Press Release

DBRS Morningstar Confirms Ratings of Wizink Master Credit Cards Fondo de Titulización

Consumer Loans & Credit Cards

April 22, 2022

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

-- 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 rating confirmations follow an annual review of the transaction and are based on the following analytical considerations:

-- Portfolio performance, in terms of delinquencies, losses, payment rates, and collateral yield, as of the February 2022 payment date;
-- The ability of programme- and series-specific structures to withstand stressed cash flow assumptions.
-- Current credit enhancement to cover the expected losses at the respective rating levels of the notes series.
-- No programme revolving termination event has occurred.

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

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 the 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 over-collateralisation, and excess spread.

The programme also includes a general reserve that is available to cover the shortfalls in senior expenses, and interest on the Class A Notes of the entire programme. The general reserve is amortising, subject to a floor amount of 0.6% of the initial Class A Notes balance of all the notes series.

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

DBRS Morningstar notes that the seller established another securitisation programme, aZul Master Credit Cards DAC, in July 2020 and the collateral outstanding balance of the Issuer has been gradually declining following the repayment of the outstanding series.

COUNTERPARTIES
Banco Santander S.A. is the issuer account bank and BNP Paribas Securities Services, Sucursal en España, is the excess account bank for the programme. Based on DBRS Morningstar’s ratings of 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 both account banks to be consistent with the ratings assigned to the notes as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
The 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 historical trends, DBRS Morningstar maintained the expected MPPR at 12.0% and a customised nonlinear stress is applied in the cash flow analysis.

The portfolio yield has historically been above 21% since the programme inception until February 2020 when a noticeable reduction of approximately 4% started, mainly driven by the moratoria related to the Coronavirus Disease (COVID-19) outbreak and a Spanish supreme court ruling in March 2020. The ruling deems the 26.82% contractual interest rate of one specific WiZink Bank’s credit card agreement to be 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 recent trends, and potential impact from further usury rate litigation, DBRS Morningstar reduced the expected yield to 16.7% from 17.0%.

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 that specify non-delinquent receivables. The most recent investor report of this Issuer shows three- and six-month average annualised charge-off rates of 9.1% and 9.7% as of February 2022, respectively. Based on the analysis of historical trends, DBRS Morningstar increased the expected charge-off rate to 9.75% from 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 also takes deposits. While the set-off exposure would crystalise when the borrowers are notified of the receivables assignment, which is, however, not an 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 rather apply to the deposit protection scheme than to set off directly against the seller should the seller become insolvent. As such, the Issuer would only in theory have set-off exposure of the deposit amount above the protection scheme limit of EUR 100,000. The potential impact is assessed in the cash flow analysis.

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

DBRS Morningstar expects the Series 2019-02 notes to enter into the scheduled amortisation in May 2022. Based on the current payment rates, Series 2019-02 notes are expected to be fully repaid by the next annual review date in April 2023.

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 2022).

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 programme, the analysis continues to consider potential portfolio migration based on 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.

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 DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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 23 April 2021 when 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; and Series 2019-03, Class A Notes and Class C Notes.

The lead analyst responsibilities for this transaction have been transferred to Roberto Perez.

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 with the parameters used to determine the ratings:

-- Expected Yield Rate of 16.7%
-- Expected MPPR of 12%
-- Expected Charge-Off Rate of 9.75%

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

Series 2019-03:
-- Class A Notes: AA (low) (sf), A (low) (sf), A (high) (sf), A (low) (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: Roberto Perez, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date:
Series 2019-02: 1 July 2019
Series 2019-03: 1 July 2019

DBRS Ratings GmbH
Neue Mainzer Straße 75
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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