Morningstar DBRS Takes Credit Rating Actions on POP NPLs 2020 S.r.l.

DBRS Ratings GmbH (Morningstar DBRS) took the following credit rating actions on the notes issued by POP NPLs 2020 S.r.l. (the Issuer):

-- Class A notes confirmed at BBB (high) (sf)
-- Class B notes downgraded to CC (sf) from CCC (sf)

Morningstar DBRS removed the Negative trend on the Class B notes, while the trend on the Class A notes remains Stable.

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 repayment of principal. 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.

At issuance, the notes were backed by a EUR 919.9 million portfolio by gross book value consisting of Italian secured and unsecured nonperforming loans originated and sold to the Issuer by 15 Italian banks.

Fire S.p.A. (Fire) and Special Gardant S.p.A. (together with Fire, the Special Servicers) service the receivables. Master Gardant S.p.A. acts as the master servicer, while Banca Finanziaria Internazionale S.p.A. (Banca Finint) has been appointed as backup servicer.

CREDIT RATING RATIONALE
The credit rating actions follow Morningstar DBRS' review of the transaction and are based on the following analytical considerations:
-- Transaction performance: An assessment of portfolio recoveries as of March 2025 focusing on (1) a comparison between actual collections and the Special 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.
-- Updated business plan: The Special Servicers' updated business plan as of December 2024, received in May 2025, and the comparison with the initial collection expectations.
-- Portfolio characteristics: Loan pool composition as of March 2025 and the evolution of its core features since issuance.
-- Transaction liquidating structure: The order of priority, which 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 collection ratio (CCR) or present value cumulative profitability ratio (PV ratio) is lower than 90%. As of the May 2025 interest payment date (IPD), these triggers had not been breached. The actual figures for the CCR and PV ratio were at 121.2% and 127.8% as of the May 2025 IPD, respectively, according to the Special Servicers.
-- Liquidity support: The transaction benefits from an amortising cash reserve providing liquidity to the structure and covering potential interest shortfall on the Class A notes and senior fees. The cash reserve target amount is equal to 4.0% of the Class A notes' principal outstanding balance, and the recovery expenses cash reserve target amounts to EUR 150,000, both fully funded.

TRANSACTION AND PERFORMANCE
According to the latest investor report from May 2025, the outstanding principal amounts of the Class A, Class B, and Class J notes were EUR 69.4 million, EUR 25.0 million, and EUR 10.0 million, respectively. As of May 2025, the balance of the Class A notes had amortised by 71.2% since issuance, and the current aggregated transaction balance was EUR 104.4 million.

As of March 2025, the transaction was performing above the Special Servicers' business plan expectations. The actual cumulative gross collections equalled EUR 214.3 million, whereas the Special Servicers' initial business plan estimated cumulative gross collections of EUR 176.2 million for the same period. Therefore, as of March 2025, the transaction was overperforming by EUR 38.1 million (21.6%) compared with the initial business plan expectations. Nevertheless, the overperformance reduced over time, as actual collections from April 2023 to March 2025 were below the Special Servicers' initial expectations.

At issuance, Morningstar DBRS estimated cumulative gross collections for the same period of EUR 124.5 million at the BBB (sf) stressed scenario and EUR 161.0 million at the CCC (sf) stressed scenario. Therefore, as of March 2025, the transaction was performing above Morningstar DBRS' initial stressed expectations.

Pursuant to the requirements set out in the receivable servicing agreement, in May 2025, the Special Servicers delivered an updated portfolio business plan. The updated portfolio business plan, combined with the actual cumulative gross collections of EUR 205.9 million as of December 2024, resulted in a total of EUR 335.2 million. This is 15.5% lower than the total gross disposition proceeds of EUR 396.8 million estimated in the initial business plan. Considering the material overperformance to date, this implies a substantial reduction in expected collections from the remaining exposures.

Excluding actual collections as of March 2025, the Special Servicers' expected future collections from April 2025 amount to EUR 123.4 million. The updated Morningstar DBRS credit rating stress assumes a haircut of 19.0% at the BBB (high) (sf) stressed scenarios to the Special Servicers' updated business plan, considering future expected collections from April 2025. In Morningstar DBRS' CCC (sf) (or below) scenarios, the updated forecast was adjusted only in terms of actual collections to the date and timing of future expected collections.

Considering the overperformance of cumulative actual collections and the rapid redemption, the Class A notes may now pass higher credit rating stresses in the cash flow analysis. However, Morningstar DBRS does not deem the senior principal redemption path to be sustainable yet, as also evidenced by the Special Servicers' underperformance compared with the initial business plan in the collection period between April 2023 and March 2025, and the Special Servicers' downward revision of total collection expectations according to the most recent business plan. In addition, Morningstar DBRS believes that higher credit ratings would not be commensurate with the transaction's risk considering the potential higher variability of nonperforming loans' cash flows and the exposure to the transaction account bank, considering the downgrade provisions outlined in the transaction documents. Hence, Morningstar DBRS confirmed the credit rating on the Class A notes at BBB (high) (sf) with a Stable trend.

Morningstar DBRS observes a reduced likelihood that the Class B notes' obligations will be fully met at maturity. As of May 2025, EUR 2.1 million unpaid interest on the Class B notes had accrued, as the interest on the Class B notes ranking senior to the Class A notes' principal is capped at 12.0%. In addition, the reduction in the Special Servicers' total expected collections leaves a lower cushion for the full payment of the Class B notes' principal and interest. Therefore, Morningstar DBRS downgraded the credit rating on the Class B notes to CC (sf) from CCC (sf).

The transaction's final maturity date is in November 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 at https://dbrs.morningstar.com/research/454196.

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 surveillance section of the principal methodology.

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, the Special Servicers, and Banca Finint, which comprise, in addition to the information received at issuance, the investor report as of May 2025, the updated business plan as of December 2024, and the semiannual servicing report as of March 2025.

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

At the time of the initial credit ratings, 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 14 June 2024, when Morningstar DBRS confirmed its credit rating on the Class A notes at BBB (high) (sf) with a Stable trend, and confirmed the Class B notes at CCC (sf), changing the trend to Negative from Stable.

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

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

-- Recovery rates used: Cumulative base-case recovery amount of approximately EUR 100.0 million and EUR 123.0 million at the BBB (high) (sf) and CCC (sf) (or below) stress levels, respectively, a 5% and 10% decrease in the base-case recovery rate.
-- Morningstar DBRS concludes that a hypothetical decrease in the recovery rate by 5%, ceteris paribus, would lead to a confirmation of the Class A notes at BBB (high) (sf).
-- Morningstar DBRS concludes that a hypothetical decrease in the recovery rate by 10%, ceteris paribus, would lead to a confirmation of the Class A notes at BBB (high) (sf).
-- Morningstar DBRS concludes that a hypothetical decrease in the recovery rate by 5%, ceteris paribus, would lead to a confirmation of the Class B notes at CC (sf).
-- Morningstar DBRS concludes that a hypothetical decrease in the recovery rate by 10%, ceteris paribus, would lead to a confirmation of the Class B notes at CC (sf).

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: Sijia Aulenbacher, Assistant Vice President
Rating Committee Chair: David Lautier, Senior Vice President
Initial Rating Date: 23 December 2020

DBRS Ratings GmbH
Neue Mainzer Straße 75
D-60311 Frankfurt am Main
Tel. +49 (69) 8088 3500
Geschäftsführung: Detlef Scholz, Marta Zurita Bermejo
Amtsgericht Frankfurt am Main, HRB 110259

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 (16 May 2025), https://dbrs.morningstar.com/research/454196

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.