DBRS Downgrades Class A Notes of Sunrise S.r.l. Series 2009

DBRS Ratings Limited (DBRS) has downgraded the Class A Notes (the Notes) issued by Sunrise S.r.l. - Series 2009 to AA (high) (sf) from its previous rating of AAA (sf). DBRS has also removed the rating from Under Review with Negative Implications. The Notes were previously placed Under Review with Negative Implications on 13 March 2013 due to the 6 March 2013 downgrade of the Republic of Italy’s long-term and local currency debt to ‘A’ (low) from ‘A’ with both rating remaining on Negative trend.

The downgrade is due to the actual defaults in the transaction being outside of DBRS initial expectations, continued deterioration in the performance of the underlying receivables and the Class A credit enhancement being insufficient to cover DBRS updated expected losses at the original rating level. The downgrade of the Notes incorporates a sovereign related stress component in the review of the receivables to address the impact of macroeconomic variables on the collateral performance given the current rating of the Republic of Italy.

Since the DBRS initial rating in May 2011 to the February 2013 Interest Payment Date (IPD), the cumulative defaults as a percentage of the original balance have increased 4.38% (from 2.31% to 6.69%). The DBRS expected default rate for the portfolio in May 2011 was 6.36%. Given the seasoning of the portfolio since the initial DBRS rating, the actual defaults are approximately 50% higher than would be expected.

Additionally, the performance of the underlying receivables has deteriorated over the last year. On the February 2012 IPD, loans between 3-8 months delinquent were 2.94%. As of the Feb 2013 IPD, the 3-8 month delinquent loans have increased to 4.64% and are trending upward.

The updated expected loss for the receivables is 9.75% and based on a portfolio default rate and recovery rate for the eligible non-defaulted receivables as of the February IPD. The updated portfolio default rate is 10.84% and incorporates a sovereign related stress component. The updated recovery rate is 10.00%, lower than the initial recovery rate assumption of 19.44% due to low observed recovery rates to date as well an increase in the portfolio concentration since May 2011 for unsecured personal loans (78.31% versus 87.05%). Given the updated expected loss, the current credit enhancement available to the Notes is sufficient to support an AA (high) (sf) rating under various stress scenarios.

Credit Agricole CIB is the Swap Counterparty and Account Bank for the transaction. Credit Agricole complies with the DBRS counterparty and legal criteria given the rating of the Notes.

Notes:
All figures are in euros unless otherwise noted.

The principal methodologies applicable are:
• Rating European Consumer and Commercial Asset-Backed Securities
• Legal Criteria for European Structured Finance Transactions
• Operational Risk Assessment for European ABS and SME CLO Servicers
• Unified Interest Rate Model Methodology for European Securitisations
• Swap Criteria for European Structured Finance Transactions
• Master European Structured Finance Surveillance Methodology

These can be found on dbrs.com under Methodologies. For a more detailed discussion of sovereign risk impact on Structured Finance ratings, please refer to DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area”.

The sources of information used for this rating include investor remittance reports and performance data relating to the receivables provided by Agos Ducato S.p.A. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

For additional information on this rating, please see the linking document.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Initial Lead Analyst: Alessio Pignataro
Initial Rating Date: 20 May 2011
Rating Committee Chair: Claire Mezzanotte

Lead Surveillance Analyst: Keith Gorman
Most Recent Rating Date: 13 March 2013
Rating Committee Chair: Erin Stafford