Press Release

DBRS Morningstar Confirms Rating on Noria 2020

Consumer Loans & Credit Cards

September 05, 2022

DBRS Ratings GmbH (DBRS Morningstar) confirmed its rating on the Class A Notes issued by Noria 2020 (the Issuer) at AAA (sf).

The rating on the Class A Notes addresses the timely payment of interest and the ultimate repayment of principal by the legal final maturity date in September 2040.

The confirmation follows an annual review of the transaction and is based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults, and losses, as of August 2022 payment date;
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables;
-- Current available credit enhancement to the Class A Notes to cover the expected losses at their AAA (sf) rating level; and
-- No revolving termination events have occurred.

The transaction is a securitisation collateralised by a portfolio of personal, debt consolidation, and sales finance loans serviced and granted by BNP Paribas Personal Finance (the Originator). The transaction includes a 24-month revolving period which is scheduled to end on the September 2022 payment date. During the revolving period, the transaction allows partial pro rata amortisation if certain triggers are breached during the revolving period, but will amortise on a fully sequential basis once the revolving period ends (the revolving period may end earlier than scheduled if certain events occur, such as the breach of performance triggers).

During the revolving period, there have been two optional repurchase of purchased receivables events in accordance with the transaction documentation, on 31 May 2021 and on 31 May 2022. As a result, the Class A and the unrated Class B Notes have amortised on a pro rata basis down to a class factor of 0.12.

PORTFOLIO PERFORMANCE
As of the August 2022 payment date, loans that were one to two months and two to three months delinquent represented 0.9% and 0.4% of the principal outstanding balance of the portfolio, respectively, while loans that were more than three months delinquent represented 0.2%. Gross cumulative defaults amounted to 2.1% of the original portfolio balance, with cumulative recoveries of 6.7% to date.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar received updated historical vintage data and updated its base case PD and LGD assumptions to 6.2% and 58.0%, respectively. As the transaction is still in its revolving period, DBRS Morningstar has continued to base the analysis on the worst case portfolio composition according to the replenishment criteria set forth in the transaction legal documents.

CREDIT ENHANCEMENT
The subordination of the Class B Notes provides credit enhancement to the Class A Notes. As of the August 2022 payment date, credit enhancement to the Class A Notes remained unchanged since closing at 23.0% because of the inclusion of the revolving period and the pro rata amortisation of the notes so far.

The transaction benefits from a liquidity reserve which is available to cover the senior expenses, swap costs, and Class A Notes interest, but only if interest collections and principal collections are not sufficient to cover shortfalls. The required reserve is 1.0% of the outstanding balance of the Class A Notes. The reserve is currently at its target level of EUR 6.7 million.

BNP Paribas SA acts as the special dedicated account bank and BNP Paribas Securities Services SCA acts as the account bank. Based on the DBRS Morningstar reference rating of AA on BNP Paribas SA (one notch below its Long Term Critical Obligations Rating of AA (high)), the private rating on BNP Paribas Securities Services SCA, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS Morningstar 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 Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

BNP Paribas Personal Finance is the cash swap counterparty for the transaction. DBRS Morningstar notes that for the AAA (sf) rating of the Class A Notes, the downgrade provisions in the transaction documents are not consistent with DBRS Morningstar’s Derivative Criteria for European Structure Finance Transactions, which has been considered in the cash flow analysis.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant impact on the credit analysis.

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/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

DBRS Morningstar analysed the transaction structure in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is the “Master European Structured Finance Surveillance Methodology” (19 May 2022).

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.

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 potential portfolio migration based on the 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/401817/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 this rating include investor reports provided by France Titrisation, and loan-level data provided by the European DataWarehouse GmbH. In the context of a new transaction from the same Originator, DBRS Morningstar was also provided with updated historical performance data as follows:
-- Quarterly default vintage analysis from Q1 2012 to Q1 2022;
-- Quarterly recovery vintage analysis from Q1 2012 to Q1 2022;
-- Dynamic monthly prepayment analysis from January 2014 to March 2022; and
-- Dynamic monthly delinquency data from April 2012 to March 2022.

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

At the time of the initial rating, 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 this rating 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 transaction took place on 8 September 2021, when DBRS Morningstar confirmed its AAA (sf) rating on the Class A Notes.

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

Sensitivity Analysis: To assess the impact of changing the transaction parameters on the rating, DBRS Morningstar considered the following stress scenarios as compared with the parameters used to determine the rating (the Base Case):

-- DBRS Morningstar 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 6.2% and 58.0%, 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 AA (high) (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 AA (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 A (sf).

Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD, expected rating of AA (high) (sf)
-- 50% increase in PD, expected rating of AA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (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. 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.

This rating is endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Preben Cornelius Overas, Senior Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 18 September 2020

DBRS Ratings GmbH
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Tel. +49 (69) 8088 3500
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Amtsgericht Frankfurt am Main, HRB 110259

The rating methodologies used in the analysis of this transaction can be found at: http://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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