DBRS Assigns Provisional Ratings of AAA (sf) and AA (low) (sf) to Sunrise S.r.l -Series 2017-1

DBRS Ratings Limited (DBRS) has today assigned provisional ratings to the following notes to be issued by Sunrise S.r.l. – Series 2017-1 (the Issuer):

-- AAA (sf) on the Class A1 Notes,
-- AAA (sf) on the Class A2 Notes (together with the Class A1 Notes, the Class A Notes) and
-- AA (low) (sf) on the Class M Notes (collectively, the Senior Notes).

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

The Senior Notes and Class J 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’s review of the following analytical considerations:

-- The sufficiency of available credit enhancement in the form of subordination (41.4% for the Class A Notes and 24.6% 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, and its financial strength.
-- 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 above-mentioned ratings are provisional. 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 as of today’s date differ from the executed version of the governing transaction documents, DBRS may assign a different final rating to the Senior Notes or may avoid assigning a final rating to the Senior Notes altogether.

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

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. Due to the inclusion of a revolving period in the transaction, the analysis for new ratings continues to be 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 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 data and 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 Crédit Agricole Corporate and Investment Bank. 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 31 January 2017 that allowed DBRS to further assess the collateral.

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

DBRS does not audit or independently verify the data or information it receives in connection with the rating process.

This rating concerns a newly issued financial instrument. This is the first DBRS rating on this financial instrument.

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 9.2%, 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 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 (low) (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 90%, ceteris paribus, would maintain the rating of the Class M Notes at AA (low) (sf).
-- A hypothetical LGD of 100%, ceteris paribus, would result in a downgrade of the rating of the Class M Notes to 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 M 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 M 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 M Notes to A (low) (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 M 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 M 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 M 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: Christian Aufsatz, Managing Director, European Structured Finance, Global Structured Finance
Initial Rating Date: 14 March 2017

DBRS Ratings Limited
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United Kingdom
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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
-- 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.