DBRS Morningstar Assigns Ratings to Ginkgo Personal Loans 2020-1

DBRS Ratings Limited (DBRS Morningstar) assigned ratings of AAA (sf), AA (sf), A (low) (sf), BBB (sf), BB (sf), and B (sf) to the Class A, Class B, Class C, Class D, Class E, and Class F Notes (collectively, the Notes) issued by Ginkgo Personal Loans 2020-1 (the Issuer).

Class G Notes are issued in this transaction but are not rated by DBRS Morningstar.

The rating of the Class A Notes addresses timely payment of scheduled interest and ultimate repayment of principal by the legal final maturity date 23 June 2038. The other ratings address the ultimate payment of scheduled interest while the class is subordinated and the timely payment of scheduled interest as the most-senior class, and ultimate repayment of principal by the legal final maturity date.

DBRS Morningstar based its ratings on information provided by the Issuer and its agents as of the date of this press release.

The Notes are backed by a portfolio of fixed-rate, unsecured, amortising personal loans granted to individuals domiciled in France for general consumption and serviced by CA Consumer Finance (the originator).

The transaction includes a 27-month revolving period. During this period, the Issuer may purchase additional receivables provided that the eligibility criteria and concentration limits set out in the transaction documents are satisfied. The revolving period may end earlier than scheduled if certain events occur, such as the breach of performance triggers or servicer termination.

Following the scheduled revolving period, the transaction incorporates a mixed sequential/pro rata/potentially sequential amortisation mechanism during the normal redemption period.

As the Notes carry floating-rate coupons based on one-month Euribor, whereas the portfolio pays a fixed-interest rate, the interest rate mismatch risk is largely hedged through an interest rate swap for the Class A Notes and another swap for Classes B through F provided by Crédit Agricole Corporate and Investment Bank.

The transaction includes Class A and Class B liquidity reserves that are available to the Issuer during the revolving period and the normal redemption period in restricted scenarios where the interest and principal collections are not sufficient to cover the shortfalls in senior expenses, swap payments and interests on the Class A Notes (available from both the Class A and Class B liquidity reserves) and the Class B Notes (only available from the Class B liquidity reserve). During the accelerated redemption period, the amounts in both liquidity reserves are not available to the Issuer and are instead returned directly to the liquidity provider.

DBRS Morningstar has rated several consumer loans ABS transactions in Europe where CA Consumer Finance is the originator or the parent of the originator(s). Recent examples include FCT Ginkgo Compartment Debt Conso 2015-1 in France and Matsuba 2016 B.V. and Magoi B.V. in the Netherlands.

DBRS Morningstar based its ratings on a review of the following analytical considerations:
-- The transaction’s capital structure, including form and sufficiency of available credit enhancement.
-- Credit enhancement levels are sufficient to support the projected expected net losses under various stress scenarios.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms of the Notes.
-- The originator and servicer’s financial strength and capabilities with respect to originations, underwriting, and servicing.
-- The operational risk review of CA Consumer Finance, which DBRS Morningstar deems to be an acceptable servicer.
-- The transaction parties’ financial strength regarding their respective roles.
-- The credit quality, diversification of the collateral, and historical and projected performance of the originator’s portfolio.
-- DBRS Morningstar’s sovereign rating of the Republic of France at AAA with a Negative trend.
-- The consistency of the transaction’s legal structure with DBRS Morningstar’s “Legal Criteria for European Structured Finance Transactions” methodology.

DBRS Morningstar analysed the transaction cash flow structure in Intex DealMaker.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

On 16 April 2020, the DBRS Morningstar Sovereign group published its outlook on the impact to key economic indicators for the 2020-22 time frame. For details see the following commentaries: https://www.dbrsmorningstar.com/research/359679/global-macroeconomic-scenarios-implications-for-credit-ratings and https://www.dbrsmorningstar.com/research/359903/global-macroeconomic-scenarios-application-to-credit-ratings. DBRS Morningstar analysis considered impacts consistent with the moderate scenario in the referenced reports.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is: “Rating European Consumer and Commercial Asset-Backed Securitisations” (13 January 2020).

DBRS Morningstar 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 is based on the worst-case replenishment criteria set forth in the transaction legal documents.

Other methodologies referenced in this transaction are listed at the end of this press release.

These may be found at: http://www.dbrsmorningstar.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 “Global Methodology for Rating Sovereign Governments” methodology at: https://www.dbrsmorningstar.com/research/350410/global-methodology-for-rating-sovereign-governments.

The data and information used for these ratings include performance and portfolio data relating to the receivables provided by the originator directly or through the arrangers, Crédit Agricole Corporate and Investment Bank and UniCredit Bank AG.

DBRS Morningstar received the following information:
-- Quarterly default vintage analysis from Q1 2008 to Q4 2019;
-- Quarterly recovery vintage analysis from Q1 2008 to Q4 2019;
-- Dynamic monthly prepayment analysis from January 2013 to December 2019; and
-- Dynamic monthly delinquency data from January 2008 to December 2019.

Stratification tables in relation to the loan pool as of 31 March 2020 and its related contractual amortisation profile were also received.

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

DBRS Morningstar was supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS Morningstar considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.

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

These ratings concern newly issued financial instruments. These are the first DBRS Morningstar ratings on these financial instruments.

Information regarding DBRS Morningstar ratings, including definitions, policies and methodologies, is available on www.dbrsmorningstar.com.

To assess the impact of changing the transaction parameters on the ratings, DBRS Morningstar considered the following stress scenarios, as compared to the parameters used to determine the rating:

-- Expected Default Rate of 7.9%, a 25% and 50% increase.
-- Expected Loss Given Default (LGD) of 55%, a 25% and 50% increase.

Scenario 1: A 25% increase in the expected default rate.
Scenario 2: A 50% increase in the expected default rate.
Scenario 3: A 25% increase in the LGD.
Scenario 4: A 25% increase in the expected default rate and a 25% increase in the LGD.
Scenario 5: A 50% increase in the expected default rate and a 25% increase in the LGD.
Scenario 6: A 50% increase in the LGD.
Scenario 7: A 25% increase in the expected default rate and a 50% increase in the LGD.
Scenario 8: A 50% increase in the expected default rate and a 50% increase in the LGD.

DBRS Morningstar concludes that the expected ratings under the eight stress scenarios are:
-- Class A Notes: AAA (sf), AA (sf), AAA (sf), AA (sf), A (high) (sf), AA (high) (sf), AA (low) (sf), A (sf)
-- Class B Notes: AA (low) (sf), A (high) (sf), AA (sf), A (high) (sf), A (low) (sf), A (high) (sf), A (low) (sf), BBB (high) (sf)
-- Class C Notes: BBB (high) (sf), BBB (sf), A (low) (sf), BBB (high) (sf), BBB (sf), BBB (high) (sf), BBB (sf), BB (high) (sf)
-- Class D Notes: BBB (low) (sf), BB (high) (sf), BBB (sf), BB (high) (sf), BB (sf), BBB (low) (sf), BB (sf), B (high) (sf)
-- Class E Notes: BB (sf), B (high) (sf), BB (sf), BB (low) (sf), B (sf), BB (low) (sf), B (sf), B (low) (sf)
-- Class F Notes: B (low) (sf), below B (low) (sf), B (sf), below B (low) (sf), below B (low) (sf), below B (low) (sf), below B (low) (sf), below B (low) (sf)

For further information on DBRS Morningstar 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: Jeffrey Cespon, Senior Analyst
Rating Committee Chair: David Lautier, Senior Vice President
Initial Rating Date: 27 April 2020

DBRS Ratings Limited
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Tel. +44 (0) 20 7855 6600
Registered in England and Wales: No. 7139960

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

-- Rating European Consumer and Commercial Asset Backed Securitisations (13 January 2020),
https://www.dbrsmorningstar.com/research/355533/rating-european-consumer-and-commercial-asset-backed-securitisations
-- Rating European Structured Finance Transactions Methodology (28 February 2020),
https://www.dbrsmorningstar.com/research/357428/rating-european-structured-finance-transactions-methodology
-- Legal Criteria for European Structured Finance Transactions (11 September 2019),
https://www.dbrsmorningstar.com/research/350234/legal-criteria-for-european-structured-finance-transactions
-- Derivative Criteria for European Structured Finance Transactions (26 September 2019),
https://www.dbrsmorningstar.com/research/350907/derivative-criteria-for-european-structured-finance-transactions
-- Operational Risk Assessment for European Structured Finance Originators (28 February 2020),
https://www.dbrsmorningstar.com/research/357430/operational-risk-assessment-for-european-structured-finance-originators
-- Operational Risk Assessment for European Structured Finance Servicers (28 February 2020),
https://www.dbrsmorningstar.com/research/357429/operational-risk-assessment-for-european-structured-finance-servicers
-- Interest Rate Stresses for European Structured Finance Transactions (10 October 2019).
https://www.dbrsmorningstar.com/research/351557/interest-rate-stresses-for-european-structured-finance-transactions

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

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].