Spanish, Portuguese, and Cypriot NPL Securitisations Performance – 2023 Update

This commentary analyses the performance of Spanish, Portuguese, and Cypriot nonperforming loan (NPL) transactions publicly rated by DBRS Morningstar. It is based on the latest available information provided by the servicers and identifies key trends in the three jurisdictions, along with peculiarities observed at the transaction level based on deal-specific aspects. This commentary provides a summary of the macroeconomic scenario for each country and, for each transaction, provides an overview of the performance evolution, the evolution of the amortisation and collateralisation for the Class A notes, and the distribution of issuer available funds on note redemptions, interest payments, and costs.

Highlights include the following:
-- Significant underperformance of Spanish and Cypriot transactions due to very optimistic (higher collections and lower costs) servicer expectations in the first two years.
-- The three oldest Spanish and Cypriot transactions (Prosil, Retiro, and Hestia) are showing signs of stabilization after the most challenging years, while the two most recent transactions (Boson and Titan) continue to show a negative performance trend.
-- The outstanding performance of the Portuguese transactions in the first two years since issuance has allowed for a rapid amortisation of the senior and mezzanine notes. The only DBRS Morningstar-rated mezzanine note outstanding is expected to be fully repaid in less than one year.

We have observed a number of idiosyncrasies among the transactions. The collateralization of the senior notes, the cost structure, and the hedging proceeds play a key role in the amortization speed of the senior notes and thus in the credit enhancement.