Fitch Affirms Island Refinancing S. r.l.
OREANDA-NEWS. Fitch Ratings has affirmed Island Refinancing S. r.l.'s floating rate notes due 2025 as follows:
EUR39.5m Class B (IT0004293574) affirmed at 'BBsf'; Outlook revised to Stable from Negative
EUR60m Class C (IT0004293582) affirmed at 'CCsf'; Recovery Estimate revised to 70% from 30%
EUR32m Class D (IT0004293590 affirmed at 'Csf'; Recovery Estimate 0%
Island Refinancing is a refinancing of Island Finance (ICR4) S. p.A. and Island Finance 2 (ICR7) S. r.l. ICR4 and ICR7 were securitisations of NPLs originated in Italy by Banco di Sicilia S. p.A. (BdS, part of the UniCredit banking group, BBB+/Negative).
KEY RATING DRIVERS
The revision of the Outlook and increased Recovery Estimate on the class C notes reflect the accumulation of EUR48.9m of cash awaiting distribution by various Italian courts. The affirmations reflect Fitch's expectation of full repayment of the class B notes, likely default of the class C notes and inevitable write-down of the class D notes. A 'BBsf' rating cap applies to the notes given the high reliance on receipt of cash in court, which may be subject to delays and deductions. Fitch gives 90% credit at 'BBsf', adequate to cover the EUR39.5m senior note balance, plus interest.
Although the class C notes are expected to amortise from collections and released cash, once the class B notes repay in full a note event of default is likely unless all unpaid interest (EUR13m in January 2016) can be promptly repaid. This will depend on the pace of collections (steadily declining) and the availability of the liquidity facility (currently EUR8.7m, and amortising).
The remaining portfolio has a gross book value of EUR1,088m. Fitch assumes an overall 10% recovery in a 'Bsf' stress, which is in line with observations of highly seasoned Italian NPL pools, which are also subject to negative selection and declining collection rates.
RATING SENSITIVITIES
Deductions or delays that would result in materially lower distributions of cash in court than projected would result in a downgrade of the class B notes. A significant slowdown in collections or distributions of cash in court will result in a downgrade of the class C notes if default becomes inevitable.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
DATA ADEQUACY
Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.
Fitch did not undertake a review of the information provided about the underlying asset pool ahead of the transaction's initial closing. The subsequent performance of the transaction over the years is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable.
Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.
SOURCES OF INFORMATION
The information below was used in the analysis.
-Transaction reporting provided by Prelios Credit Servicing S. p.A. as at end-January 2016
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