DBRS Morningstar Upgrades Ratings on Golden Bar (Securitisation) S.r.l. - Series 2020-1

DBRS Ratings GmbH (DBRS Morningstar) upgraded its ratings on the Class A 2020-1 and Class B 2020-1 Notes (the Rated Notes) issued by Golden Bar (Securitisation) S.r.l. - Series 2020-1 (the Issuer) as follows:

-- Class A 2020-1 Notes to AAA (sf) from A (high) (sf)
-- Class B 2020-1 Notes to AA (sf) from BBB (sf)

The rating on the Class A 2020-1 Notes addresses the timely payment of interest and the ultimate repayment of principal by the legal final maturity date in September 2044. The rating on the Class B 2020-1 Notes addresses the timely payment of interest once most senior and the ultimate repayment of principal by the legal final maturity date.

The upgrades follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults, and losses, as of the December 2022 payment date;
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables; and
-- Current available credit enhancement to the Notes to cover the expected losses at their respective rating levels.

The transaction is a securitisation of Italian receivables originated and serviced by Santander Consumer Bank S.p.A (SCB). The original portfolio of EUR 746.5 million was granted to private individuals resident in Italy, and consisted of personal loans (33.6%); loans for the purchase of durable goods and services (3.2%); and both standard amortising (3.1%) and balloon (60.1%) auto loans. The transaction closed in February 2020 and had a 24-month revolving period, which ended in March 2022.

PORTFOLIO PERFORMANCE
As of the December 2022 payment date, loans 0 to 30 days and 30 to 60 days in arrears represented 0.6% and 0.1% of the portfolio balance, respectively, while loans 60 to 90 days in arrears represented 0.04%. Gross cumulative defaults amounted to 1.3% of the aggregate initial portfolio balance, with cumulative recoveries of 20.8% to date.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted a loan-by-loan analysis of the pool of receivables and updated its base case PD and LGD assumptions to 3.5% and 80.8% from 6.9% and 82.4%, respectively, based on the actual portfolio composition following the end of the revolving period, which, along the increased credit enhancement, prompted the rating upgrades.

CREDIT ENHANCEMENT
The subordination of the respective junior obligations provides credit enhancement to the Rated Notes. As of the December 2022 payment date, credit enhancement to the Class A 2020-1 and Class B 2020-1 Notes increased to 22.5% and 12.9% from 15.7% and 9.0%, respectively, at the time of the last annual review 12 months ago, following the end of the revolving period in March 2022.

The transaction benefits from an amortising cash reserve, currently at its target level of EUR 6.6 million, available to cover senior expenses and interest payments on the Class A 2020-1 and Class B 2020-1 Notes. The reserve has a target balance equal to 1.25% of the aggregated outstanding balance of the Rated Notes, subject to a floor of EUR 1.0 million. Additionally, a set-off reserve is expected to be funded and become available to the Issuer if the rating on the servicer’s owner, Santander Consumer Finance S.A., falls below BBB or it ceases to own 100% of the originator’s share capital.

Banco Santander SA (Santander) acts as the Spanish account bank for the transaction while Citibank N.A., Milan Branch (Citibank-Milan) acts as the Italian account bank. Based on the account bank reference rating of A (high) on Santander (one notch below DBRS Morningstar’s Long Term Critical Obligations Rating of AA (low)), DBRS Morningstar’s private rating on Citibank-Milan, 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 banks to be consistent with the ratings assigned to the Rated Notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect 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 ratings is the “Master European Structured Finance Surveillance Methodology” (7 February 2023), https://www.dbrsmorningstar.com/research/409485/master-european-structured-finance-surveillance-methodology.

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.

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 these ratings include investor reports provided by Citibank N.A., London Branch (the computation agent), servicer reports by SCB, and loan-level data provided by the European DataWarehouse GmbH.

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 purpose 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 transaction took place on 14 February 2022, when DBRS Morningstar confirmed its ratings on the Class A 2020-1 and Class B 2020-1 Notes at A (high) (sf) and BBB (sf), respectively.
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 ratings, DBRS Morningstar considered the following stress scenarios as compared with the parameters used to determine the ratings (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 3.5% and 80.8%, 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 on the Class A 2020-1 Notes would be expected to remain at AAA (sf), ceteris paribus. If the PD increases by 50%, the rating on the Class A 2020-1 Notes would be expected to decrease to AA (sf), ceteris paribus. Furthermore, if both the PD and LGD increase by 50%, the rating on the Class A 2020-1 Notes would be expected to decrease to AA (sf).

Class A 2020-1 Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (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 (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (sf)

Class B 2020-1 Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD, expected rating of AA (low) (sf)
-- 50% increase in PD, expected rating of A (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (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: Daniel Rakhamimov, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 27 February 2020

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

-- Master European Structured Finance Surveillance Methodology (7 February 2023), https://www.dbrsmorningstar.com/research/409485/master-european-structured-finance-surveillance-methodology.
-- Rating European Consumer and Commercial Asset-Backed Securitisations (19 October 2022), https://www.dbrsmorningstar.com/research/404212/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.
-- Legal Criteria for European Structured Finance Transactions (22 July 2022),
https://www.dbrsmorningstar.com/research/400166/legal-criteria-for-european-structured-finance-transactions.
-- 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.
-- 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.
-- 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.

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].