Press Release

DBRS Morningstar Upgrades and Confirms Ratings on Sunrise SPV Z90 S.r.l. - Sunrise 2020-1 Following Amendment

Consumer Loans & Credit Cards

June 26, 2023

DBRS Ratings GmbH (DBRS Morningstar) took the following rating actions on the Class A and Class B Notes (the rated notes) issued by Sunrise SPV Z90 S.r.l. - Sunrise 2020-1 (the Issuer):
-- Class A Notes confirmed at AAA (sf)
-- Class B Notes upgraded to AA (high) (sf) (sf) from AA (low) (sf)

The rating on the Class A Notes addresses the timely payment of scheduled interest and the ultimate repayment of principal by the legal final maturity date of 27 October 2045. The rating on the Class B Notes addresses the ultimate payment of interest but the timely payment of scheduled interest when they are the most senior tranche, and the ultimate repayment of principal by the legal final maturity date.

The rating actions follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults, and losses, as of the May 2023 payment date;
-- An amendment to the transaction executed on 19 June 2023, which primarily includes an 18 month extension of the revolving period until the initial amortisation date falling in January 2025 (the Amendment).
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions considering the potential portfolio migration based on replenishment criteria set forth in the transaction legal documents;
-- The nonoccurrence of any early termination event to date; and
-- Current available credit enhancement to the rated notes to cover the expected losses at their respective rating levels.

The transaction is a securitisation of unsecured Italian consumer loan receivables granted to retail clients and originated and serviced by Agos Ducato S.p.A. The initial EUR 1.1 billion portfolio comprised new and used automobile loans, personal loans, furniture loans, and other-purpose loans. The transaction closed on 10 June 2020, and had an initial 18-month revolving period, set to end on the November 2021 payment date. Following an amendment in November 2021, the revolving period was extended by 19 months until June 2023. With the current Amendment, it has been further extended for another 18 months until January 2025. Concentration limits are in place to mitigate any negative evolution of the portfolio, and performance triggers are included in the revolving period termination events. To date, all triggers have been met.

PORTFOLIO PERFORMANCE
As of the May 2023 payment date, loans that were one to two months and two to three months delinquent represented 0.4% and 0.2% of the portfolio balance, respectively, while loans more than three months delinquent represented 0.4%. Gross cumulative defaults amounted to 1.5% of the aggregate original and subsequent portfolios, 6.3% of which has been recovered to date.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar received updated historical vintage data from the originator and updated its base case PD and LGD assumptions to 5.2% and 90.2% from 6.7% and 88.6% respectively, at the time of the last rating action on the transaction. The analysis continues to consider the replenishment criteria set forth in the transaction legal documents. The improved PD assumptions as a result of the updated historical vintage data prompted the upgrades on the Class B Notes.

CREDIT ENHANCEMENT
The subordination of the respective junior notes and the cash reserve provides credit enhancement to the rated notes.
As of the May 2023 payment date, credit enhancement to the Class A and Class B Notes was 34.8% and 24.8%, respectively, stable since DBRS Morningstar’s initial rating because of the revolving period.

The transaction benefits from several funded reserves. The nonamortising payment interruption risk reserve account has a current balance of EUR 5.7 million and is available to cover senior expenses and interest payments on the rated notes, providing liquidity support to the transaction.

Credit support is provided through an amortising cash reserve with a target balance equal to 2.5% of the outstanding performing collateral principal. The cash reserve is currently at its target balance of EUR 28.6 million and can be used to offset the principal losses of defaulted receivables. The transaction structure also provisions for a Rata Posticipata cash reserve, which mitigates the liquidity risk arising from flexible loans. This reserve will only be funded if, for two consecutive payment dates, the outstanding balance of the flexible loans in relation to which the debtors have exercised the contractual right to postpone the payments is higher than 5.0% of the outstanding balance of all flexible loans. As of the April 2023 payment date, this condition had not been met.

Crédit Agricole Corporate & Investment Bank, Milan branch (CACIB Milan) acts as the account bank for the transaction. Based on the DBRS Morningstar private rating on CACIB Milan, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS Morningstar considers the risk arising from the exposure to the account bank to be consistent with the ratings assigned to the rated notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the “DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings” at: https://www.dbrsmorningstar.com/research/396929.

DBRS Morningstar analysed the transaction structure in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is: “Master European Structured Finance Surveillance Methodology” (7 February 2023), https://www.dbrsmorningstar.com/research/409485/master-european-structured-finance-surveillance-methodology.

Other methodologies referenced in this transaction are listed at the end of this press release.

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 continues to consider potential portfolio migration based on 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.

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 Morningstar Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrsmorningstar.com/research/401817/global-methodology-for-rating-sovereign-governments.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

The sources of data and information used for these ratings include investor reports provided by CACIB Milan and loan-level data provided by European DataWarehouse GmbH. Additionally, in the context of a new transaction from the same originator, DBRS Morningstar was provided with updated historical performance data as follows:
-- Quarterly static default data from Q1 2004 to Q4 2021;
-- Quarterly static recovery data from Q1 2001 to Q4 2021;
-- Static prepayment rates by annual vintages from 2003 to 2021; and
-- Monthly dynamic delinquency data from June 2008 to December 2021.

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

At the time of the initial ratings, DBRS Morningstar was 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.

The last rating action on this transaction took place on 28 November 2022, when DBRS Morningstar confirmed its ratings on the Class A and Class B Notes at AAA (sf) and AA (low) (sf), respectively.

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available on www.dbrsmorningstar.com.

Sensitivity Analysis: To assess the impact of changing the transaction parameters on the ratings, DBRS Morningstar considered the following stress scenarios as compared with the parameters used to determine the ratings (the base case):
-- DBRS Morningstar expected a lifetime base case PD and LGD for the pool based on a review of the current assets. Adverse changes to asset performance may cause stresses to base case assumptions and therefore have a negative effect on credit ratings.
-- The base case PD and LGD of the current pool of loans for the Issuer are 5.2% and 90.2%, respectively.
-- The risk sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base case assumption. For example, if the LGD increases by 50%, the rating of the Class A Notes would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A Notes would be expected to fall to AA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected to fall to AA (low) (sf).

Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf)

Class B Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD, expected rating of AA (high) (sf)
-- 50% increase in PD, expected rating of AA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (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: https://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. For further information on DBRS Morningstar historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

These ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Preben Cornelius Overas, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 10 June 2020

DBRS Ratings GmbH
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60311 Frankfurt am Main Deutschland
Tel. +49 (69) 8088 3500
Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://www.dbrsmorningstar.com/research/278375

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.

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