DBRS Confirms Ratings on Golden Bar (Securitisation) S.r.l. – Series 2014-1

DBRS Ratings Limited (DBRS) has today taken the following rating actions on the bonds issued by Golden Bar (Securitisation) S.r.l. – Series 2014-1 (the Issuer):
-- Class A notes confirmed at A (high) (sf).
-- Class B notes confirmed at A (low) (sf).

The confirmation of the ratings on the Class A and Class B notes is based on the following analytical considerations as described more fully below:

-- Portfolio performance, in terms of delinquencies and defaults, as of March 2016.
-- Updated portfolio default rate, loss given default and expected loss assumptions for the remaining collateral pool.
-- Current available credit enhancement to the Class A and Class B notes to cover the expected losses at the A (high) (sf) and A (low) (sf) rating levels respectively.

Golden Bar (Securitisation) S.r.l. – Series 2014-1 is a securitisation of Italian unsecured vehicle loans extended to retail clients and small business enterprises, originated and serviced by Santander Consumer Bank SpA. The transaction closed in June 2014 and is currently in its 24-month revolving period. There are concentration limits and portfolio tests in place to mitigate any potential deterioration. To date, all of them have been met.

As of March 2016, the 90+ delinquencies ratio is at 0.24% while the current cumulative default rate is at 0.53%. There are triggers in place on the portfolio which, if breached, will prohibit the Issuer from purchasing any subsequent portfolios, and the amortisation period will begin. The Default Ratio must not be higher than 1%, and is currently equal to 0.194%. The Arrear Ratio must not be higher than 4%, and is currently equal to 0.628%.

As of the March 2016 payment date, credit enhancement to the Class A notes stands at 16.49% and credit enhancement to the Class B notes stands at 12.49%, both stable since the closing of the transaction due to the revolving period. Credit enhancement to the Class A Notes consists of subordination of the Class B and Class C notes, as well as the Cash Reserve, while credit enhancement to the Class B notes consists of the Class C notes and the Cash Reserve.

The transaction benefits from a Cash Reserve that is available to cover senior fees and any interest shortfall on the Class A and Class B notes, and is also available to reduce the debit balance on the Class A, Class B and Class C Principal Deficiency Ledgers (PDL). The Cash Reserve is currently at its target level of EUR 18.80 million and may amortise upon the termination of the revolving period, subject to further performance conditions.

As of March 2016, the Class A, Class B and Class C PDLs are equal to zero. Each PDL is debited sequentially up to a maximum of the outstanding amount of its respective class of note, starting with the most junior class.

BNP Paribas Securities Services SCA/London acts as the account bank for the transaction. The DBRS private rating of BNP Paribas Securities Services SCA/London complies with the Minimum Institution Rating given the rating assigned to the Class A Notes, as described in DBRS’s ‘Legal Criteria for European Structured Finance Transactions’ methodology.

Notes:

All figures are in euros unless otherwise noted.

The principal methodology applicable is the Master European Structured Finance Surveillance Methodology.

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. However, due to the inclusion of a revolving period in the transaction and no change in assumptions, the initial analysis based on worst-case replenishment criteria set forth in the transaction documents was assumed.

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

Other methodologies referenced in this transaction are listed at the end of this press release. This 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 the DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” found at http://www.dbrs.com/industries/bucket/id/10036/name/commentaries.

The sources of information used for this rating include investor reports provided by BNP Paribas Securities Services SCA/Milan branch (the “Calculation Agent”) and data from the European Data Warehouse GmbH.

DBRS does not rely upon third-party due diligence in order to conduct its analysis. DBRS was not supplied with third-party assessments; however, this did not impact the rating analysis.

DBRS considers the information available to it for the purpose of providing this rating was 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.

The last rating action on this transaction took place on 8 June 2015 when DBRS confirmed the ratings on the Class A and Class B notes at A (high) and A (low) respectively. The lead responsibilities for this transaction have been transferred to Andrew Lynch.

Information regarding DBRS ratings, including definitions, policies and methodologies are 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 with the parameters used to determine the rating (the base case):
-- DBRS expected a lifetime base case probability of default (PD) and loss given default (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 mortgages for the Issuer are 4.66% and 89.49%, 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 fall to A (sf), assuming no change in the PD. If the PD increases by 50%, the rating for the Class A notes would be expected to fall to A (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 BBB (sf).

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

Class B Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (low) (sf).
-- 50% increase in LGD, expected rating of BBB (high) (sf).
-- 25% increase in PD, expected rating of A (low) (sf).
-- 50% increase in PD, expected rating of BBB (high) (sf).
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (low) (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (low) (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating of BB (sf).

For further information on DBRS historic default rates published by the European Securities and Markets Administration 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.

Initial Lead Analyst: Paolo Conti, Senior Vice President
Initial Rating Date: 11 June 2014
Initial Rating Committee Chair: Chuck Weilamann, Managing Director

Lead Surveillance Analyst: Andrew Lynch, Senior Financial Analyst
Rating Committee Chair: Diana Turner, Senior Vice President

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

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

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.