DBRS Ratings Limited (DBRS) finalised its provisional ratings on the Class A, Class B and Class C Notes (the Rated Notes, and together with the unrated Class M1/M2 Notes, the Notes) issued by Sunrise SPV Z70 S.r.l. (the Issuer) – as Sunrise 2019-1, as follows:
-- AA (high) (sf) to the Class A Notes
-- A (high) (sf) to the Class B Notes
-- BBB (high) (sf) to the Class C Notes
The Notes are backed by a pool of receivables related to consumer loan contracts originated by Agos Ducato S.p.A. (Agos), a leading consumer finance company in Italy.
The ratings are based upon DBRS’s review of the following analytical considerations:
-- The transaction capital structure including the form and sufficiency of available credit enhancement.
-- Credit enhancement levels are sufficient to support DBRS’s expected defaults and recoveries under various stress scenarios.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay the Rated Notes according to the terms under which the Rated Notes have been issued.
-- The capabilities of Agos with respect to originations, underwriting, servicing and financial strength.
-- The sovereign rating of the Republic of Italy, currently rated BBB (high) with a Stable trend by DBRS.
-- The consistency of the transaction’s legal structure with DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology and the presence of legal opinions that address the true sale of the assets to the Issuer
The transaction cash flow structure was analysed in Intex DealMaker.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the ratings is “Rating European Consumer and Commercial Asset-Backed Securitisations”.
DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.
An asset and a cash flow analysis were both conducted. Due to the inclusion of a revolving period in the transaction, the analysis is based on the worst-case replenishment criteria set forth in the transaction legal documents.
Other methodologies referenced in this transaction are listed at the end of this press release.
These may be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies.
For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Rating Sovereign Governments” methodology at: https://www.dbrs.com/research/333487/rating-sovereign-governments.
The sources of data and information used for these ratings include performance data relating to the receivables provided by Agos directly or through the arrangers, Banca Akros S.p.A. and Crédit Agricole Corporate and Investment Bank.
DBRS received historical gross default and recovery data relating to Agos originations by quarterly vintages on a cumulative basis dating back to Q1 2004 and Q1 2001, respectively. Data was also provided relating to delinquencies and prepayments. A detailed summary and an amortisation schedule were provided for the portfolio selected by Agos as at 31 March 2019 that allowed DBRS to further assess the collateral.
DBRS did not rely upon third-party due diligence in order to conduct its analysis.
DBRS was supplied with third-party assessments. However, this did not impact the rating analysis.
DBRS considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.
DBRS does not audit or independently verify the data or information it receives in connection with the rating process.
These ratings concern newly issued financial instruments. These are the first DBRS ratings on these financial instruments.
Information regarding DBRS ratings, including definitions, policies and methodologies, is available on www.dbrs.com.
To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating:
-- Expected default of 7.9%, a 25% and 50% increase.
-- Expected loss given default (LGD) of 86.5%: a 25% and 50% increase.
Scenario 1: A 25% increase in the expected default.
Scenario 2: A 50% increase in the expected default.
Scenario 3: A 25% increase in the expected LGD.
Scenario 4: A 25% increase in the expected default and 25% increase in the expected LGD.
Scenario 5: A 50% increase in the expected default and 25% increase in the expected LGD.
Scenario 6: A 50% increase in the expected LGD.
Scenario 7: A 25% increase in the expected default and 50% increase in the expected LGD.
Scenario 8: A 50% increase in the expected default and 50% increase in the expected LGD.
DBRS concludes that the expected ratings under the eight stress scenarios are:
-- Class A Notes: AA (low) (sf), A (sf), AA (high) (sf), A (high) (sf), A (sf), AA (high) (sf), A (high) (sf), A (sf)
-- Class B Notes: A (low) (sf), BBB (high) (sf), A (high) (sf), A (low) (sf), BBB (high) (sf), A (high) (sf), A (low) (sf), BBB (high) (sf)
-- Class C Notes: BBB (sf), BB (high) (sf), BBB (high) (sf), BBB (low) (sf), BB (sf), BBB (high) (sf), BBB (low) (sf), BB (sf)
For further information on DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.
Ratings assigned by DBRS Ratings Limited are subject to EU and US regulations only.
Lead Analyst: Jeffrey Cespon, Senior Financial Analyst, European ABS – Global Structured Finance
Rating Committee Chair: Tim O'Neil, Managing Director - Head of Canadian Structured Finance
Initial Rating Date: 8 May 2019
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The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Legal Criteria for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators
-- Interest Rate Stresses for European Structured Finance Transactions
A description of how DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375
For more information on this credit or on this industry, visit www.dbrs.com or contact us at email@example.com.