Morningstar DBRS Comments on Leviticus SPV S.r.l. Following Amendments

DBRS Ratings GmbH (Morningstar DBRS) reviewed the impact of certain amendments (collectively, the Amendments) effective on 25 March 2025 to the legal documents of Leviticus SPV S.r.l. (the Issuer) and concluded that the Amendments in the form submitted to Morningstar DBRS will not, in and of themselves, result in a downgrade or withdrawal of Morningstar DBRS' B (sf) credit rating with a Negative trend on the Class A Notes.

The notes are backed by a portfolio consisting of Italian unsecured and secured nonperforming loans (NPLs) originated by Banco BPM S.p.A. Master Gardant S.p.A. (the servicer) and Gardant Liberty Servicing S.p.A. (the subservicer) service the receivables, while Zenith Service S.p.A. operates as the backup servicer. 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 first part of the Amendments revises the definition of the Cumulative Collection Ratio (CCR) to eliminate any uncertainties in its computation. The revised definition of the CCR will include, for the computation of both the numerator and denominator, all legal costs and procedural costs instead of only certain amounts. Nevertheless, the revision will have no impact on the CCR levels, as the calculation has, in practice, always been aligned with the revised definition of the CCR. Furthermore, the definitions of Net Expected Collections, Net Present Value Cumulative Profitability Ratio, and Net Collections will also be amended to ensure alignment with the revised definition of the CCR.

The second part of the Amendments revises the Real Estate Owned Companies (ReoCo) priority of payment and the deadline of the last drawdown of the ReoCo loan. By introducing a reimbursement cap, general expenses will be spread across various real estate assets owned by the ReoCo, according to a criterion based on the repayment capacity of each individual real estate asset instead of a time-driven criterion. Furthermore, the potential shortfall in the payment of expenses on an individual real estate asset will be covered by other real estate assets, resulting in cross collateralisation. Finally, the deadline for the drawdown of the ReoCo loan is to be postponed by 48 months from 2025 to 2029. Morningstar DBRS believes the amendment to the ReoCo priority of payment might reduce the amount of ReoCo proceeds that will ultimately flow to the Issuer, as more resources will be used to cover senior expenses. However, there are a number of mitigants already in place within the ReoCo Framework Agreement, including the cap on the aggregate ReoCo loan of EUR 20 million, the Maximum ReoCo Amount of EUR 50 million, and loan-to-value criteria requiring an additional advance under the ReoCo loan, all of which limit the potential impact on the credit rating. While Morningstar DBRS understands that the ReoCo intervention aims to preserve the asset's value from material depreciation, the 48-month deadline extension on the ReoCo operation might result in increased uncertainty about the actual holding time from onboarding to sale and exposure to lower-quality properties that might be difficult to place in the market.

More information on the transaction is available at: https://dbrs.morningstar.com/issuers/23754.

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) at https://dbrs.morningstar.com/research/437781.

Notes:
All figures are in euros unless otherwise noted.

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