Press Release

DBRS Morningstar Finalises Provisional Ratings on Noria 2021

Consumer Loans & Credit Cards

July 26, 2021

DBRS Ratings GmbH (DBRS Morningstar) finalised the provisional ratings on the following notes issued by Noria 2021 (the Issuer):

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

DBRS Morningstar does not rate the Class G Notes also issued in the transaction.

The rating of the Class A Notes addresses the timely payment of scheduled interest and the ultimate repayment of principal by the legal maturity date. The ratings of the Class B, Class C, Class D, Class E, and Class F Notes address the ultimate payment of interest and ultimate repayment of principal by the legal maturity date while junior to other outstanding classes of notes, but the timely payment of scheduled interest when they are the senior-most tranche.

The transaction is a securitisation fund with French unsecured consumer loan receivables originated by BNP Paribas Personal Finance (the originator and servicer) with the BNP Paribas group.

The ratings are based on a review of the following analytical considerations:
-- The transaction’s capital structure, including form and sufficiency of available credit enhancement to support the projected expected net losses under various stress scenarios.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay the notes according to the terms of the notes.
-- The originator’s financial strength and capabilities with respect to originations, underwriting, and servicing.
-- The operational risk review of the originator, 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 on the Republic of France at AA (high) with a Stable trend.
-- The consistency of the transaction’s legal structure with DBRS Morningstar’s “Legal Criteria for European Structured Finance Transactions” methodology.
-- Current economic environment and an assessment of sustainable performance, as a result of the Coronavirus Disease (COVID-19) pandemic.

TRANSACTION STRUCTURE
The transaction represents the issuance of Class A, Class B, Class C, Class D, Class E, Class F, and Class G Notes (together, the Notes) backed by a pool of approximately EUR 900 million of fixed-rate, unsecured, and amortising personal loans, debt consolidation loans, and sales finance loans granted to individuals domiciled in France and serviced by the originator.

The transaction envisages a 11-month revolving period during which time the Issuer will purchase new receivables that the originator may offer, provided that certain conditions set out in the transaction documents are satisfied.

The transaction benefits from a cash reserve equal to 1% of the Class A, Class B, Class C, Class D Notes balance funded by the seller at closing that is available to the Issuer during the revolving and normal redemption periods only when the principal collections are not sufficient to cover the interest deficiencies, which are defined as the shortfalls in senior expenses, swap payments, and interests on the Class A Notes, and if not subordinated, interest on the Class B, Class C, and Class D Notes.

A commingling reserve facility is also available to the Issuer if the specially dedicated account bank is rated below the account bank required rating or following a breach of its material obligations. The required amount is equal to the sum of 2.5% of the performing receivables and 0.6% of the outstanding principal balance of the initial receivables.

COUNTERPARTIES
BNP Paribas Securities Services is the account bank and BNP Paribas SA is the specially dedicated account bank for the transaction. Based on DBRS Morningstar’s private rating on BNP Paribas Securities Services and its public rating on BNP Paribas, and downgrade provisions outlined in the transaction documents, DBRS Morningstar considers the risk arising from the exposure to the account bank and specially dedicated account bank to be commensurate with the ratings assigned.

The originator also acts as the swap counterparty for the transaction. DBRS Morningstar's private rating on the originator is consistent with the first rating threshold as described in DBRS Morningstar's "Derivative Criteria for European Structured Finance Transactions" methodology.

PORTFOLIO ASSUMPTIONS, COVID-19 CONSIDERATIONS AND KEY DRIVERS
The originator has a long operating history of consumer loan lending. The performance to date has been stable based on a detailed vintage analysis. DBRS Morningstar also benchmarked the portfolio performance to comparable consumer loan portfolios in France and revised its asset assumptions of lifetime gross default and recovery assumptions to 6.3% and 40%, respectively, based on the worst possible concentration limits during the scheduled revolving period.

The coronavirus and the resulting isolation measures have caused an economic contraction, leading to sharp increases in unemployment rates and income reductions for many borrowers. DBRS Morningstar anticipates that delinquencies may continue to increase in the coming months for many asset-backed security (ABS) transactions, some meaningfully. The ratings are based on additional analysis to expected performance as a result of the global efforts to contain the spread of the coronavirus. For this transaction, DBRS Morningstar assumed a moderate decline in the expected recovery rate.

DBRS Morningstar analysed the transaction structure in Intex DealMaker.

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 18 June 2021. For details, see the following commentaries: https://www.dbrsmorningstar.com/research/380281/global-macroeconomic-scenarios-june-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 and 17 June 2020, DBRS Morningstar published commentaries outlining how the coronavirus crisis is likely to affect DBRS Morningstar-rated ABS transactions in Europe. For more details, please see these 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 structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

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.

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 “Rating European Consumer and Commercial Asset-Backed Securitisations” (3 September 2020).

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found at: https://www.dbrsmorningstar.com/about/methodologies.

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 considers the potential portfolio migration based on the replenishment criteria set forth in the transaction legal documents.

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/381451/global-methodology-for-rating-sovereign-governments.

The data and information used for the rating include performance and portfolio data relating to the receivables provided by the originator directly or through the arranger, BNP Paribas, as follows:

-- Quarterly default vintage analysis from Q1 2011 to Q1 2021;
-- Quarterly recovery vintage analysis from Q1 2011 to Q1 2021;
-- Dynamic monthly prepayment analysis from January 2014 to March 2021; and
-- Dynamic monthly delinquency data from January 2011 to March 2021.

DBRS Morningstar was also provided with detailed stratification tables as of 31 May 2021.

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 a newly issued financial instrument. These are the first DBRS Morningstar ratings on this financial instrument.

This is the first rating action since the Initial Rating Date.

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 rating, DBRS Morningstar considered the following stress scenarios, as compared to the parameters used to determine the rating:
-- Expected Default Rate of 6.3%, a 25% and 50% increase.
-- Expected Loss Given Default (LGD) of 60%, 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 expected LGD.
Scenario 4: A 25% increase in the expected Default Rate and 25% increase in the expected LGD.
Scenario 5: A 50% increase in the expected Default Rate and 25% increase in the expected LGD.
Scenario 6: A 50% increase in the expected LGD.
Scenario 7: A 25% increase in the expected Default Rate and 50% increase in the expected LGD.
Scenario 8: A 50% increase in the expected Default Rate and 50% increase in the expected LGD.

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

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: Roberto Perez, Assistant Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 30 June 2021

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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