New multioriginator securitization of distressed loans promoted by Luigi Luzzatti consortium: Prelios is acting as master servicer and principal special servicer

"Securitization with a rating, whose senior tranche is eligible for the GACS state guarantee, which the Italian Ministry for the Economy & Finance is expected to renew imminently, continues to be an effective support tool for the banking system's derisking plan, and a type of product that attracts the interest of specialized investors, even when macro-economic conditions are not particularly favorable." Marco Monselesan, Prelios Director of Corporate & Business Development, was commenting on the new multioriginator securitization of distressed loans promoted by Luigi Luzzatti - a consortium of 19 territorial cooperative banks (banche popolari), most of them locally significant - for an overall gross book value of approximately 550 million euro. "We are delighted to have assisted Luzzatti, for the second time in the last three years, on the execution of a multioriginator transaction whose structure envisages use of a real estate owned company for optimal valorization of the underlying property. On this transaction, Prelios Credit Servicing and Prelios Credit Solutions are acting as master servicer and principal special servicer respectively."

The new securitization has been structured with a view to assignment of a BBB+/Baa1 rating on the senior notes - pending the reintroduction of Italy's GACS State guarantee and an assessment of subsequently applying for the guarantee - and is one of the initiatives developed by Luzzatti for proactive management and derisking of the various types of distressed loans, planned at consortium level to support the targeted reductions of the member banks' NPL ratios.

The securitization (on which Luzzatti acted as global coordinator and, starting this year, as general advisor) has been structured with the assistance of Intesa Sanpaolo S.p.A. - IMI Corporate & Investment Banking Division, which has taken on the role of arranger and placement agent for the notes.

The banks taking part in the transaction have sold a portfolio of distressed credits to an ad hoc securitization vehicle established pursuant to Italian law 130/99 ("Luzzatti POP NPLS 2022 S.r.l."). The portfolio refers to approximately 3,000 borrowers for an overall gross payable amount of 545 million euro, originating largely from Luzzatti shareholder banks and consisting 30% of borrowers secured by at least a first-charge mortgage and for the remaining part of borrowers guaranteed by junior liens or without security.

Prelios is acting as master servicer and principal special servicer, assisting Luzzatti and the banks with portfolio analysis and handling the due diligence stage; Fire is co-special servicer with regard to the granular portion of the portfolio.

The transaction was structured with state-of-the-art procedures and tools, using a real estate owned company, which can be activated immediately at the request of the holders of the mezzanine and junior notes, for better valorization of the portfolio. The securitization vehicle has issued three tranches of asset-backed securities: a senior tranche for € 118.25 million, accounting for 21.7% of the GBV, assigned a Baa1/BBB+ rating by Moodys and ARC; a mezzanine tranche for € 17.5 million, accounting for 3.2 % of the GBV; a junior tranche, with no rating, for € 3 million, accounting for 0.6% of the overall GBV.

The capital structure, with senior notes with a BBB+ rating (1 notch higher than the requirement of the last GACS law) representing more than a fifth of the overall GBV, is an appreciable and significant result in the current market climate, affected by the negative repercussions of the rise in interest rates and the economic slowdown.