DBRS Confirms Ratings on Golden Bar (Securitisation) S.r.l. - Series 2016-1

DBRS Ratings Limited (DBRS) confirmed its ratings on the bonds issued by Golden Bar (Securitisation) S.r.l. - Series 2016-1 (the Issuer) as follows:

-- Class A Notes at A (low) (sf)
-- Class B Notes at BBB (high) (sf)
-- Class C Notes at BBB (sf)
-- Class D Notes at BB (sf)

The rating on the Class A Notes addresses the timely payment of interest and ultimate payment of principal on or before the final legal maturity date. The ratings on the Class B Notes, Class C Notes and Class D Notes address the ultimate payment of interest and principal on or before the legal final maturity date.

The rating actions follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults and losses as of the April 2018 payment date.
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables.
-- Current available credit enhancement (CE) to the notes to cover the expected losses at their respective rating levels.
-- No Purchase Termination Events have occurred.

The Issuer is a securitisation of salary assignment, pension assignment and delegation of payment receivables originated in Italy by Santander Consumer Bank S.p.A. The transaction is currently in its four-year ramp-up period, which is scheduled to terminate in July 2020. During the ramp-up period, the Seller may assign subsequent portfolios to the Issuer, subject to certain conditions. Additional portfolios are funded through principal collections on the receivables or additional subscription of the notes up to the programme limit of EUR 1.3 billion.

PORTFOLIO PERFORMANCE
As of April 2018, loans that were two- to three-months in arrears represented 0.1% of the outstanding portfolio balance, down from 0.2% in April 2017. The 90+ delinquency ratio was 0.1%, up from 0.0% in April 2017. The cumulative default ratio was 4.2%.

CREDIT ENHANCEMENT
As of the April 2018 payment date, CE to the Class A, Class B, Class C and Class D Notes was 20.5%, 18.0%, 14.5% and 9.5%, respectively. These levels have been stable since the DBRS initial rating because of the transaction ramp-up period.

The transaction benefits from a Cash Reserve, which covers senior fees, interest shortfall and principal losses on the Class A to D Notes. The Cash Reserve is currently at its target level of EUR 27.5 million. Following additional subscriptions of the Notes, the cash reserve can reach a level of EUR 32.5 million. The Cash Reserve is permitted to amortise provided that certain conditions have been met.

The transaction also benefits from a non-amortising liquidity reserve funded to its target level of EUR 22.0 million, which covers senior fees and any interest shortfall on the Class A Notes. The target balance of the liquidity reserve is 2.00% of the total subscription amount, and can therefore reach EUR 26.0 million following additional subscriptions.

Banco Santander SA acts as the account bank for the transaction. On the basis of the account bank reference rating of A (high) - being one notch below the DBRS public Long-Term Critical Obligations Rating of Banco Santander SA of AA (low) - and the mitigants outlined in the transaction documents, DBRS considers the risk arising from the exposure to the banks to be consistent with the rating assigned to the Class A Notes.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings 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. Due to the inclusion of a revolving period in the transaction, the analysis continues to be based on the worst-case replenishment criteria set forth in the transaction legal documents.

A review of the transaction 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 investor reports and loan-level data provided by Santander Consumer Bank SpA (Italy), and 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, 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 this transaction took place on 29 June 2017, when DBRS upgraded its ratings of the Class B, Class C and Class D Notes to BBB (high) (sf), BBB (sf) and BB (sf) respectively, and downgraded its rating of the Class A Notes to A (low) (sf).

Information regarding DBRS ratings, including definitions, policies and methodologies is available at 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 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 15.2% and 62.6%, 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 BBB (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A Notes would be expected to fall to BBB (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 BB (low) (sf).

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

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

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

Class D Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of B (high) (sf).
-- 50% increase in LGD, expected rating below B (sf).
-- 25% increase in PD, expected rating of B (high) (sf).
-- 50% increase in PD, expected rating below B (sf).
-- 25% increase in PD and 25% increase in LGD, expected rating below B (sf).
-- 25% increase in PD and 50% increase in LGD, expected rating below B (sf).
-- 50% increase in PD and 25% increase in LGD, expected rating below B (sf).
-- 50% increase in PD and 50% increase in LGD, expected rating below B (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 and US regulations only.

Lead Analyst: Andrew Lynch, Assistant Vice President
Rating Committee Chair: Gareth Levington, Managing Director
Initial Rating Date: 2 August 2016

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

-- Legal Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Servicers
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Interest Rate Stresses for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Originators
-- Rating CLOs and CDOs of Large Corporate Credit

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.