Fitch Ratings has affirmed Hoist Finance AB (publ) France's (Hoist France) Residential and Asset-Backed Special Servicer Ratings at 'RSS2' and 'ABSS2+', respectively.
The agency has also assigned both ratings Stable Outlooks.
The rating actions follow Fitch's full review of the servicer's business and operations, which have demonstrated that the servicer continues to perform its activities at a high standard.
RATING ACTIONS
Entity / Debt
Rating
Prior
Hoist Finance AB (publ) France
ABS Special Servicer
ABSS2+
Affirmed
ABSS2+
RMBS Special Servicer
RSS2
Affirmed
RSS2
Page
of 1
VIEW ADDITIONAL RATING DETAILS
Key Rating Drivers
Hoist France is a branch of Hoist Finance AB (the group) and has been special servicing unsecured loans since 2004. The residential non-performing loan (NPL) special servicing activities were launched more recently in 2018. The additional company experience in servicing residential NPLs since Fitch's previous review in 2020 has resulted in a small improvement in the relevant section of the agency's scoring matrix, while the score for the other secured and unsecured scorecard remains stable.
In April 2022, the group divested Hoist Finance UK. Fitch understands that the decision was driven by regulatory changes to capital requirements for unsecured portfolios, as well as the group's strategic reasons linked to market maturity. Historically the agency considered Hoist branches to be operationally integral and strategically important to the parent's business. While the group support and operational ties remain between the parent and Hoist France, the sale of the UK entity, which at the previous review held the largest percentage (26%) of the group's assets under management (AUM) indicates that Fitch can no longer assume that group support to Hoist France, which currently holds 10% of the group's AUM, is long term. Consequently, the parental support score of Fitch's scoring matrices has deteriorated to a '2' rating category from '1' at the previous review.
Fitch notes that there are still 65 Hoist group employees based in the UK providing support functions, such as IT and analytics. The group continues to look at the UK market, as evidenced by the recent acquisition of a portfolio in April 2022.
Hoist France acts as sole servicer for the French portfolio acquired by the group. It also supports the parent during the investment process by performing various activities, including due diligence, analysis, evaluations and recovery forecasts. As at 31 March 2022, Hoist France's residential special servicing portfolio consisted of 4,209 loans (30 June 2020: 4,415) with a value of EUR319.4 million (30 June 2020: EUR377.6million). The unsecured special servicing portfolio consisted of 538,259 accounts (30 June 2020: 765,500) with a value of EUR1.6 billion (30 June 2020: EUR1.5 billion). Fitch notes that Hoist Finance AB has invested more than EUR350 million in the last five years in France.
At the previous review, there were seven senior managers led by the country manager. The country manager has changed role and is now a group resource. A new country manager joined the Hoist group in 2014 and took on the current role in June 2021. The country manager has six direct reports (excluding group resource). The senior management team's average company tenure remains four years, and is commensurate with the '4' rating category.
Furthermore, three of the seven senior managers at previous review have left the servicer, as well as five middle managers who left in the 12 months leading to the data cut-off date. The combination of the senior and middle manager departures has led to an increase in the Fitch-calculated annualised management turnover rate to 17.0% from 8.6% at the previous review, making it commensurate with the '4' rating category (compared with '3' at the previous review).
Since our previous review, Hoist France has restructured its organisation, leading to fewer middle managers. Most of the previous middle managers remain with the company, but some have had their reporting lines changed. As at the cut-off date, there were 12 middle managers who directly report to a senior manager and have staff management responsibilities. The team's company tenure averages 4.8 years (up from 2.3 at the previous review), which is commensurate with the '3' rating category.
Hoist France employs 105 operational staff (excluding managers and group resources). The industry experience of the teams managing both residential and other secured and unsecured loans has improved marginally compared with the previous review, but remains commensurate with the '2' rating category.
Two residential and 29 unsecured operational staff (excluding managers) left in the 12 months to the cut-off date, resulting in a Fitch-calculated annualised staff turnover rates of 3.1% and 28% respectively. As such the scoring of the turnover metrics for operational staff remains unchanged to the previous review.
Since our previous review, Hoist has also changed its staffing strategy. In July 2020, Hoist France opened an office for amicable collections in Bucharest, which at the previous review employed 18 staff. However, in April 2022 the servicer decided to shift strategy and centralise teams, leading to the closure of the Romanian office. Fitch understands that many of the employees in Bucharest were students and therefore unable to work full time, making the business case for the office non-viable. As at July 2022, all the roles from Romania were filled in France, without any disruptions to the servicing of the accounts.
Hoist France operates a three-lines-of-defence risk management framework, with processes and controls commensurate with the '2' rating category. The first line includes two person checks and call quality assessments carried out by a dedicated quality assurance team and supported by the operational teams. Fitch has seen the reporting and dashboards used for monitoring activities across the operations and considers them robust, leading to a marginal increase in the scoring of the technology and dashboard section of the scoring matrices, which is now commensurate with the '1' rating category.
The second line is the compliance and risk teams that report to the group. The processes and controls of the teams are unchanged from the previous review. The third line of defence is the internal audit, carried out by the group. Fitch has seen the audit reports, which identified some high-risk findings that were outstanding at the data cut-off date.
In the 12 months leading to the data cut-off Hoist France boarded two portfolios valued at EUR80.3 million and 2,964 individual loans from forward flow agreements that totalled EUR3.7 million. The boarding of all loans and portfolios was completed in seven days. Fitch views Hoist France's new loan set-up process as efficient, as it is highly automated. The process uses pre-defined templates, limiting the exposure to errors and delays in portfolio boarding.
In 2020, Hoist France implemented Autorek, a financial tool used for account changes i.e. debits or credits. The tool automatically allocates the change to the customer account and reconciles the amount to the bank and collection system. Reporting at Hoist is fully automated and the intra-group reporting function uses pre-agreed templates. Overall Fitch deems the loan administration processes and controls at Hoist France commensurate with the '1' rating category.
Defaulted loan management processes and controls at Hoist France remain proactive and commensurate with the '2' rating category. In determining the optimal recovery route, the servicer focuses on the borrower's circumstances to determine their affordability. The loan asset manager will refer to internal and external sources in order to obtain all available loan, asset and borrower information. As at the previous review, the process remains less automated than Fitch-rated servicers scoring in the '1' rating category. However, appropriate controls remain in place, with the oversight of a senior management committee.
Hoist France's servicing platforms are well integrated with the key proprietary system. The system has a good level of automation and includes robotic technologies. However, Hoist France was unable to provide Fitch with full information on the use of these tools, which has limited the agency's ability to assess their efficacy.
Hoist France has good cybersecurity procedures, with appropriate password controls, encryption, anti-virus and firewalls controls. The latter are assessed in weekly vulnerability and penetration tests. The servicer has good business continuity procedures and disaster recovery plans, which are tested annually with the most recent tests performed in March 2022 and February 2022, respectively. Both tests resulted in no findings.
The rating commentary is based on information provided to Fitch as of end-March 2022, unless stated otherwise.
Additional information is available on www.fitchratings.com
PARTICIPATION STATUS
The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer's available public disclosure.
HOIST FINANCE AB 
