DBRS Morningstar Assigns Provisional Ratings to Sunrise SPV Z80 S.r.l. – Sunrise 2019-2

DBRS Ratings Limited (DBRS Morningstar) assigned provisional ratings to the Class A, Class B, Class C, Class D and Class E Notes (the Rated Notes and together with the unrated Class M Notes, the Notes) to be issued by Sunrise SPV Z80 S.r.l. (the Issuer) – as Sunrise 2019-2, 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
-- BBB (low) (sf) to the Class D Notes
-- BB (high) (sf) to the Class E Notes

DBRS Morningstar will not rate the lowest-ranked Class M Notes.

The rating of the Class A Notes addresses the timely payment of scheduled interest and ultimate repayment of principal by the legal final maturity date. The ratings of the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes address the ultimate payment of scheduled interest while subordinated but timely payment of scheduled interest as the most senior class and ultimate repayment of principal by the legal final maturity date.

The ratings will be finalised upon receipt of an execution version of the governing transaction documents. To the extent that the documents and information provided to DBRS Morningstar as of this date differ from the executed version of the governing transaction documents, DBRS Morningstar may assign different final ratings to the Rated Notes.

The Notes are expected to be 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 Morningstar’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 Morningstar’s expected default and recovery assumptions 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 DBRS Morningstar sovereign rating of the Republic of Italy, currently BBB (high).
-- The expected consistency of the transaction’s legal structure with DBRS Morningstar’s “Legal Criteria for European Structured Finance Transactions” methodology and the presence of legal opinions that are expected to address the true sale of the assets to the Issuer.

The transaction cash flow structure was analysed in Intex DealMaker.

Notes:
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 Morningstar 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 “Global Methodology for Rating Sovereign Governments” methodology at: https://www.dbrs.com/research/350410/global-methodology-for-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 Morningstar received quarterly static default data from Q1 2004 to Q2 2019, quarterly static recovery data from Q1 2001 to Q2 2019, monthly dynamic arrears and default data from June 2008 to June 2019, and static prepayment rates by annual vintages from 2003 to 2019. DBRS Morningstar also received a set of stratification tables in relation to the loan pool as of 31 August 2019 and its related contractual amortisation profile.

DBRS Morningstar did not rely upon third-party due diligence in order to conduct its analysis.

DBRS Morningstar was not supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS Morningstar considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.

DBRS Morningstar 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 Morningstar ratings on these financial instruments.

Information regarding DBRS Morningstar 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 Morningstar considered the following stress scenarios, as compared to the parameters used to determine the rating (the Base Case):

-- 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 Morningstar concludes that the expected ratings under the eight stress scenarios are:

-- Class A Notes: A (high) (sf), A (sf), AA (sf), A (sf), A (low) (sf), AA (sf), (A) (sf), A (low) (sf);
-- Class B Notes: A (low) (sf), BBB (high) (sf), A (sf), BBB (high) (sf), BBB (sf), A (sf), BBB (high) (sf), BBB (sf);
-- Class C Notes: BBB (sf), BB (high) (sf), BBB (high) (sf), BBB (low) (sf), BB (high) (sf), BBB (high) (sf), BBB (low) (sf), BB (high) (sf);
-- Class D Notes: BB (high) (sf), BB (low) (sf), BB (high) (sf), BB (sf), B (high) (sf), BB (high) (sf), BB (sf), B (high) (sf);
-- Class E Notes: BB (low) (sf), B (sf), BB (sf), B (high) (sf) B (low) (sf), BB (sf), B (high) (sf), B (low) (sf).

For further information on DBRS Morningstar 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, Global Structured Finance
Rating Committee Chair: Christian Aufsatz, Managing Director, Head of European Structured Finance
Initial Rating Date: 15 October 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
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators
-- Derivative Criteria for European Structured Finance Transactions
-- Interest Rate Stresses for European Structured Finance Transactions

A description of how DBRS Morningstar 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 info@dbrs.com.