DBRS Takes Rating Actions on Sunrise S.r.l. Series 2012, Series 2015-2 and Series 2016-1

DBRS Ratings Limited (DBRS) took rating actions on three Sunrise S.r.l. transactions (the transactions) as follows:

Sunrise S.r.l. - Series 2012 (Sunrise 2012)
-- Class A Notes confirmed at AAA (sf)
-- Class M Notes upgraded to AAA (sf) from AA (sf)

Sunrise S.r.l. - Series 2015-2 (Sunrise 2015-2)
-- Class M1 Notes upgraded to AAA (sf) from AA (high) (sf)
-- Class M2 Notes upgraded to AAA (sf) from AA (high) (sf)

Sunrise S.r.l. - Series 2016-1 (Sunrise 2016-1)
-- Class A1 Notes confirmed at AAA (sf)
-- Class A2 Notes confirmed at AAA (sf)
-- Class M Notes upgraded to AA (high) (sf) from AA (low) (sf)

The rating actions follow an annual review of the transactions and are based on the following analytical considerations:
-- The overall portfolios performance as of the April 2018 payment date, with regards to low levels of cumulative net loss and delinquencies.
-- The increased levels of credit enhancement (CE) available to the rated notes to cover expected losses.
-- Improved base case default and recovery assumptions, considering the updated quarterly vintage performance data received by DBRS.

The ratings of the Notes address the timely payment of interest and the ultimate payment of principal on or before the respective legal maturity.

The transactions are securitisations of unsecured Italian consumer loan receivables originated by Agos Ducato S.p.A. (Agos). The portfolios mostly consist of loans for the purchase of vehicles and personal loans. They also contain flexible loans that 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.

PORTFOLIO PERFORMANCE
The gross cumulative default ratio of Sunrise 2012 was 5.1% of the original portfolio plus all subsequent portfolios purchased as of April 2018, of which 15.4% has been recovered or repurchased, and the 90+ delinquency ratio was 3.7%. Gross cumulative defaults represented 2.1% of the aggregated Sunrise 2015-2 original portfolio, recoveries and repurchases have been 47.3% and the percentage of loans more than 90 days delinquent was 1.7%. Sunrise 2016-1 defaulted loans represented 0.9% of the aggregated original portfolio, recoveries and repurchases have been 3.2% and 90+ delinquencies were 0.9%.

CREDIT ENHANCEMENT
CE is provided by overcollateralisation, the subordination of the most junior obligations and the cash reserve through a principal deficiency ledger mechanism. At April 2018 and since closing:

Sunrise 2012:
CE for the Class A Notes increased to 95.1% from 31.0%, while CE for the Class M Notes increased to 69.5% from 22.5%.

Sunrise 2015-2:
CE for the Class M1 and M2 Notes increased to 73.9% from 24.1%.

Sunrise 2016-1:
CE for the Class A1 and A2 Notes increased to 66.5% from 40.8%, while CE for the Class M Notes increased to 42.9% from 25.8%.

BASE CASE ASSUMPTIONS
DBRS has received updated vintage performance data for each product type. With the updated data, DBRS recalibrated its base case assumptions of gross default and recovery considering the current pool composition:
-- Sunrise 2012: probability of default (PD) of 9.3% and recovery rate of 11.1%;
-- Sunrise 2015-2: PD of 9.1% and recovery rate of 11.2%;
-- Sunrise 2016-1: PD of 8.7% and recovery rate of 11.5%.

The transactions benefit from credit and liquidity support in the form of two reserves. The payment interruption risk reserve is available to cover senior expenses and missed interest payments on the rated notes, and is sized at EUR 9.3 million, EUR 10.7 million and EUR 6.0 million for Sunrise 2012, Sunrise 2015-2 and Sunrise 2016-1, respectively. The cash reserve can additionally be used to offset the principal losses of defaulted receivables and has a current balance of 3% of the respective initial portfolios – considering the restructured portfolio as the initial for Sunrise 2012. A commingling reserve is also available for each transaction and will become part of the interest available funds in the event of servicer insolvency. All three transactions’ reserves are currently at their targeted levels.

The structures also include a rata posticipata cash reserve that mitigates the liquidity risk arising from flexible loans. 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 the payments is higher than 5% of the outstanding balance of all flexible loans. As of the April 2018 payment date, this condition had not been breached for any transaction.

Crédit Agricole Corporate and Investment Bank SA, Milan Branch (Crédit Agricole CIB, Milan) acts as account bank for the transactions. The private DBRS rating of Crédit Agricole CIB, Milan is consistent with the Minimum Institution Rating given the ratings assigned to the Notes, as described in the DBRS methodology “Legal Criteria for European Structured Finance Transactions”.

Crédit Agricole Corporate and Investment Bank S.A. (Crédit Agricole CIB) acts as the swap counterparty for Sunrise 2015-2 and Sunrise 2016-1. Additionally, Natixis S.A., London Branch shares this role in the Sunrise 2016-1 transaction. The current private ratings of Crédit Agricole CIB and Natixis S.A., London Branch are consistent 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 to the ratings 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 transactions legal documents was not conducted as the legal 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.

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 “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Rating Sovereign Governments” methodology at: http://dbrs.com/research/319564/rating-sovereign-governments.pdf.

The sources of data and information used for these ratings include Crédit Agricole CIB, Milan, servicer reports provided by Agos and data from the European DataWarehouse GmbH.

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

At the time of the initial rating of Sunrise 2012, DBRS was not supplied with third-party assessments. However, this did not impact the rating analysis.

At the time of the initial ratings of Sunrise 2015-2 and Sunrise 2016-1, DBRS was supplied with third-party assessments. However, this did not impact the rating analysis.
DBRS considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.

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

The last rating action on Sunrise 2012 took place on 26 May 2017, when DBRS confirmed its ratings on the Class A Notes at AAA (sf) and upgraded its rating on the Class M Notes to AA (sf) from A (high) (sf).

The last rating action on Sunrise 2015-2 took place on 11 January 2018, when DBRS discontinued its ratings on the Class A Notes due to repayment in full. The last full review took place on 26 May 2017, when DBRS confirmed its ratings on the Class A Notes at AAA (sf) and upgraded its rating on the Class M1 and M2 Notes to AA (high) (sf) from AA (sf).

The last rating action on Sunrise 2016-1 took place on 26 May 2017, when DBRS confirmed its ratings on the Class A1 and A2 Notes at AAA (sf) and upgraded its rating on the Class M Notes to AA (low) (sf) from A (high) (sf).

The lead analyst responsibilities for these transactions have been transferred to Matt Albin.

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 these ratings, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the “Base Case”):

-- DBRS expected a base case 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.

Sunrise 2012
-- The Base Case PD and LGD of the current pool of receivables, excluding sovereign stress, are 9.3% and 88.9%, respectively.

For example, if the LGD increases by 50%, the rating of the Class A Notes would be expected to remain at AAA (sf), ceteris paribus. If the PD increases by 50%, the rating of the Class A Notes would be expected to remain at AAA (sf), ceteris paribus. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected to remain at AAA (sf), ceteris paribus.

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 AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AAA (sf)

Class M 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 AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AA (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf)

Sunrise 2015-2
-- The Base Case PD and LGD of the current pool of receivables, excluding sovereign stress, are 9.1% and 88.8%, respectively.

For example, if the LGD increases by 50%, the rating of the Class M Notes would be expected to remain at AAA (sf), ceteris paribus. If the PD increases by 50%, the rating of the Class M Notes would be expected to remain at AAA (sf), ceteris paribus. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected to remain at AAA (sf), ceteris paribus.

Class M 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 AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AAA (sf)

Sunrise 2016-1
-- The Base Case PD and LGD of the current pool of receivables, excluding sovereign stress, are 8.7% and 88.5%, respectively.

For example, if the LGD increases by 50%, the rating of the Class A Notes would be expected to remain at AAA (sf), ceteris paribus. If the PD increases by 50%, the rating of the Class A Notes would be expected to decrease to AA (high) (sf), ceteris paribus. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected to decrease to AA (high) (sf), ceteris paribus.

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 AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AA (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf)

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

Lead Analyst: Matt Albin, Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 17 July 2012 (Sunrise 2012); 9 June 2015 (Sunrise 2015-2); 1 June 2016 (Sunrise 2016-1)

DBRS Ratings Limited
20 Fenchurch Street, 31st Floor, 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
-- Interest Rate Stresses 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.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.