Morningstar DBRS Places POP NPLs 2019 S.r.l.'s Credit Ratings Under Review With Negative Implications

DBRS Ratings GmbH (Morningstar DBRS) placed the Class A Notes and the Class B Notes issued by POP NPLs 2019 S.r.l. (the Issuer) Under Review with Negative Implications.

The transaction represents the issuance of Class A, Class B, and Class J Notes (collectively, the Notes). The credit rating on the Class A Notes addresses the timely payment of interest and the ultimate payment of principal on or before the legal final maturity date and the credit rating on the Class B Notes addresses the ultimate payment of principal and interest. Morningstar DBRS does not rate the Class J Notes.

As of the 1 January 2019 cut-off date, the Notes were backed by a EUR 826.7 million portfolio consisting of secured and unsecured Italian nonperforming loans sold to the Issuer by 12 Italian banks.

Prelios Credit Solutions S.p.A. (Prelios) and Fire S.p.A. (Fire; together with Prelios, the Servicers) service the receivables. Prelios Credit Servicing S.p.A. acts as the master servicer and Banca Finanziaria Internazionale S.p.A. (Banca Finint) operates as the backup servicer.

CREDIT RATING RATIONALE
The credit rating actions follow a review of the transaction and are based on the following analytical considerations:
-- Transaction performance: An assessment of portfolio recoveries as of December 2024, focusing on: (1) a comparison between actual collections and the Servicers' initial business plan forecast; (2) the collection performance observed over recent months; and (3) a comparison between the current performance and Morningstar DBRS' expectations.
-- Portfolio characteristics: The loan pool composition as of December 2024 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). Additionally, interest payments on the Class B Notes become subordinated to principal payments on the Class A Notes if the cumulative net collection ratio or the net present value cumulative profitability ratio is lower than 90%. These triggers were not breached on the February 2025 interest payment date, with the actual figures at 99.8% and 118.7%, respectively, according to the Servicers.
-- 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 4.5% of the Class A Notes' outstanding balance and is currently fully funded.

TRANSACTION AND PERFORMANCE
According to the latest investor report from February 2025, the outstanding principal amounts of the Class A Notes, Class B Notes, and Class J Notes were EUR 67.6 million, EUR 25.0 million, and EUR 5.0 million, respectively. As of the February 2025 payment date, the balance of the Class A Notes had amortised by approximately 60.9% since issuance and the current aggregated transaction balance was EUR 97.6 million.

As of December 2024, the transaction was performing above the Servicers' business plan gross expectations. The actual cumulative gross collections equalled EUR 157.6 million, whereas the Servicers' initial business plan estimated cumulative gross collections of EUR 145.9 million for the same period. Therefore, as of December 2024, the transaction was overperforming by EUR 11.7 million (8.0%) compared with the initial business plan gross expectations.

As of the December 2023 collection date, actual cumulative gross collections were 28.8% higher than the Servicers' initial expectations; therefore, as of December 2024, the overperformance has decreased by about 20.8%.

Furthermore, recovery expenses and servicing costs have been proportionally higher compared to the expectations at issuance. Therefore first- and second-level cumulative actual collections as of December 2024 are 0.5% and 2.7% lower than the Servicers' initial expectations, respectively.

At issuance, Morningstar DBRS estimated cumulative gross collections of EUR 97.9 million at the BBB (sf) stressed scenario for the same period and EUR 107.9 million at the CCC (sf) stressed scenario. Therefore, as of December 2024, the transaction was performing above Morningstar DBRS' initial stressed expectations.

Pursuant to the requirements set out in the receivable servicing agreement, the Servicers are required to provide, on a yearly basis, a revised business plan combined with the actual cumulative collections as of December of the previous year. An updated portfolio business plan for the current year has not been provided yet. Considering the deterioration of the performance of the transaction as of December 2024 and the higher-than-expected recovery costs, a decrease in future cash flow projections could result in a downgrade of the credit ratings of the Class A Notes and Class B Notes.

The final maturity date of the transaction is in February 2045.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.

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

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August 2024) https://dbrs.morningstar.com/research/437781.

Morningstar DBRS analysed the transaction structure in Intex Dealmaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the credit ratings is: Master European Structured Finance Surveillance Methodology (4 February 2025), https://dbrs.morningstar.com/research/447080.

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

Morningstar DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

Morningstar DBRS is undertaking a review and will remove the credit rating from this status as soon as it is appropriate.

A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent credit rating action.

For a more detailed discussion of the sovereign risk impact on Structured Finance credit ratings, please refer to "Appendix C: The Impact of Sovereign Credit Ratings on Other Morningstar DBRS Credit Ratings" of the "Global Methodology for Rating Sovereign Governments" at: https://dbrs.morningstar.com/research/436000.

The sources of data and information used for these credit ratings include the Issuer, Prelios, Fire, and Banca Finint, which comprise, in addition to the information received at issuance, the investor report as of February 2025, the semiannual master servicer report as of December 2024, the semiannual servicer reports as of December 2024, and quarterly loan-by-loan reports as of December 2024.

Morningstar DBRS did not rely upon third-party due diligence in order to conduct its analysis.

At the time of the initial credit rating, Morningstar DBRS was supplied with third-party assessments. However, this did not affect the credit rating analysis.

Morningstar DBRS considers the data and information available to it for the purposes of providing these credit ratings to be of satisfactory quality.

Morningstar DBRS does not audit or independently verify the data or information it receives in connection with the credit rating process.

The last credit rating action on this transaction took place on 23 May 2024. when Morningstar DBRS confirmed its credit rating on the Class A Notes with a Stable trend. On the same date, Morningstar DBRS confirmed its credit rating on the Class B Notes at CCC (low) with a Negative trend.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on https://dbrs.morningstar.com.

These credit ratings are Under Review with Negative Implications. Generally, the conditions that lead to the assignment of reviews are resolved within a 90-day period.

For further information on Morningstar DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on Morningstar DBRS historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

These credit ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: William Taliento, Assistant Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 23 December 2019

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The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- Rating European Nonperforming and Reperforming Loans Securitisations (11 April 2025),
https://dbrs.morningstar.com/research/451813
-- Legal and Derivative Criteria for European Structured Finance Transactions (19 November 2024),
https://dbrs.morningstar.com/research/443196
-- Master European Structured Finance Surveillance Methodology (4 February 2025),
https://dbrs.morningstar.com/research/447080
-- Rating European Consumer and Commercial Asset-Backed Securitisations (18 September 2024),
https://dbrs.morningstar.com/research/439583
-- European RMBS Insight Methodology (8 May 2025),
https://dbrs.morningstar.com/research/453613
-- European CMBS Rating and Surveillance Methodology (4 March 2025),
https://dbrs.morningstar.com/research/449278
-- Operational Risk Assessment for European Structured Finance Originators and Servicers (18 September 2024), https://dbrs.morningstar.com/research/439571
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2024),
https://dbrs.morningstar.com/research/439913
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August 2024), https://dbrs.morningstar.com/research/437781

A description of how Morningstar DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/439604.

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.