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Rating Action:

Moody's downgrades and places under review for downgrade ratings in eleven Italian NPLs deals

24 Apr 2020

NOTE: On September 28, 2020, the press release was corrected as follows: In the thirteenth paragraph of the Regulatory Disclosures section, the contact number for Journalists was added. Revised release follows.

Madrid, April 24, 2020 -- Moody's Investors Service ("Moody's") has today downgraded and placed on review for further downgrade the ratings of two notes and placed on review for downgrade the ratings of 12 notes in 11 Italian NPLs deals. The downgrades reflect underperformance against our initial assumption. The placings on review for downgrade reflect the slower and potentially lower anticipated cash-flows in the transactions in the context of reduced operability of judicial system, economic disruption and negatively affected investors sentiment following coronavirus outbreak. The review focuses on the transactions viewed as more vulnerable to this expected deterioration in cash-flows.

Please click on this link https://www.moodys.com/viewresearchdoc.aspx?docid=PBS_ARFTL423273 for the List of Affected Credit Ratings. This list is an integral part of this Press Release and identifies each affected issuer.

RATINGS RATIONALE

Please click on this link https://www.moodys.com/viewresearchdoc.aspx?docid=PBS_ARFTL423273 for the List of Affected Credit Ratings. This list is an integral part of this Press Release and provides, for each of the credit ratings covered, Moody's disclosures on the following items:

- Lead Rating Analyst

- Person Approving the Credit Rating, and

- Releasing Office

The rating action is prompted by underperformance against our initial assumption for the two transactions with tranches downgraded and the slower and potentially lower anticipated cash-flows in the transactions in the context of reduced operability of judicial system, economic disruption and negatively affected investors sentiment following coronavirus outbreak.

Slower than anticipated cash-flows for Popolare Bari NPLs 2016 and 2017 S.r.l.

Gross Cumulative Collection Ratio stood at 88.17% and 70.86% respectively as of the latest reporting date, which means collections are significantly slower than anticipated in the original Business Plan projections. NPV Cumulative Profitability Ratio stood at 100.63% and 100.2% respectively, in line with original servicer's expectations, however it only refers to closed positions while the time to process open positions and the future collections on those remain to be seen.

Slower and potentially lower anticipated cash-flows generated from the recovery process following coronavirus outbreak and economic disruption

NPL transactions' cash flows depend on the timing and amount of collections. Measures imposed to contain the spread of the coronavirus are directly and severely affecting the operability of judicial systems, which will delay NPL securitisations' gross recoveries. Courts are closed, with reopening dates being pushed back. As a result, court appraisals, property inspections and auctions are frozen. Until courts return to normal activity, recoveries for transactions will be delayed, although Moody's understand there are still some payments being made from previously sold properties.

We also expect slow down in the recoveries from unsecured loans in the portfolios in the current economic environment.

Negatively affected investor sentiment

NPL transactions are exposed to investment sentiment and how property markets are functioning. Real estate prices could deteriorate to a varying extent, depending on the magnitude of the economic slowdown and the property characteristics.

The virus will also affect the ability of special servicers to realise loan sales to other entities or to reach extrajudicial agreements with borrowers under additional stress in this environment. Travel restrictions, among other constraints, will impede the operability of special servicers.

Due to the current circumstances, Moody's has considered additional stresses in its analysis, including a six-month delay in the recovery timing and has placed on review for downgrade the ratings of the deals that the agency views as more vulnerable to a deterioration of timeline and amount of cash-flows. This higher anticipated vulnerability could be driven by one or more of a number of factors, including (i) the composition of the loan portfolios (for instance in terms of court and regional distribution), (ii) the credit enhancement under the notes and the deleveraging since the last rating action and (iii) the transactions' performance to date. Moody's expects that transactions that were already behind servicers' original projections will have additional difficulty improving underperformance.

In the coming months, liquidity available in the transactions may be needed to ensure payments of senior costs and interest on notes, given no or reduced cash flows. Currently, reserves are at target. Moody's expects available liquidity in the transactions to be sufficient to cover over 12 months of senior costs.

The rating reviews will be concluded following a detailed review and remodeling with updated performance data of each transaction and consideration of the evolution of operability of judicial systems and special servicers and of property prices.

Our analysis has considered the increased uncertainty relating to the effect of the coronavirus outbreak on the Italian economy as well as the effects that the announced government measures, put in place to contain the virus, will have on the cash-flows generated from the recovery process on the non-performing loans. We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety. It is a global health shock, which makes it extremely difficult to provide an economic assessment. The degree of uncertainty around our forecasts is unusually high.

Moody's has taken into account the potential cost of the GACS Guarantee within its cash flow modelling, while any potential benefit from the guarantee for the senior noteholders has not been considered in its analysis.

The principal methodology used in these ratings was "Non-Performing and Re-Performing Loan Securitizations Methodology" published in January 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1207103. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Factors that would lead to an upgrade or downgrade of the ratings:

Factors or circumstances that could lead to an upgrade of the ratings include: (1) the recovery process of the non-performing loans producing significantly higher cash-flows in a shorter time frame than expected; (2) improvements in the credit quality of the transaction counterparties; and (3) a decrease in sovereign risk.

Factors or circumstances that could lead to a downgrade of the ratings include: (1) significantly lower or slower cash-flows generated from the recovery process on the non-performing loans due to either a longer time for the courts to process the foreclosures and bankruptcies, a change in economic conditions from our central scenario forecast or idiosyncratic performance factors. For instance, should economic conditions be worse than forecasted and the sale of the properties generate less cash-flows for the issuer or take a longer time to sell the properties, all these factors could result in a downgrade of the ratings; (2) deterioration in the credit quality of the transaction counterparties; and (3) increase in sovereign risk.

REGULATORY DISCLOSURES

The List of Affected Credit Ratings includes additional disclosures that vary with regard to some of the ratings. Please click on this link https://www.moodys.com/viewresearchdoc.aspx?docid=PBS_ARFTL423273 for the List of Affected Credit Ratings. This list is an integral part of this Press Release and provides, for each of the credit ratings covered, Moody's disclosures on the following items:

- Lead Rating Analyst

- Person Approving the Credit Rating, and

- Releasing Office

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

The analysis relies on a Monte Carlo simulation that generates a large number of collateral loss or cash flow scenarios, which on average meet key metrics Moody's determines based on its assessment of the collateral characteristics. Moody's then evaluates each simulated scenario using model that replicates the relevant structural features and payment allocation rules of the transaction, to derive losses or payments for each rated instrument. The average loss a rated instrument incurs in all of the simulated collateral loss or cash flow scenarios, which Moody's weights based on its assumptions about the likelihood of events in such scenarios actually occurring, results in the expected loss of the rated instrument.

Moody's quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows. Moody's weights the impact on the rated instruments based on its assumptions of the likelihood of the events in such scenarios occurring.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

At least one ESG consideration was material to the credit rating action(s) announced and described above.

The below contact information is provided for information purposes only. Please see the ratings tab of the issuer page at www.moodys.com, for each of the ratings covered, Moody's disclosures on the lead rating analyst and the Moody's legal entity that has issued the ratings.

The person who approved Popolare Bari NPLs 2016 S.r.l., Popolare Bari NPLs 2017 S.r.l., BELVEDERE SPV S.R.L., Pop NPLs 2018 S.r.l., Aqui SPV S.r.l, BCC NPLs 2018 S.r.l., Prisma SPV S.r.l. and BCC NPLs 2019 S.r.l. credit ratings is Barbara Rismondo, Senior Vice President/Manager, Structured Finance Group, 44 20 7772 5456, 44 20 7772 5454. The person who approved Maggese S.r.l., SIENA NPL 2018 S.r.l. and Riviera NPL S.r.l. credit ratings is Michelangelo Margaria, Senior Vice President/Manager, Structured Finance Group, 44 20 7772 5456, 44 20 7772 5454.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Maria Turbica Manrique
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Michelangelo Margaria
Senior Vice President/Manager
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Barbara Rismondo
Senior Vice President/Manager
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Sara Santagostino
Analyst
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody’s Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $5,000,000. MCO and Moody’s Investors Service also maintain policies and procedures to address the independence of Moody’s Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody’s Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

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