DBRS Takes Rating Action on Sunrise S.r.l. – Series 2015-2

DBRS Ratings Limited (DBRS) has today taken the following rating actions on the Notes issued by Sunrise S.r.l. - Series 2015-2 (the Issuer):
-- EUR 555,489,386.26 Class A Notes confirmed at AAA (sf)
-- EUR 40,000,000 Class M1 Notes upgraded to AA (sf) from A (high) (sf)
-- EUR 174,000,000 Class M2 Notes upgraded to AA (sf) from A (high) (sf)

The above-mentioned rating actions are based on the following analytical considerations, as described more fully below:
-- Portfolio performance, in terms of defaults and level of delinquencies, as of the July 2016 payment date.
-- Updated base case assumptions, considering the final portfolio after the end of the Revolving Period.
-- Current available credit enhancements to the Class A Notes and to the Class M1 and Class M2 Notes (together, the Class M Notes) to cover the expected losses assumed in line with the AAA (sf) and AA (sf) rating levels.

The ratings of the Class A and Class M Notes address the timely payment of interest and the ultimate payment of principal on or before the Final Maturity Date in December 2032.

Sunrise S.r.l. - Series 2015-2 is a securitisation consisting of unsecured Italian consumer loan receivables granted to private individuals residing in Italy by Agos Ducato S.p.A. The portfolio consists of auto loans (13.32%), personal loans (75.49%) and other purpose loans (11.19%).

The transaction’s one-year revolving period ended with the June 2016 payment date. As opposed to the Initial Rating when DBRS modelled the worst portfolio composition within the concentration limits required during the revolving period, the current portfolio distribution has been considered. This implies the following:
-- Improved base case defaults and recovery assumptions.
-- Higher portfolio yield assumptions.

The portfolio is performing in line with DBRS’s expectations. The gross cumulative default ratio (as a percentage of the aggregate original portfolio) is 0.43% as of June 2016. Two- and three-month delinquencies are at 0.45% and 0.25%, respectively, of the principal outstanding balance of the portfolio, while delinquencies of over three months are at 0.64%.

Credit Enhancement (CE) is provided by overcollateralisation, the subordination of the most junior obligations and the Cash Reserve Account. CE for the Class A Notes increased from 44.09% at closing in June 2015 to 48.84% in July 2016, while CE for the Class M Notes increased from 24.13% to 27.91%.

The transaction benefits from liquidity support in the form of two non-amortising reserves. The EUR 10.72 million Payment Interruption Risk Reserve Account is available to cover senior expenses and missed interest payments on the rated Notes, while the EUR 32.17 million Cash Reserve Account can additionally be used to offset the principal losses of defaulted receivables. Both reserves are currently at their targeted levels.

The structure also includes a Rata Posticipata Cash Reserve, which mitigates the liquidity risk arising from Flexible Loans. These loans represent 61.88% of the pool as of the July 2016 payment date and allow the borrower the option to skip one monthly instalment per year (up to a maximum of five times during the life of the loan) and to modify the amount of the monthly instalments. This reserve is only funded if, for two consecutive payment dates, the outstanding balance of the Flexible Loans in relation to which the debtors have exercised the contractual right to postpone is higher than 5% of the outstanding balance of all Flexible Loans. As of the July 2016 payment date, this condition has not been breached.

Crédit Agricole Corporate and Investment Bank SA, Milan Branch (Crédit Agricole CIB) serves as Account Bank for the transaction. The DBRS private rating of Crédit Agricole CIB 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.

Crédit Agricole Corporate & Investment Bank SA is the Swap Counterparty. The DBRS private rating of this entity comply with the First Rating Threshold defined in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is “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.

A review of the transaction 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 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 investor reports provided by Crédit Agricole CIB, servicer reports provided by Agos Ducato S.p.A. and data from the European DataWarehouse GmbH.

DBRS does not rely upon third-party due diligence in order to conduct its analysis. DBRS was supplied with third party assessments for the Initial Rating date. However, this did not impact the rating analysis.

DBRS considers the information available to it for the purposes 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 1 July 2015, when DBRS finalised the provisional ratings it assigned to this transaction.

The lead responsibilities for this transaction have been transferred to Joana Seara da Costa.

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.

To assess the impact of the 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”):

-- DBRS expected a base case probability of default (PD) and loss given default (LGD) for the portfolio 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 receivables is 9.18% and 86.57% (excluding sovereign stress), respectively.

-- The Risk Sensitivity overview below illustrates the ratings expected for the Class A and Class M Notes if the PD and LGD increase by a certain percentage over the base case assumptions. For example, if the LGD increases by 50%, the rating for the Class A Notes would be expected to remain at AAA (sf) and the rating for the Class M Notes would be expected to decrease to AA (low) (sf), all else being equal. If the PD increases by 50% the rating for the Class A and Class M Notes would be expected to decrease to AA (sf) and A (sf), respectively, all else being equal. Furthermore, if both the PD and LGD increase by 50%, the rating for the Class A and Class M Notes would be expected to decrease to AA (low) (sf) and A (low) (sf), respectively, all else being equal.

Class A Notes risk sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AA (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD, expected rating of AA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (low) (sf)

Class M Notes risk sensitivity:
-- 25% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in LGD, expected rating of AA (low) (sf)
-- 25% increase in PD, expected rating of A (high) (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 A (sf)
-- 50% increase in PD, expected rating of A (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (low) (sf)

For further information on DBRS historic 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.

Initial Lead Analyst: Paolo Conti
Initial Rating Date: 9 June 2015
Initial Rating Committee Chair: Claire Mezzanotte

Lead Surveillance Analyst: Joana Seara da Costa, Financial Analyst
Rating Committee Chair: Chuck Weilamann, Managing Director

DBRS Ratings Limited
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London EC3M 3BY United Kingdom
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

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

A description of how DBRS analysis structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375

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.