DBRS Ratings GmbH (DBRS) confirmed the A (high) (sf) rating on the Class A Notes issued by Geldilux-TS-2015 S.A. (the Issuer).
The rating on the Class A Notes addresses the timely payment of interest and the ultimate payment of principal on or before the legal final maturity date in December 2024.
The confirmation follows an annual review of the transaction and is based on the following analytical considerations:
-- Portfolio performance in terms of delinquencies and defaults, as of the April 2019 payment date.
-- Base-case probability of default (PD) and updated default and recovery rates on the remaining collateral pool.
-- The credit enhancement (CE) available to the Class A Notes to cover the expected losses at the A (high) (sf) rating level.
The transaction is a cash-flow-revolving securitisation collateralised by a portfolio of short-term loans (maturities ranging from a few days to one year) to large corporates, small- and medium-sized enterprises, entrepreneurs, self-employed individuals and private individuals in Germany. The loans are originated under the UniCredit EGON Loan Program (EGON), whereby the loans (bullet in interest and principal) are arranged by UniCredit Bank AG (UCB; the Originator) and extended by UniCredit Luxembourg S.A. (UCL or the Seller), which merged with UCB in July 2018.
The transaction closed in July 2015 and includes a revolving period scheduled to end in June 2022 (it was extended following a restructuring last year), during which the Seller has the option to sell new EGON loans to the Issuer. Given the short-term nature of the loans, the portfolio is replenished on a daily basis using the same random procedure used at closing, subject to loan Eligibility Criteria and Portfolio Limits. The purchase price of new loans is usually paid by setting off the principal proceeds collected by the Transaction Servicer and Servicer (UCL and UCB, respectively) during the previous day. To date, all performance and replenishment triggers have passed.
PORTFOLIO PERFORMANCE AND ASSUMPTIONS
The portfolio’s performance remains stable since the last review. As of the 31 May 2019 payment date, the cumulative defaulted loans ratio (more than 29 days overdue) was 0.08%. As the transaction is still revolving and the performance remains within DBRS’s expectation, DBRS maintained the base-case PD rate assumption for the collateral pool at 1.42%.
The CE of the Class A notes is provided in the form of subordination and remains at 14.5% — the same as last year — due to the revolving period.
Citibank N.A., London Branch is the main Account Bank provider of the transaction. Based on the private rating of the Account Bank, the downgrade provisions outlined in the transaction documents and structural mitigants, DBRS considers the risk arising from exposure to the Account Bank to be consistent with the rating assigned to the Class A Notes, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology.
UniCredit Bank AG, Luxembourg Branch replaced UCL as swap counterparty to the transaction following the merger of UCL and UCB. The DBRS private rating of UCB meets the swap counterparty rating requirements, given the rating assigned to the Class A Notes, as described in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology.
The transaction structure was analysed in DBRS’s proprietary excel-based cash flow engine.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the rating is: “Rating CLOs Backed by Loans to European SMEs”.
DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the surveillance section of 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 continues to be based on the worst-case replenishment criteria set forth in the transaction legal documents.
A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent rating action.
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: http://dbrs.com/research/333487/rating-sovereign-governments.pdf.
The sources of data and information used for this rating include reports and information provided by UniCredit Bank AG and loan-by-loan data from European DataWarehouse GmbH.
DBRS did not rely upon third-party due diligence in order to conduct its analysis.
At the time of the initial rating, 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 this rating to be of satisfactory quality.
DBRS does not audit or independently verify the data or information it receives in connection with the rating process.
The last rating action on this transaction took place on 19 July 2018 when DBRS confirmed the rating on the Class A Notes at A (high) (sf) after a transaction restructuring.
The lead analyst responsibilities for this transaction have been transferred to Alfonso Candelas.
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 (the Base Case):
-- PD Rates Used: Base-case PD of 1.42%, a 10% increase of the base case and a 20% increase of the base-case PD.
-- Recovery Rates Used: Base-case recovery rates of 26.25% at the A (high) (sf) stress level for the Class A Notes, a 10% and 20% decrease in the base-case recovery rates. Note that the percentage decreases in the recovery rates are assumed for the other stress recovery-rate levels.
DBRS concludes that a hypothetical increase of the base-case PD by 20% or a hypothetical decrease of the recovery rate by 20%, ceteris paribus, would lead to a confirmation of the Class A Notes at A (high) (sf). A scenario combining both an increase in the base-case PD by 10% and a decrease in the base-case recovery rate by 10%, ceteris paribus, would also lead to a confirmation of the Class A Notes at A (high) (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 GmbH are subject to EU and U.S. regulations only.
Lead Analyst: Alfonso Candelas, Senior Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 30 July 2015
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The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies.
-- Legal Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Rating CLOs Backed by Loans to European SMEs
-- Rating CLOs and CDOs of Large Corporate Credit
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators
-- Interest Rate Stresses for European Structured Finance Transactions
-- Cash Flow Assumptions for Corporate Credit Securitisations
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.