DBRS Morningstar Confirms Rating on Purple Master Credit Cards

DBRS Ratings GmbH (DBRS Morningstar) confirmed its AAA (sf) rating on the Series 2020-1, Class A Notes (Class A Notes) issued by Purple Master Credit Cards.

The confirmation follows an annual review of the transaction and is based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, charge-off, principal payment, and yield rates, as of the August 2022 payment date;
-- The ability of programme- and series-specific structures to withstand stressed cash flow assumptions;
-- No revolving termination event; and
-- The current levels of credit enhancement available to the Class A Notes to cover expected losses at the AAA (sf) rating level.

The rating on the Class A Notes addresses the timely payment of scheduled interest and the ultimate repayment of principal by the legal final maturity date in October 2034.

The transaction is a 2015 securitisation of French revolving credit card receivables, originated and serviced by BPCE Financement SA (BPCE). The transaction included an initial 18-month revolving period, which has been extended three times over the life of the transaction. The first two amendments, which occurred in 2016 and in October 2018, extended the revolving period by another 24 months each while the latest amendment in October 2020 extended the revolving period by another 28 months.

PORTFOLIO PERFORMANCE
As of the August 2022 payment date, loans that were one to two months and two to three months delinquent represented 0.5% and 0.3% of the portfolio balance, respectively, while loans more than three months delinquent represented 0.2%. The annualised portfolio yield is currently 12.6%, and the monthly principal payment rate is currently 7.3% and has averaged 7.5% since closing. The annualised charge-off rate has averaged 1.0% since closing and currently stands at 0.9%.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
The monthly principal payment rates (MPPRs) of the securitised portfolio have been fairly stable at higher than 5.0% over the reported period. Based on the historical trends and macroeconomic factors, DBRS Morningstar maintained its expected MPPR assumption at 4.5%.

Similarly, the portfolio yield has been stable over the reported period. The yield dropped to a low of 10.6% in August 2020, excluding recoveries, but quickly recovered to prior levels. As a result, DBRS Morningstar maintained its expected cash interest yield assumption at 11.5%.

The charge-off rates declined from March 2017 to December 2020, but began increasing to pre-Coronavirus Disease (COVID-19) levels in July 2021. Based on the historical trends and macroeconomic factors, DBRS Morningstar maintained its expected charge-off rate assumption at 4.5% for this review.

CREDIT ENHANCEMENT
Credit enhancement is provided by the subordination of the Class S Notes. As of the August 2022 payment date, credit enhancement to the Class A Notes was 17.3%.

The transaction benefits from an amortising reserve fund available to cover senior expenses and Class A Notes interest. This reserve, which BPCE funded to EUR 5.5 million at closing, has a target level of 1.0% of the aggregate outstanding principal balance of the Class A Notes and is subject to a floor of EUR 2.75 million. It has been at its required balance since closing.

Natixis S.A. (Natixis) acts as the account bank for the transaction. Based on DBRS Morningstar’s private rating on Natixis, the downgrade provisions outlined in the transaction documents, and structural mitigants, DBRS Morningstar considers the risk arising from the exposure to Natixis 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.

Natixis also acts as the swap counterparty for the transaction. DBRS Morningstar’s private rating on Natixis is consistent with the First Rating Threshold as described in DBRS Morningstar’s “Derivative Criteria for European Structured Finance Transactions” methodology.

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 (17 May 2022).

DBRS Morningstar analysed the transaction structure with its proprietary cash flow engine.

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 continues to consider 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 monthly investor reports provided by EuroTitrisation.

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 6 October 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 to the parameters used to determine the rating (the base case):

-- Expected charge-off rate: 4.5%
-- Expected principal payment rate: 4.5%
-- Expected yield rate: 11.5%

Scenario 1: A 25% increase on the expected charge-off rate.
Scenario 2: A 25% decrease on the expected principal payment rate.
Scenario 3: A 25% decrease on the expected yield rate.
Scenario 4: A 15% increase on the expected charge-off rate, 15% decrease on the expected principal payment rate and 15% decrease on the expected yield rate.

DBRS Morningstar concludes that the expected rating of the Class A Notes under the four stress scenarios are AAA (sf), AAA (sf), AAA (sf), and AA (high) (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: 17 March 2015

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: http://www.dbrsmorningstar.com/about/methodologies.

-- Legal Criteria for European Structured Finance Transactions (22 July 2022),
https://www.dbrsmorningstar.com/research/400166/legal-criteria-for-european-structured-finance-transactions.
-- Master European Structured Finance Surveillance Methodology (19 May 2022),
https://www.dbrsmorningstar.com/research/397033/master-european-structured-finance-surveillance-methodology.
-- Operational Risk Assessment for European Structured Finance Originators (15 September 2022), https://www.dbrsmorningstar.com/research/402773/operational-risk-assessment-for-european-structured-finance-originators.
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2022), https://www.dbrsmorningstar.com/research/402774/operational-risk-assessment-for-european-structured-finance-servicers.
-- Interest Rate Stresses for European Structured Finance Transactions (22 September 2022), https://www.dbrsmorningstar.com/research/402943/interest-rate-stresses-for-european-structured-finance-transactions.
-- Derivative Criteria for European Structured Finance Transactions (20 September 2021),
https://www.dbrsmorningstar.com/research/384624/derivative-criteria-for-european-structured-finance-transactions.
-- Rating European Consumer and Commercial Asset-Backed Securitisations (29 October 2021), https://www.dbrsmorningstar.com/research/387042/rating-european-consumer-and-commercial-asset-backed-securitisations.
-- Rating European Structured Finance Transactions Methodology (15 July 2022),
https://www.dbrsmorningstar.com/research/399899/rating-european-structured-finance-transactions-methodology.
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (17 May 2022), https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

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].