Press Release

DBRS Morningstar Confirms Rating on Maggese S.r.l. with Negative Trend

Nonperforming Loans

May 26, 2023

DBRS Ratings GmbH (DBRS Morningstar) confirmed its rating on the Class A notes issued by Maggese S.r.l. (the Issuer) at CCC (sf) with a Negative trend.

The transaction was funded by 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 the ultimate payment of principal on or before its final maturity date of 25 July 2037. DBRS Morningstar does not rate the Class B or Class J notes.

At issuance, the Notes were backed by a EUR 697 million portfolio by gross book value consisting of a mixed pool of Italian nonperforming residential, commercial, and unsecured loans originated by Cassa di Risparmio di Asti S.p.A. and Cassa di Risparmio di Biella e Vercelli - Biverbanca S.p.A.

The receivables are serviced by Prelios Credit Servicing S.p.A. (Prelios or the Servicer). A backup servicer facilitator, Securitisation Services S.p.A., was appointed and will act as servicer if Prelios’ appointment is terminated.

RATING RATIONALE
The confirmation follows a review of the transaction and is based on the following analytical considerations:
-- Transaction performance: An assessment of portfolio recoveries as of 31 December 2022, focusing on: (1) a comparison between actual collections and the Servicer’s initial business plan forecast; (2) the collection performance observed over recent months; and (3) a comparison between the current performance and DBRS Morningstar’s expectations.
-- The Servicer’s updated business plan as of December 2022, received in March 2023, and the comparison with the initial collection expectations.
-- Portfolio characteristics: Loan pool composition as of March 2023 and the 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).
-- Performance ratios and underperformance events: As per the most recent December 2022 semiannual servicing report, the cumulative collection ratio was 49% and the net present value cumulative profitability ratio was 87%. Since the January 2021 interest payment date, the 90% limit for the cumulative collection ratio was breached, such that Class B interest payments are subordinated to the repayment of Class A principal.
-- Liquidity support: The transaction benefits from an amortising cash reserve providing liquidity to the structure covering potential interest shortfall on the Class A notes and senior fees. The cash reserve target amount is equal to 4% of the Class A principal outstanding and is currently fully funded.

TRANSACTION AND PERFORMANCE
According to the latest investor report from January 2023, the outstanding principal amounts of the Class A, Class B, and Class J notes were EUR 103.3 million, EUR 24.4 million, and EUR 11.4 million, respectively. As of the January 2023 payment date, the balance of the Class A notes had amortised by 39.5% since issuance and the current aggregated transaction balance was EUR 139.1 million.

As of December 2022, the transaction was performing below the Servicer’s business plan expectations. The actual cumulative gross collections equalled EUR 94.1 million whereas the Servicer’s initial business plan estimated cumulative gross collections of EUR 192 million for the same period. Therefore, as of December 2022, the transaction was underperforming by EUR 97.9 million (-51.0%) compared with the initial business plan expectations. In addition, positions are being closed below initial expectations, with the net present value cumulative profitability ratio at 87.3% as of December 2022.

At issuance, DBRS Morningstar estimated cumulative gross collections for the same period at EUR 152.8 million in the BBB (low) (sf) stressed scenario. Therefore, as of December 2022, the transaction was performing considerably below DBRS Morningstar’s stressed expectations at issuance.

Pursuant to the requirements set out in the receivable servicing agreement, in March 2023, the Servicer delivered an updated portfolio business plan. The updated portfolio business plan, combined with the actual cumulative gross collections as of December 2022, results in a total of EUR 182.9 million, which is 25.4% lower than the total gross disposition proceeds of EUR 245.1 million estimated in the initial business plan, and 7.5% lower than the total gross disposition proceeds of EUR 197.6 million estimated in last year’s business plan. Excluding actual collections, the Servicer’s expected future collections from January 2023 are EUR 88.7 million, less than the current outstanding balance of the Class A notes. In DBRS Morningstar’s CCC (sf) scenario, DBRS Morningstar only adjusted the Servicer’s updated forecast in terms of actual collections to date and the timing of future expected collections. Considering senior costs and interest due on the Notes, the full repayment of Class A principal is unlikely, but considering the transaction structure, a payment default on the bond would likely only occur in a few years from now.

The final maturity date of the transaction is in July 2037.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the “DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings” at https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

DBRS Morningstar analysed the transaction structure using Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is: “Master European Structured Finance Surveillance Methodology” (7 February 2023), https://www.dbrsmorningstar.com/research/409485/master-european-structured-finance-surveillance-methodology.

Other methodologies referenced in this transaction are listed at the end of this press release.

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.

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/401817/global-methodology-for-rating-sovereign-governments.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

The sources of data and information used for this rating include the Issuer, Prelios, and KPMG Fides Servizi di Amministrazione SpA which comprise, in addition to the information received at issuance, the investor report as of January 2023; the semiannual servicer report as of December 2022; the quarterly servicer report as of March 2023; the loan-by-loan data as of March 2023; and the updated business plan received in March 2023.

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 27 May 2022, when DBRS Morningstar downgraded its rating on the Class A notes to CCC (sf) from CCC (high) (sf) and maintained the Negative trend.

The lead analyst responsibilities for this transaction have been transferred to Pablo Iturriaga.

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available on www.dbrsmorningstar.com.

Sensitivity Analysis: To assess the impact of changing the transaction parameters on the rating, DBRS Morningstar considered the following stress scenarios as compared with the parameters used to determine the rating (the base case):

-- 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 below CCC (low) (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 below CCC (low) (sf)

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: https://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. For further information on DBRS Morningstar historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

This rating is endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Pablo Iturriaga, Assistant Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 26 July 2018

DBRS Ratings GmbH, Sucursal en España
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Tel. +49 (69) 8088 3500
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The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://www.dbrsmorningstar.com/research/278375.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.

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