DBRS Ratings Limited (DBRS) confirmed its ratings of the notes issued by Aurorus 2017 B.V. (the Issuer) as follows:
-- Class A Notes at AAA (sf)
-- Class B Notes at AA (sf)
-- Class C Notes at A (sf)
-- Class D Notes at BBB (sf)
-- Class E Notes at BB (sf)
-- Class F Notes at B (sf)
The ratings address the timely payment of interest and ultimate payment of principal on or before the legal final maturity date.
The confirmations follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of charge-off rates, principal payment rates and yield rates.
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions on the receivables.
-- Current available credit enhancement (CE) to the notes to cover the expected losses at their respective rating levels.
-- No revolving termination events have occurred.
Aurorus 2017 B.V. is a securitisation of unsecured credit cards, revolving credit facilities and instalment loans originated by Qander Consumer Finance B.V. in the Netherlands. The receivables are serviced by Qander, with Vesting Finance Servicing B.V. acting as the backup servicer. The transaction is currently in its revolving period, which is scheduled to end in August 2020.
As of July 2019, the monthly principal payment rate (MPPR) was 4.1%, the annualised yield rate was 7.7% and the annualised charge-off rate was 1.1%. Loans that were two- to three-month in arrears represented 0.2% of the outstanding portfolio balance, down from 0.3% in July 2018. The 90+ delinquency ratio was 0.1%, down from 0.2% in July 2018. The cumulative default ratio was 2.0% and the cumulative loss ratio was 1.9%.
DBRS maintained its base case charge-off rate at 5.5% for both revolving loans and credit cards. DBRS maintained its base case MPPR at 1.7% for revolving loans and 7.5% for credit cards. DBRS maintained its base case yield rate at 7.0% for revolving loans and 12.0% for credit cards. DBRS maintained its base case PD at 8.2% for fixed-term loans and its base case recovery rate of 25.0% for all portfolio subsets. Given the revolving period, the portfolio assumptions continue to be based on the worst-case portfolio composition.
CREDIT ENHANCEMENT AND RESERVES
Class A CE is 45.4%, Class B CE is 36.8%, Class C CE is 31.8%, Class D CE is 24.2%, Class E CE is 14.0% and Class F CE is 8.7% and has remained stable due to the revolving period. CE is provided by subordination of the junior notes.
The transaction benefits from a cash reserve funded to its target level of EUR 3.7 million, which covers shortfalls of senior fees, senior swap payments and interest on the Class A to D Notes. The reserve amortises to a target level of 1.5% of the sum of the outstanding Class A to D Notes, subject to a floor of EUR 250,000. The Pre-Funded Reserve is used to purchase further advance receivables and new loan receivables during the revolving period and is currently funded to EUR 4.7 million.
ABN AMRO Bank N.V. acts as the account bank for the transaction. Based on the account bank reference rating of ABN AMRO Bank N.V. at AA (low), which is one notch below the DBRS Long-Term Critical Obligations Rating of AA, the downgrade provisions outlined in the transaction documents and other mitigating factors inherent in the transaction structure, DBRS considers the risk arising from the 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.
BNP Paribas SA acts as the swap counterparty for the transaction. DBRS's Long-Term Critical Obligations Rating of BNP Paribas SA at AA (high) is above the First Rating Threshold 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 ratings is the “Master European Structured Finance Surveillance Methodology”. 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 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 these ratings include investor reports provided by Qander Consumer Finance B.V.
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 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.
The last rating action on this transaction took place on 14 August 2018, when DBRS confirmed its ratings of the Class A Notes, Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class F Notes at AAA (sf), AA (sf), A (sf), BBB (sf), BB (sf), B (sf), respectively.
Information regarding DBRS ratings, including definitions, policies and methodologies is available at www.dbrs.com.
To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios on revolving credit facilities, as compared to the parameters used to determine the rating (the Base Case):
-- Expected Charge-Off Rate: 5.5% for credit cards and 5.5% revolving loans
-- Expected MPPR: 1.7% for revolving loans and 7.5% for credit cards
-- Expected Yield Rate: 7.0% for revolving loans and 12.0% for credit cards
-- Scenario 1: 25% increase in the Expected Charge-Off Rate, 25% decrease in the Expected Yield Rate
-- Scenario 2: 25% increase in the Expected Charge-Off Rate, 25% decrease in the MPPR
-- Scenario 3: 25% decrease in the Expected Yield Rate, 25% decrease in MPPR
-- Scenario 4: 15% decrease in Expected Yield Rate, 15% decrease in Expected Principal Payment Rate, Expected Charge-Off Rate
DBRS concludes that the expected ratings under the stressed scenarios (1, 2, 3 and 4 respectively) are:
-- Class A Notes: AA (high) (sf), AA (high) (sf), AA (high) (sf), A (sf)
-- Class B Notes: A (high) (sf), A (high) (sf), A (high) (sf), BBB (sf)
-- Class C Notes A (low) (sf), BBB (high) (sf), A (sf), BB (high) (sf)
-- Class D Notes: BB (high) (sf), BB (high) (sf), BBB (low) (sf), BB (low) (sf)
-- Class E Notes: B (high) (sf), BB (low) (sf), BB (low) (sf), B (sf)
-- Class F Notes: B (sf), B (sf), B (sf), Below B (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: Clare Wootton, Senior Financial Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 19 July 2017
DBRS Ratings Limited
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Registered and incorporated under the laws of England and Wales: Company No. 7139960.
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
-- Operational Risk Assessment for European Structured Finance Servicers
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Interest Rate Stresses for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Originators
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.