European Structured Finance Servicers (28 February 2020), https://www.dbrsmorningstar.com/research/357429/operational-risk-assessment-for-european-structured-finance-servicers
-- Legal Criteria for European Structured Finance Transactions (11 September 2019),
-- Derivative Criteria for European Structured Finance Transactions (26 September 2019),
-- Interest Rate Stresses for European Structured Finance Transactions (10 October 2019),
A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrsmorningstar.com/research/278375
For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at firstname.lastname@example.org.