Morningstar DBRS Confirms Credit Ratings on Eridano II SPV S.r.l. Following Collection Agent Replacement

DBRS Ratings GmbH (Morningstar DBRS) confirmed its credit ratings on the rated notes issued by Eridano II SPV S.r.l. (Eridano II or the Issuer) as follows:

-- Class A Asset-Backed Floating-Rate Notes at AA (high) (sf) (the Class A Notes)
-- Class B Asset-Backed Floating-Rate Notes at AA (sf) (the Class B Notes)

The credit rating on the Class A Notes addresses the timely payment of interest and the ultimate payment of principal by the respective final maturity date in May 2035. The credit rating on the Class B Notes addresses the ultimate payment of interest and the ultimate payment of principal by the respective final maturity dates while the relevant bond is subordinated, but the timely payment of interest when the bond becomes the most-senior tranche.

CREDIT RATING RATIONALE
The credit rating actions follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performances, in terms of delinquencies, defaults, and losses, as of the April 2025 payment date;
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables;
-- Replacement of MCE Finance S.p.A. (MCE) as collection agent by ViViBanca S.p.A. (ViViBanca); and
-- Current available credit enhancement to the rated notes to cover the expected losses at their respective rating levels.

Eridano II is a static securitisation of receivables related to salary and pension assignment loans as well as payment delegation loans originated by ViViBanca and MCE and granted to employees and pensioners residing in Italy. The portfolio is serviced by ViViBanca, with Quinservizi S.p.A. acting as backup servicer.

MCE was acting as a collection agent for its sub-portfolio until April 2025, when Vivibanca replaced MCE in this capacity. This amendment follows the failure of MCE to transfer the collections from its sub-portfolio to the Issuer since October 2024. MCE transferred a partial amount of these collections to the Issuer; however, an outstanding amount of EUR 1.5 million remains unpaid as of 9 April 2025. As of the March 2025 cut-off date, the MCE sub-portfolio constitutes around 9.1% of the total performing portfolio balance. Morningstar DBRS reviewed the transaction with the latest available information and concluded that there is no impact on the credit ratings of the rated notes.

PORTFOLIO PERFORMANCE
As of the March 2025 cut-off date, delinquencies were low with loans that were two to three months and more than three months in arrears representing 0.2% and 0.4% of the outstanding portfolio balance, respectively. At the same portfolio cut-off date, the gross cumulative default ratio was equal to 3.2% of the initial portfolio balance.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
Morningstar DBRS conducted a loan-by-loan analysis of the remaining pools of receivables and updated its base case PD and LGD assumptions to 8.6% and 10.2%, respectively

CREDIT ENHANCEMENT
Credit enhancement to the rated notes is provided by overcollateralisation of the outstanding portfolio balance.

As of the April 2025 payment date, credit enhancement levels were as follows compared with the latest annual review in January 2025:
-- Class A Notes: 79.8%, up from 68.2%
-- Class B Notes: 32.2%, up from 27.5%

The transaction benefits from a cash reserve, available to cover senior fees and expenses, swap payments, and interest payments on the rated notes. Various performance-related triggers are in place to defer the interest on subordinated notes upon portfolio deterioration. The reserve is currently at its target level and floor of EUR 3.5 million.

The Issuer also benefits from a prepayment reserve, available to cover losses arising from the set-off of capitalised fees. The prepayment reserve is currently at its target level of EUR 450,000.

BNP Paribas, Succursale Italia acts as the account bank for the transaction. Based on Morningstar DBRS' private rating on the account bank, the downgrade provisions outlined in the transaction documents, and structural mitigants inherent in the transaction's structure, Morningstar DBRS considers the risk arising from the exposure to the account bank to be consistent with the credit ratings assigned to the rated notes, as described in Morningstar DBRS' "Legal and Derivative Criteria for European Structured Finance Transactions" methodology.

Société Générale, S.A. acts as the swap counterparty for the transaction. Morningstar DBRS' public ratings on the swap counterparty are consistent with the first and second rating thresholds, as defined in Morningstar DBRS' "Legal and Derivative Criteria for European Structured Finance Transactions" methodology. The swap/cap documents are compliant with the same methodology.

Morningstar DBRS' credit ratings on the rated notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
Social (S) and Governance (G) Factors
The high exposure to public-sector employees, pensioners, and civil servants makes these transactions dependent on the creditworthiness of the Italian sovereign. Morningstar DBRS considers some of the key drivers behind the latest rating action on Italy - namely Human Capital and Human Rights (S) and Institutional Strength, Governance & Transparency (G) - to be significant rating factors. According to the IMF Word Economic Outlook, Italy's GDP per capita of USD 39,012 in 2023 was relatively low compared with its euro area peers. According to the World Bank, Italy ranked for Governance Effectiveness at 70th percentile in 2023. Morningstar DBRS took these factors into account in the "Economic Structure and Performance", "Fiscal Management and Policy", and "Political Environment" building blocks of its "Global Methodology for Rating Sovereign Governments".

Credit rating actions on the Republic of Italy are likely to have an impact on these credit ratings. ESG factors that have a significant or relevant effect on the credit analysis of the Republic of Italy are discussed separately at https://dbrs.morningstar.com/research/452176.

There were no Environmental factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings at https://dbrs.morningstar.com/research/454196.

Morningstar DBRS analysed the transaction's structure in Intex DealMaker.
Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to these credit ratings is: "Master European Structured Finance Surveillance Methodology" (4 February 2025), https://dbrs.morningstar.com/research/447080.

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

Morningstar DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

A review of the transaction's legal documents was not conducted as the legal documents have remained unchanged since the most recent credit rating actions.

For a more detailed discussion of the sovereign risk impact on Structured Finance credit ratings, please refer to "Appendix C: The Impact of Sovereign Credit Ratings on Other Morningstar DBRS Credit Ratings" of the "Global Methodology for Rating Sovereign Governments" at https://dbrs.morningstar.com/research/436000.

The sources of data and information used for these credit ratings include servicer reports provided by ViViBanca and investor reports provided by Banca Finanziaria Internazionale S.p.A., and loan-level data provided by the European DataWarehouse GmbH.

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

At the time of the initial credit rating, Morningstar DBRS was supplied with third-party assessments. However, this did not affect the credit rating analysis.

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

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

The last credit rating actions on this transaction took place on 24 January 2025 when Morningstar DBRS upgraded its credit rating on the Class A Notes to AA (high) (sf) from AA (sf) and confirmed its credit rating on the Class B Notes at AA (sf).

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on https://dbrs.morningstar.com.

Sensitivity Analysis: To assess the impact of changing the transaction parameters on the credit ratings, Morningstar DBRS considered the following stress scenarios as compared with the parameters used to determine the credit ratings (the base case):

Morningstar DBRS 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 8.6% and 10.2%, respectively.

The risk sensitivity overview below illustrates the credit ratings expected if the PD and LGD increase by a certain percentage over the base case assumptions.

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

Class B Asset-Backed Floating-Rate Notes Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of AA (sf)
-- 50% increase in LGD, expected credit rating of AA (sf)
-- 25% increase in PD, expected credit rating of AA (sf)
-- 50% increase in PD, expected credit rating of AA (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of AA (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of AA (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of AA (sf)

For further information on Morningstar DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on Morningstar DBRS historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

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

Lead Analyst: Pascale Kallas, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Associate Managing Director
Initial Rating Date: 5 October 2020

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

-- Master European Structured Finance Surveillance Methodology (4 February 2025), https://dbrs.morningstar.com/research/447080.
-- Legal and Derivative Criteria for European Structured Finance Transactions (19 November 2024), https://dbrs.morningstar.com/research/443196.
-- Operational Risk Assessment for European Structured Finance Originators and Servicers (18 September 2024), https://dbrs.morningstar.com/research/439571.
-- Rating European Consumer and Commercial Asset-Backed Securitisations (18 September 2024), https://dbrs.morningstar.com/research/439583.
-- Rating European Structured Finance Transactions Methodology (19 November 2024), https://dbrs.morningstar.com/research/443199.
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (16 May 2025), https://dbrs.morningstar.com/research/454196.

A description of how Morningstar DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/439604.

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.