Algebra brings Portuguese NPL ABS

Algebra Capital is in the market with an unusual Portuguese non-performing loan ABS. Dubbed Scalabis STC (compartment Panda), the securitisation is backed by a €1.47bn portfolio that was acquired through two investment vehicles – LX Investment Partners II and III – from Banco BPI, Banco Comercial Português, Caixa Geral de Depósitos, Caixa Leasing e Factoring and Novo Banco between 2019 and 2021.

The pool comprises five corresponding sub-portfolios - BCP-04, NB-01, CGD-01, BPI-01 and BCP-06 – with a gross book value of approximately €1.9bn. The assets are predominantly unsecured loans, representing approximately 90.5% of the GBV, with secured loans - including loans with associated cash in court - representing the remaining 9.5%.

The loans were granted to corporates and SMEs (representing 65.9% of the pool), as well as to individuals (34.1%). The secured loans are backed by residential and non-residential properties that are concentrated in the Lisbon district.

Rated by DBRS and Scope, the capital structure comprises €80m BBB/BBB rated class A notes (which will pay three-month Euribor plus 2%), €25m unrated class Bs (6% fixed) and €20m unrated class Js. The class B interest rate payments rank senior to class A principal, they will be subordinated if the cumulative amounts collected are 10% below the business plan or if the present value cumulative profitability ratio falls below 90%.

There is also an equity leakage feature, which allows for a pre-amortisation of class B using up to 10% of the issuer remaining funds after the payments of class A and B interests, as well as class A principal, in case the transaction is performing above 110% of the business plan.

The servicer (Algebra) has already reached a number of agreements or payment plans with 2,219 borrowers. Although these loans represent only a small share of the portfolio’s outstanding balance (3.3%), they consist of more regular flows of recovery amounts totalling 14.5% of class A gross collections, according to Scope.

The transaction benefits from a cash reserve, sized at 3% of the principal outstanding of the class A notes, and a recovery expenses cash reserve of €50,000 – both of which are fully funded with part of the proceeds from the initial collections. The final maturity date of the transaction is October 2075.

Angela Sharda