As anticipated, collections in SCIP2, the Italian real estate government securitization, fell short of new issue assumptions. Regardless, Fitch Ratings believes the deal is still relatively strong in the near term, at least.

The latest investor report for the deal showed quarterly collections were €255 million (US$310 million), just 15% of what was expected for that period. However, investors were warned earlier this year that a new law allowing for deeper discounts to tenants might delay the timeliness of collections going forward.

Since the April implementation of the decree, collections have shown slight signs of improvement, said market sources. But the portfolio performance remains well below the business plan. SCIP 2 has collected €1.1 billion (US$1.3 billion) to date versus the expected €5.4 billion (US$6.57 billion) outlined under the business plan.

The overall performance still remains within the stressed assumptions tested by Fitch, the rating agency said. If, in the next few quarters, the transaction does not return to previous trend levels, a ratings action might follow. At the moment the class C notes are looking most vulnerable.

"At a collections rate of €300 million (US$365 million) per quarter, the final cash flows of the C tranche will be very close to the legal final," reported analysts at JPMorgan Securities.

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