Press Release

DBRS Morningstar Confirms Ratings of the Notes Issued by Wizink Master Credit Cards Fondo de Titulización

Consumer Loans & Credit Cards

April 23, 2021

DBRS Ratings GmbH (DBRS Morningstar) confirmed its ratings on the notes issued by Wizink Master Credit Cards Fondo de Titulización (the Issuer) as follows:

-- Series 2018-01, Class A Notes at AA (sf)
-- Series 2018-01, Class C Notes at BB (high) (sf)
-- Series 2019-01, Class A Notes at AA (sf)
-- Series 2019-01, Class C Notes at BB (high) (sf)
-- Series 2019-02, Class A Notes at AA (high) (sf)
-- Series 2019-02, Class C Notes at BB (high) (sf)
-- Series 2019-03, Class A Notes at AA (sf)
-- Series 2019-03, Class C Notes at BB (high) (sf)

The ratings address the timely payment of scheduled interest and the ultimate repayment of principal by the legal final maturity date.

The programme is a securitisation of credit card receivables related to credit agreements granted to individuals in Spain, originated and serviced by WiZink Bank SA (the seller).

The confirmations follow an annual review of the programme and are based on the following analytical considerations:

-- Portfolio performance of the Issuer, in terms of delinquencies, charge-off, principal payment, and yield rates as of the February 2021 payment date.
-- The ability of programme- and series-specific structures to withstand stressed cash flow assumptions.
-- No programme revolving termination event has occurred.
-- Current available credit enhancement to the notes series to cover the expected losses at their respective rating levels.
-- DBRS Morningstar’s sovereign rating of the Kingdom of Spain at “A” with a Stable trend.
-- Current economic environment and an assessment of sustainable performance, as a result of the Coronavirus Disease (COVID-19) pandemic.

PROGRAMME AND TRANSACTION STRUCTURE
The programme incorporates separate interest and principal waterfalls during the programme revolving and programme amortisation periods that allocate the available funds including reserve fund and collections of interest, principal, and recoveries from receivables to each specific notes series.

The programme has an indefinite revolving period. During this period, additional receivables may be purchased by the Issuer, provided that the eligibility criteria set out in the transaction documents are satisfied. For this Issuer, the revolving termination events are set at the programme level, instead of series-specific ones. Occurrence of such events would lead to early amortisation of all outstanding notes at the same time, subject to series-specific waterfalls and allocation percentages.

Credit enhancement available to the notes series during the amortisation period consists of subordination of the junior notes and SICF note, potential overcollateralisation, and excess spread.

The programme also includes a general reserve that is available to cover the shortfalls in senior expenses, swap payments if applicable, and interest on the Class A notes of the entire programme. The general reserve is amortising, subject to a floor amount of 0.5% of the initial Class A notes balance of all notes series.

A commingling reserve facility is also available to the Issuer following the servicer’s breach of its payment obligations. The required amount is equal to 1.5% of outstanding receivables.

COUNTERPARTIES
Banco Santander S.A. is the issuer account bank for the programme and BNP Paribas Securities Services, Sucursal en España, is the excess account bank. Based on DBRS Morningstar’s ratings of both Banco Santander S.A. and BNP Paribas Securities Services, and the downgrade provisions outlined in the transaction documents, DBRS Morningstar considers the risk arising from the exposure to the issuer account bank and the excess account bank to be commensurate with the ratings assigned.

PORTFOLIO ASSUMPTIONS, COVID-19 CONSIDERATIONS, AND KEY DRIVERS
The coronavirus and the resulting isolation measures have caused an economic contraction, leading to increases in unemployment rates and adverse financial impact on many borrowers. DBRS Morningstar anticipates that delinquencies could continue to rise, and payment and yield rates could remain subdued and volatile for many credit card portfolios.

Monthly principal payment rate (MPPR) has been in the range of 10% to 15%, which is higher than many continental European credit card programmes and is influenced by the inclusion of full payments made during the interest-free grace period. Based on the analysis of historical data, macroeconomic factors, potentially permanent changes in borrowers’ payment behaviour, DBRS Morningstar reduced the expected MPPR to 12.0% from 12.5% and a customised nonlinear decline stress curve is applied in the cash flow analysis.

The yield has always been above 21% since the programme inception until February 2020 when a noticeable reduction of approximately 4% started to occur, mainly driven by the moratoria related to the coronavirus outbreak and a Spanish supreme court ruling in March 2020, which deems the 26.82% contractual interest rate of one specific WiZink Bank’s credit card agreement usurious as it was considered notably higher than the average normal money interest rate published by Bank of Spain for the credit card segment at the inception of this specific agreement. After considering the historical trends and potential compression and set-off from further usury rate litigation, DBRS Morningstar reduced the expected yield to 17%.

The charge-offs reported by the Issuer since the programme inception have been historically lower than the entire managed book by approximately 3%. The noticeable better performance is due to the eligibility criteria specifying nondelinquent receivables. The most recent investor report as of February 2021 shows three- and six-month average annualised charge-off rates of 7.7% and 9.3%, respectively. Based on the analysis of historical data, macroeconomic factors, positive selection of eligible receivables, and portfolio-specific adjustment due to the coronavirus impact, DBRS Morningstar maintained the expected charge-off rate at 9.25%.

As the receivables are unsecured and no static vintage data was provided, DBRS Morningstar used a zero-recovery assumption in its cash flow analysis.

Set-off risk exists for this programme as the seller takes deposits. The set-off exposure would crystalise when the borrowers are notified of the receivables assignment. There is, however, no effective mitigant for set-off risk as the borrowers are not likely to be notified until the seller insolvency occurs. To assess the potential set-off impact, DBRS Morningstar assumes the borrowers would most likely apply to the deposit protection scheme than set off directly against the seller should the seller become insolvent. As such, the Issuer could only be exposed to set-off limited by the deposit amount above the protection scheme. The potential impact is assessed in the cash flow analysis considering the likelihood of seller insolvency over the tenor of the notes series.

DBRS Morningstar analysed the program and transaction structure in its proprietary cash flow tool.

On 16 April 2020, the DBRS Morningstar Sovereign group released a set of macroeconomic scenarios for the 2020–22 period in select economies. These scenarios were last updated on 17 March 2021. For details, see the following commentaries: https://www.dbrsmorningstar.com/research/375376/global-macroeconomic-scenarios-march-2021-update and https://www.dbrsmorningstar.com/research/359903/global-macroeconomic-scenarios-application-to-credit-ratings. The DBRS Morningstar analysis considered impacts consistent with the moderate scenario in the referenced reports.

On 8 May 2020, DBRS Morningstar published a commentary outlining how the coronavirus crisis is likely to affect the DBRS Morningstar-rated ABS transactions in Europe. For more details, please see the following commentaries: https://www.dbrsmorningstar.com/research/360734/european-abs-transactions-risk-exposure-to-coronavirus-covid-19-effect and https://www.dbrsmorningstar.com/research/362712/european-structured-finance-covid-19-credit-risk-exposure-roadmap.

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 the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

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.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is: Master European Structured Finance Surveillance Methodology (8 February 2021).

DBRS Morningstar has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

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 these transactions are listed at the end of this press release. These may be found at: https://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 Morningstar Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrsmorningstar.com/research/364527/global-methodology-for-rating-sovereign-governments.

The sources of data and information used for these ratings include investor reports provided by InterMoney Titulización S.G.F.T., S.A.

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

At the time of the initial ratings, 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.

The last rating action on this programme took place on 10 December 2020 when DBRS Morningstar discontinued its ratings of the Series 2017-03, Class A Notes and Series 2017-03, Class C Notes. Prior to that, on 24 April 2020 DBRS Morningstar confirmed its ratings of the Series 2018-01, Class A Notes and Class C Notes, Series 2019-01, Class A Notes and Class C Notes, Series 2019-02, Class A Notes and Class C Notes, Series 2019-03, Class A Notes and Class C Notes.

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 ratings:

-- Expected Yield Rate of 17%
-- Expected MPPR of 12%
-- Expected Charge-Off Rate of 9.25%

Scenario 1: a 25% decrease in the Expected Yield Rate
Scenario 2: a 25% decrease in the Expected MPPR
Scenario 3: a 25% increase in the Expected Charge-Off Rate
Scenario 4: a 15% decrease in the Expected Yield Rate, 15% decrease in the Expected MPPR, and 15% increase in the Expected Charge-Off Rate.

DBRS Morningstar concludes that the expected ratings under the four stress scenarios are:

Series 2018-01:
-- Class A Notes: AA (sf), AA (sf), AA (sf), AA (sf)
-- Class C Notes: BB (high) (sf), BB (high) (sf), BB (high) (sf), BB (sf)

Series 2019-01:
-- Class A Notes: AA (sf), A (sf), A (high) (sf), A (sf)
-- Class C Notes: BB (high) (sf), BB (high) (sf), BB (sf), BB (sf)

Series 2019-02:
-- Class A Notes: AA (high) (sf), AA (low) (sf), AA (sf), AA (sf)
-- Class C Notes: BB (sf), BB (sf), BB (sf), BB (low) (sf)

Series 2019-03:
-- Class A Notes: AA (sf), A (sf), A (high) (sf), A (sf)
-- Class C Notes: BB (sf), BB (sf), BB (sf), BB (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: https://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage: https://www.fca.org.uk/firms/credit-rating-agencies.

These ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Alfonso Candelas, Senior Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date:
Series 2018-01: 18 June 2018
Series 2019-01: 16 April 2019
Series 2019-02: 1 July 2019
Series 2019-03: 1 July 2019

DBRS Ratings GmbH
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60311 Frankfurt am Main Deutschland
Tel. +49 (69) 8088 3500
Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

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

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://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].

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.

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