DBRS Confirms Ratings of Aurorus 2017 B.V.

DBRS Ratings Limited (DBRS) confirmed the following ratings of the Notes issued by Aurorus 2017 B.V. (the Issuer):

-- Class A Notes at AAA (sf)
-- Class B Notes at AA (sf)
-- Class C Notes at A (sf)
-- Class D Notes at BBB (sf)
-- Class E Notes at BB (sf)
-- Class F Notes at B (sf)

The rating actions follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of charge-off, payment and yield rates.
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions on the receivables.
-- Current available credit enhancement to the Notes to cover the expected losses at their respective rating levels.
-- No revolving termination events have occurred.

Aurorus 2017 B.V. is a securitisation of unsecured credit cards, revolving credit facilities and fixed-rate instalment loans originated by Qander Consumer Finance B.V. (Qander) in the Netherlands. The receivables are serviced by Qander, with Vesting Finance Servicing B.V. acting as the backup servicer. The transaction is currently in its revolving period, which is scheduled to end in August 2020.

PORTFOLIO PERFORMANCE
As of July 2018, the monthly principal payment rate (MPPR) was 3.9%, the annualised yield rate was 4.7% and the annualised charge-off rate was 2.2%. Charge-off rates have been falling over the reporting period for revolving credit facilities and credit cards, while MPPR rates have been trending upwards. However, yield rates have exhibited a downward trend.

Delinquency rates have been relatively stable, with loans two- to three-months in arrears at 0.3% of the outstanding pool balance and the 90+ delinquency ratio at 0.2%, as of July 2018. The cumulative default ratio was 1.5% and the cumulative loss ratio was 1.4%.

PORTFOLIO ASSUMPTIONS
DBRS updated its base case assumptions for the revolving loan and credit card portfolio subsets based on updated dynamic vintage data provided by Qander. DBRS reduced its base case charge-off rate to 5.5% from 6.0% for both revolving loans and credit cards. DBRS revised its base case MPPR upwards to 1.7% from 1.6% for revolving loans, and to 7.5% from 6.5% for credit cards. DBRS revised its base case yield rate assumption downwards to 7.0% from 9.0% for revolving loans, and to 12.0% from 12.5% for credit cards. DBRS maintained its base case default rate for fixed-term loans at 8.2% and maintained its base case recovery rate of 25.0% for all portfolio subsets. Given the revolving period, the portfolio assumptions continue to be based on the worst-case portfolio composition.

CREDIT ENHANCEMENT
As of the July 2018 payment date, credit enhancement to the Class A, Class B, Class C, Class D, Class E and Class F Notes was 45.4%, 36.8%, 31.8%, 24.2%, 14.0% and 8.7%, respectively, stable since the DBRS initial rating due to the transaction revolving period ending in August 2020. Credit enhancement is provided by subordination of the junior classes.

The transaction benefits from a cash reserve funded to its target level of EUR 3.7 million, which covers any shortfall in senior fees and interest on the Class A to D Notes. The reserve amortises to a target level of 1.5% of the sum of the outstanding Class A to D Notes, subject to a floor of EUR 250,000. The Pre-Funded Reserve is used to purchase further advance receivables and new loan receivables during the revolving period and is currently funded to EUR 1.3 million.

ABN AMRO Bank N.V. acts as the account bank for the transaction. The account bank reference rating of AA (low), which is one notch below the DBRS public Long-Term Critical Obligations Rating of ABN AMRO Bank N.V. of AA, is consistent 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.

BNP Paribas SA acts as the swap counterparty for the transaction. DBRS's public Long-Term Critical Obligations Rating of BNP Paribas SA at AA (high) is above the First Rating Threshold as described 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.

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:
-- Dynamic receivables balance, payment, charge-off, origination, yield and recovery data up to April 2018.
-- Static default data for each product type up to May 2018.
-- Investor reports provided by Qander Consumer Finance B.V.
-- Loan-level data provided by the European DataWarehouse GmbH.

Information for these ratings was sourced by Qander Consumer Finance B.V., directly or indirectly through ABN AMRO Bank N.V.

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 14 August 2017, when DBRS finalised its provisional ratings on the Notes.

The lead analyst responsibilities for this transaction have been transferred to Clare Wootton.

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 to the parameters used to determine the rating (the Base Case):
-- Expected Charge-off Rate: 5.5% for credit cards and 5.5% revolving loans
-- Expected MPPR: 1.7% for revolving loans and 7.5% for credit cards
-- Expected Yield Rate: 7.0% for revolving loans and 12.0% for credit cards

-- Scenario 1: 25% increase in the Expected Charge-Off Rate, 25% decrease in the Expected Yield Rate
-- Scenario 2: 25% increase in the Expected Charge-Off Rate, 25% decrease in the MPPR
-- Scenario 3: 25% decrease in the Expected Yield Rate, 25% decrease in MPPR

DBRS concludes that the expected ratings under the stressed scenarios (1, 2 and 3 respectively) are:
-- Class A Notes: AA (high) (sf), AA (sf), AA (high) (sf)
-- Class B Notes: A (sf), A (low) (sf), A (low) (sf)
-- Class C Notes: BBB (sf), BBB (sf), BBB (sf)
-- Class D Notes: BB (high) (sf), BB (high) (sf), BB (high) (sf)
-- Class E Notes: B (sf), B (high) (sf), B (sf)
-- Class F Notes: Below B (sf), B (sf), 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: Clare Wootton, Senior Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 19 July 2017

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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
-- Derivative Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Originators

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.