DBRS Ratings Limited (DBRS Morningstar) assigned ratings of A (high) (sf) and BBB (sf), to the Class A 2020-1 Notes and Class B 2020-1 notes, respectively, issued by Golden Bar (Securitisation) S.r.l., Series 2020-1 (the Issuer). DBRS Morningstar does not rate the Class Z Notes issued in this transaction.
The ratings of the Class A 2020-1 and the Class B 2020-1 notes address the timely payment of interest and the ultimate repayment of principal by the legal maturity date, in accordance with terms of the notes.
The transaction represents the issuance of the Class A 2020-1, the Class B 2020-1, and the Class Z 2020-1 notes backed by a portfolio of approximately EUR 746 million of fixed-rate receivables related to personal loans, fully amortising auto loans, auto loans with an optional, final balloon payment and other purpose loans granted by Santander Consumer Bank S.p.A. (the originator) to private individuals residing in the Republic of Italy. The originator will also service the portfolio.
The ratings are based on DBRS Morningstar’s review of the following analytical considerations:
-- The transaction capital structure, including form and sufficiency of available credit enhancement.
-- Credit enhancement levels are sufficient to support DBRS Morningstar’s projected expected net losses under various stress scenarios.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms of the notes.
-- The seller, originator, and servicer’s capabilities with respect to originations, underwriting, servicing and financial strength.
-- DBRS Morningstar’s operational risk review of Santander Consumer Bank S.p.A., which it deemed to be an acceptable originator and servicer.
-- The transaction parties’ financial strength with regard to their respective roles.
-- The credit quality, diversification of the collateral and historical and projected performance of the seller’s portfolio.
-- DBRS Morningstar’s sovereign rating of the Republic of Italy, at BBB (high) with Stable trend.
-- The consistency of the transaction’s legal structure with DBRS Morningstar’s “Legal Criteria for European Structured Finance Transactions” methodology, the presence of legal opinions that address the true sale of the assets to the Issuer and non-consolidation of the Issuer with the seller.
The transaction includes a 24-month revolving period during which time the originator may offer additional receivables that the Issuer will purchase provided that eligibility criteria and concentration limits set out in the transaction documents are satisfied. The revolving period may end earlier than scheduled if certain events occur, including the breach of performance ratios or concentration.
The transaction allocates payments on separate interest and principal priorities and benefits from an amortising EUR 8.5 million cash reserve funded through a subordinated loan.
The cash reserve can be used to cover senior costs, interest on the Class A 2020-1 and Class B 2020-1 notes thus providing liquidity support during the life of the transaction. The reserve amortises in line with the rated notes and has to be maintained at 1.25% of their aggregated principal amount outstanding, with a floor of 0.15% of the rated notes’ initial principal balance.
A setoff reserve is expected to be funded by the originator if the rating of the servicer’s owner, Santander Consumer Finance S.A., falls below BBB or it ceases to own 100% of the share capital of the originator.
The repayment of the notes occurs on a fully sequential basis with senior notes repaid in priority.
The notes pay fixed interest rate, and the portfolio also pays fixed-interest rate.
Banco Santander S.A. and Citibank N.A., Milan branch act as account bank for the transaction. Based on the DBRS Morningstar public rating of Banco Santander S.A. at A (high) / R-1 (mid) and the private rating of Citibank N.A. the downgrade provisions outlined in the transaction documents, and structural mitigants, DBRS Morningstar considers the risk arising from the exposure to either of the account banks to be consistent with the ratings assigned, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.
The transaction structure was analysed in Intex Dealmaker.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the rating 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” at: https://www.dbrs.com/research/350410/global-methodology-for-rating-sovereign-governments.
The sources of data and information used for these ratings include the originator, Santander Consumer Bank S.p.A., the originator’s owner, Santander Consumer Finance S.A., and the arranger, Banco Santander S.A.
DBRS Morningstar was provided with historical dynamic and static data on personal loans, durable loans, amortising new vehicle loans, and auto loans featuring an optional, final balloon payment including:
-- Static quarterly default data from Q1 2009 to Q4 2019 (as at October 2019) both considering all default events and excluding restructured loans from the analysis (for new auto with balloon loans data was only provided excluding restructured loans).
-- Static quarterly recovery data for all subsets from Q1 2009 to Q4 2019 (as at October 2019) (all data was produced excluding restructured loans).
-- Dynamic monthly delinquency and dynamic prepayment data covering January 2009 to October 2019 (all data was produced excluding restructured loans).
DBRS Morningstar was further provided with:
-- Detailed stratification tables and expected pool amortisation schedule related to the collateral portfolio selected by SCB as at 23 January 2020;
-- Dealer balloon concentration information showing all outstanding dealer balloon payments and their contractual timings of as at 23 January 2020;
-- Outstanding insurance exposures related to loans in the final pool as at 30 November 2019, and;
-- A legal memo drafted by the transaction counsel opining on the VFG auto loans with an optional, final balloon payment.
DBRS Morningstar did not rely upon third-party due diligence in order to conduct its analysis.
At the time of the initial rating DBRS Morningstar was supplied with third-party assessments. However, this did not impact the rating analysis.
DBRS Morningstar does not audit or independently verify the data or information it receives in connection with the rating process.
These ratings concern a newly issued financial instrument.
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:
-- Portfolio cumulative default (PD) used: Expected PD of 6.9%, a 25% and 50% increase on the applicable PD.
-- Recovery rate used: Expected recovery rate of 17.6%.
-- Loss given default (LGD) used: Expected LGD of 82.4%, a 25% and 50% increase on the applicable LGD.
Scenario 1: A 25% increase in the expected default rate.
Scenario 2: A 50% increase in the expected default rate.
Scenario 3: A 25% increase in the LGD.
Scenario 4: A 25% increase in the expected default rate and a 25% increase in the LGD.
Scenario 5: A 50% increase in the expected default rate and a 25% increase in the LGD.
Scenario 6: A 50% increase in the LGD.
Scenario 7: A 25% increase in the expected default rate and a 50% increase in the LGD.
Scenario 8: A 50% increase in the expected default rate and a 50% increase in the LGD.
DBRS Morningstar concludes that the expected ratings under the eight stress scenarios are, respectively:
-- Class A 2020-1 Notes: A (high) (sf), A (low) (sf), BBB (sf), A (sf), BBB (high) (sf), BBB (sf), A (sf), BBB (high) (sf), BBB (sf).
-- Class B 2020-1 Notes: BBB (sf), BBB (low) (sf), BB (sf), BBB (sf), BB (sf), B (high) (sf), BBB (sf), BB (sf), B (high) (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: Miklos Halasz, Senior Analyst
Rating Committee Chair: David Lautier, Senior Vice President
Initial Rating Date: 27 February 2020
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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
-- Rating European Structured Finance Transactions Methodology
-- Legal Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Originators
-- Operational Risk Assessment for European Structured Finance Servicers
-- 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 email@example.com.