Morningstar DBRS Confirms Credit Rating on Marzio Finance S.r.l. - Series 8-2020

DBRS Ratings GmbH (Morningstar DBRS) confirmed its AA (sf) credit rating on the Class A Notes issued by Marzio Finance S.r.l. Series 8-2020 (the Issuer) in the context of a securitisation programme (the programme).

The credit rating addresses the timely payment of interest and the ultimate payment of principal on or before the final maturity date in March 2048.

CREDIT RATING RATIONALE
The confirmation follows an annual review of the transaction and is based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults, and losses, as of the October 2024 payment date;
-- Updated portfolio default rate (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables; and
-- Current available credit enhancement to the Class A Notes to cover the expected losses at the AA (sf) credit rating level.

Marzio Finance S.r.l. is a EUR 10,000,000,000 programme established in August 2017 and amended in November 2018, March 2020, June 2022, and September 2023, designed to follow the standard structure under the Italian securitisation law. The programme represents the issuance of notes under various series backed by pools of receivables related to salary- and pension-assignment loans as well as payment-delegation loans granted by IBL Istituto Bancario del Lavoro S.p.A. (IBL) to Italian employees and pensioners. IBL Servicing S.p.A. (fully owned by IBL) services the portfolios while IBL acts as subservicer and Zenith Service S.p.A. acts as backup servicer.

PORTFOLIO PERFORMANCE
As of the September 2024 cut-off date, loans that were one to two months and two to three months in arrears represented 2.0% and 1.4% of the outstanding portfolio balance, respectively, while loans more than three months in arrears represented 3.0%. The gross cumulative default ratio stood at 4.5% of the initial portfolio.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
Morningstar DBRS conducted a loan-by-loan analysis of the outstanding pool of receivables and updated its base case annualised PD and LGD assumptions to 7.3% and 6.3%, respectively.

CREDIT ENHANCEMENT
Overcollateralisation of the outstanding collateral portfolio and the additional reserve provide credit enhancement to the Class A Notes in the transaction. As of the October 2024 payment date, credit enhancement to the Class A Notes was 49.8%, up from 24.2% as of the November 2023 payment date.

The series benefits from an amortising cash reserve available to cover senior fees and expenses, and interest payments on the Class A Notes as well as from an additional reserve that provides actual credit enhancement to the Class A Notes on top of liquidity support. As of the October 2024 payment date, both the cash reserve and additional reserve were at their respective floor levels.

Cash trapping conditions are in place to trap the excess spread upon the breach of certain triggers if the cumulative net default ratio rises above a certain threshold.

The series also benefits from a prepayment reserve, available to cover losses arising from the set-off of capitalised fees.

Citibank N.A./Milan Branch acts as the account bank for the transaction. Based on Morningstar DBRS' private credit rating on the account bank, the downgrade provisions outlined in the transaction documents, and structural mitigants inherent in the transaction structures, Morningstar DBRS considers the risk arising from the exposure to the account bank to be consistent with the credit rating assigned to the Class A Notes, as described in Morningstar DBRS' "Legal and Derivative Criteria for European Structured Finance Transactions" methodology.

Morningstar DBRS' credit ratings on the Class A Notes 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
Social (S) and Governance (G) Factors
The high exposure to public-sector employees, pensioners, and civil servants makes the transaction dependent on the creditworthiness of the Italian sovereign. Morningstar DBRS considers some of the key drivers behind the latest rating action on the Republic of Italy (Italy)¿namely Human Capital and Human Rights (S) and Institutional Strength, Governance & Transparency (G)¿to be significant rating factors. According to the IMF World Economic Outlook, Italy's GDP per capita of USD 39,012 in 2023 was relatively low compared with its euro area peers. According to the World Bank, for Governance Effectiveness Italy ranked at the 67th percentile in 2022. Morningstar DBRS took these factors into account in the "Economic Structure and Performance", "Fiscal Management and Policy", and "Political Environment" building blocks of its "Global Methodology for Rating Sovereign Governments".

Credit rating actions on Italy are likely to have an impact on this credit rating. ESG factors that have a significant or relevant effect on the credit analysis of Italy are discussed separately at https://dbrs.morningstar.com/research/441774.

There were no Environmental 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/437781.

Morningstar DBRS analysed the transaction structure in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to this credit rating is: "Master European Structured Finance Surveillance Methodology" (19 November 2024),https://dbrs.morningstar.com/research/443204.

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.

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 this credit rating include servicer reports, investor reports, and additional performance information provided by IBL and loan-level data provided by the European DataWarehouse GmbH.

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 impact the credit rating analysis.

Morningstar DBRS considers the data and information available to it for the purposes of providing this credit rating 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 22 December 2023, when Morningstar DBRS upgraded its credit rating on the Class A Notes to AA (sf) from AA (low) (sf).

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 transactions parameters on the credit rating, Morningstar DBRS considered the following stress scenarios as compared with the parameters used to determine the credit rating (the base case):

--Morningstar DBRS expected a lifetime base - case PD and LGD for the pool based on a review of the current assets.
Adverse changes to asset performance may cause stresses to base case assumptions and therefore have a negative effect on credit rating.
The base case PD and LGD of the current pool of loans for the Issuer are 7.3% and 6.3%, respectively.

Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of AA (sf)
-- 50% increase in LGD, expected credit rating of AA (sf)
-- 25% increase in PD, expected credit rating of AA (sf)
-- 50% increase in PD, expected credit rating of AA (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of AA (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of AA (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of AA (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.

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

Lead Analyst: Pascale Kallas, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Associate Managing Director
Initial Rating Date: 16 March 2020

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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.

-- Master European Structured Finance Surveillance Methodology (19 November 2024),
https://dbrs.morningstar.com/research/443204.
-- Legal and Derivative Criteria for European Structured Finance Transactions (19 November 2024),
https://dbrs.morningstar.com/research/443196.
-- Operational Risk Assessment for European Structured Finance Originators and Servicers (18 September 2024),
https://dbrs.morningstar.com/research/439571.
-- Rating European Consumer and Commercial Asset-Backed Securitisations (18 September 2024),
https://dbrs.morningstar.com/research/439583.
-- Rating European Structured Finance Transactions Methodology (19 November 2024),
https://dbrs.morningstar.com/research/443199.
-- 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.