DBRS Finalises Provisional Ratings of AAA (sf) and A (high) (sf) on Sunrise S.r.l. - Series 2016-2

DBRS Ratings Limited (DBRS) has today finalised provisional ratings on the following notes issued by Sunrise S.r.l. – Series 2016-2 (the Issuer):

-- AAA (sf) on the Class A1 Notes
-- AAA (sf) on the Class A2 Notes
-- A (high) (sf) on the Class M Notes (collectively, the Senior Notes)

The lowest-ranked Class J Notes are not be rated by DBRS.

The notes are 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’s review of the following analytical considerations:

-- The sufficiency of available credit enhancement in the form of subordination (42.4% for the Class A Notes and 25.9% for the Class M Notes), various reserves and excess spread.
-- The ability of the transaction’s structure and triggers to withstand stressed cash flow assumptions and repay the Senior Notes according to the terms of the transaction documents.
-- The capabilities of Agos with respect to originations, underwriting and servicing.
-- The legal structure and presence of legal opinions addressing the assignment of the assets to the issuer and the consistency with DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

The transaction was modelled in Intex DealMaker and the default rates at which the Senior Notes did not return all specified cash flows in a timely manner were determined.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is Rating Consumer and Commercial Asset Backed Securitisations.

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.

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 DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.

The sources of information used for this rating include performance data relating to the receivables provided by Agos directly or through the arrangers, Banca Aletti S.p.A. and Credit Agricole Corporate and Investment Banking. DBRS received historical gross default and recovery data relating to Agos originations by quarterly vintages on a cumulative basis dating back to 2004 and 2001, respectively. Data was also provided relating to delinquencies and prepayments. A detailed summary and an amortisation schedule were provided for the portfolio selected by Agos as at 30 September 2016 that allowed DBRS to further assess the collateral.

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

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

DBRS considers the information available to it for the purposes of providing this rating to be of satisfactory quality.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

These ratings concern newly issued financial instruments. This is the first DBRS rating on these financial instruments.

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):

-- Probability of default (PD): base case of 9.4%, a 25% and 50% increase on the Base Case PD.
-- Loss given default (LGD): base case of 88%, increase to 90% and 100%.

DBRS concludes that for the Class A Notes:
-- A hypothetical LGD of 88%, ceteris paribus, would maintain the rating of the Class A Notes at AAA (sf).
-- A hypothetical LGD of 90%, ceteris paribus, would maintain the rating of the Class A Notes at AAA (sf).
-- A hypothetical LGD of 100%, ceteris paribus, would result in a downgrade of the rating of the Class A Notes to AA (high) (sf).
-- A hypothetical increase of the base case PD by 25% and a hypothetical LGD of 88%, ceteris paribus, would result in a downgrade of the rating of the Class A Notes to AA (sf).
-- A hypothetical increase of the base case PD by 25% and a hypothetical LGD of 90%, ceteris paribus, would result in a downgrade of the rating of the Class A Notes to AA (sf).
-- A hypothetical increase of the base case PD by 25% and a hypothetical LGD of 100%, ceteris paribus, would result in a downgrade of the rating of the Class A Notes to AA (sf).
-- A hypothetical increase of the base case PD by 50% and a hypothetical LGD of 88%, ceteris paribus, would result in a downgrade of the rating of the Class A Notes to AA (low) (sf).
-- A hypothetical increase of the base case PD by 50% and a hypothetical LGD of 90%, ceteris paribus, would result in a downgrade of the rating of the Class A Notes to AA (low) (sf).
-- A hypothetical increase of the base case PD by 50% and a hypothetical LGD of 100%, ceteris paribus, would result in a downgrade of the rating of the Class A Notes to A (high) (sf).

DBRS concludes that for the Class M Notes:
-- A hypothetical LGD of 88%, ceteris paribus, would maintain the rating of the Class B Notes at A (high) (sf).
-- A hypothetical LGD of 90%, ceteris paribus, would maintain the rating of the Class B Notes at A (high) (sf).
-- A hypothetical LGD of 100%, ceteris paribus, would maintain the rating of the Class B Notes at A (high) (sf).
-- A hypothetical increase of the base case PD by 25% and a hypothetical LGD of 88%, ceteris paribus, would result in a downgrade of the rating of the Class B Notes to A (sf).
-- A hypothetical increase of the base case PD by 25% and a hypothetical LGD of 90%, ceteris paribus, would result in a downgrade of the rating of the Class B Notes to A (sf).
-- A hypothetical increase of the base case PD by 25% and a hypothetical LGD of 100%, ceteris paribus, would result in a downgrade of the rating of the Class B Notes to A (sf).
-- A hypothetical increase of the base case PD by 50% and a hypothetical LGD of 88%, ceteris paribus, would result in a downgrade of the rating of the Class B Notes to A (low) (sf).
-- A hypothetical increase of the base case PD by 50% and a hypothetical LGD of 90%, ceteris paribus, would result in a downgrade of the rating of the Class B Notes to A (low) (sf).
-- A hypothetical increase of the base case PD by 50% and a hypothetical LGD of 100%, ceteris paribus, would result in a downgrade of the rating of the Class B Notes to BBB (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 Limited are subject to EU regulations only.

Lead Analyst: Kevin Chiang, Senior Vice President, Global Structured Finance
Rating Committee Chair: Chuck Weilamann, Managing Director, Head of US ABS, Global Structured Finance
Initial Rating Date: 10 November 2016

DBRS Ratings Limited
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Registered in England and Wales: No. 7139960

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

-- Rating Consumer and Commercial Asset Backed Securitisations
-- Legal Criteria for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators
-- Unified Interest Rate Model for European 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.