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

DBRS Ratings Limited (DBRS) confirmed its ratings of 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 of the Class A Notes addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date. The ratings of 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 2019 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, scheduled to terminate in July 2020 (inclusive). During the ramp-up period, the Seller may assign subsequent portfolios to the Issuer, subject to certain conditions. The 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 2019, loans that were delinquent for two to three months represented 0.1% of the outstanding portfolio balance, while loans more than three months delinquent represented 0.1%. The cumulative default ratio was 5.6%.

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, which is 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 providing 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. Based on the account bank reference rating of Banco Santander SA at A (high) - one notch below the DBRS public Long-Term Critical Obligations Rating of AA (low) - the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS considers the risk arising from the exposure to the account bank to be consistent with the rating assigned to the Class A Notes, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology.

The transaction structure was analysed in Intex DealMaker.

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.

DBRS carried out a review of the Master Amendment Agreement in December 2018 following a reduction in the recovery fee. A review of the other transaction legal documents was not conducted as these 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/333487/rating-sovereign-governments.pdf.

The sources of data and information used for these ratings include investor reports provided by Santander Consumer Bank SpA (Italy) and loan-level data provided by 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 2018, when DBRS confirmed the ratings of the Class A Notes, Class B Notes, Class C Notes, Class D Notes at A (low) (sf), BBB (high) (sf), BBB (sf) and BB (sf), respectively.

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 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 57.1%, 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 (low) (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 (low) (sf).
-- 50% increase in PD, expected rating of BBB (sf).
-- 25% increase in PD and 25% increase in LGD, expected rating of BB (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 B (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 below B (sf).

Class D Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of B (high) (sf).
-- 50% increase in LGD, expected rating of B (high) (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 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: Clare Wootton, Senior Financial Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
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.