DBRS Morningstar Takes Rating Actions on Three Sunrise Transactions

DBRS Ratings GmbH (DBRS Morningstar) took the following rating actions on the notes issued by Sunrise SPV Z70 S.r.l. - Sunrise 2019-1 (Sunrise 2019-1), Sunrise SPV 92 S.r.l. - Sunrise 2021-1 (Sunrise 2021-1), and Sunrise SPV 94 S.r.l. - Sunrise 2022-1 (Sunrise 2022-1) (collectively, the Transactions):

Sunrise 2019-1:
-- Class B Notes upgraded to AAA (sf) from AA (high) (sf);
-- Class C Notes upgraded to AAA (sf) from A (high) (sf).

The ratings on the Class B and Class C Notes address the timely payment of interest and the ultimate repayment of principal by the legal final maturity date in May 2044.

Sunrise 2021-1:
-- Class A Notes upgraded to AAA (sf) from AA (high) (sf);
-- Class B Notes upgraded to AA (high) (sf) from A (high) (sf);
-- Class C Notes upgraded to AA (sf) from BBB (high) (sf);
-- Class D Notes upgraded to A (high) (sf) from BBB (sf);
-- Class E Notes upgraded to BBB (high) (sf) from BB (high) (sf).

The rating on the Class A Notes addresses the timely payment of scheduled interest and the ultimate repayment of principal on or before the legal final maturity date in July 2046. The ratings on the Class B, Class C, Class D, and Class E Notes address the ultimate payment of interest but the timely payment of scheduled interest when they become the senior-most tranche, and the ultimate repayment of principal on or before the legal final maturity date.

Sunrise 2022-1:
-- Class A Notes upgraded to AAA (sf) from AA (high) (sf);
-- Class B Notes confirmed at AA (sf);
-- Class C Notes confirmed at A (sf);
-- Class D Notes confirmed at BBB (high) (sf);
-- Class E Notes upgraded to BBB (sf) from BBB (low) (sf).

The ratings on the Class A and Class B Notes address the timely payment of scheduled interest and the ultimate repayment of principal by the legal final maturity date in January 2047. The ratings on the Class C, Class D, and Class E Notes address the ultimate payment of scheduled interest while the class is subordinated and the timely payment of scheduled interest as the most senior class, and the ultimate repayment of principal by the legal final maturity date.

The rating actions follow an annual review of the transactions and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults, and losses, as of the February 2023 payment date.
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables.
-- No revolving period termination event have occurred for Sunrise 2022-1.
-- Current available credit enhancement to the rated notes to cover the expected losses at their respective rating levels.

The transactions are securitisations of unsecured Italian consumer loan receivables granted to retail clients and originated by Agos Ducato S.p.A (the originator). The portfolios comprise new and used automobile loans, personal loans, furniture loans, and other-purpose loans. Sunrise 2019-1, Sunrise 2021-1, and Sunrise 2022-1 closed on 23 May 2019, 29 March 2021, and 28 March 2022, respectively. Sunrise 2022-1 includes a 12-month revolving period scheduled to end on the April 2023 payment date. The revolving period may end earlier than scheduled if certain events occur, such as the breach of performance triggers, insolvency of the originator, or replacement of the servicer.

PORTFOLIO PERFORMANCE
-- For Sunrise 2019-1, as of the February 2023 payment date, loans that were one to two months and two to three months delinquent represented 0.9% and 0.4% of the portfolio balance, respectively, while loans more than three months delinquent represented 0.7%. Gross cumulative defaults amounted to 2.2% of the aggregate original and subsequent portfolios, of which 8.2% has been recovered so far.

-- For Sunrise 2021-1, as of the February 2023 payment date, loans that were one to two months and two to three months delinquent represented 0.3% and 0.2% of the portfolio balance, respectively, while loans more than three months delinquent represented 0.3%. Gross cumulative defaults amounted to 1.2% of the aggregate original and subsequent portfolios, of which 4.7% has been recovered so far.

-- For Sunrise 2022-1, as of the February 2023 payment date, loans that were one to two months and two to three months delinquent represented 0.4% and 0.2% of the portfolio balance, respectively, while loans more than three months delinquent represented 0.4%. Gross cumulative defaults amounted to 0.7% of the aggregate original and subsequent portfolios, of which 1.8% has been recovered so far.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar received updated historical vintage data from the originator and updated its base case PD and LGD assumptions for all transactions as follows:
-- For Sunrise 2019-1, DBRS Morningstar updated its PD and LGD assumptions to 5.6% and 90.3%, respectively.
-- For Sunrise 2021-1, DBRS Morningstar updated its PD and LGD assumptions to 5.1% and 90.2%, respectively.
-- For Sunrise 2022-1, DBRS Morningstar updated its PD and LGD assumptions to 5.0% and 90.1%, respectively. This takes into account the current portfolio composition given that Sunrise 2022-1 is becoming static on the May 2023 payment date.

CREDIT ENHANCEMENT
The subordination of the respective junior notes and the cash reserve provides credit enhancement to the rated notes. As of the February 2023 payment date, the credit enhancement (CE) was as follows:
-- For Sunrise 2019-1, CE to the Class B and Class C Notes was 79.5% and 48.1%, respectively, up from 50.4% and 30.4%, respectively, at the last annual review.
-- For Sunrise 2021-1, CE to the Class A, Class B, Class C, Class D, and Class E Notes was 42.0%, 31.1%, 21.7%, 14.9%, and 8.7%, respectively, up from 35.3%, 26.2%, 18.2%, 12.5%, and 7.3%, respectively, at the last annual review.
-- For Sunrise 2022-1, CE to the Class A, Class B, Class C, Class D, and Class E Notes was 30.3%, 21.5%, 13.8%, 9.6%, and 7.0%, respectively, up from 28.3%, 19.5%, 11.8%, 7.6%, and 5.0%, respectively, at closing.

The increased credit enhancement on Sunrise 2022-1, still within its revolving period, is due to the cash reserve that was funded to EUR 5.6 million at closing and was later topped up using excess spread up to its current targeted amount, i.e., EUR 27.9 million.

The transactions benefit from several funded reserves. The non-amortising Payment Interruption Risk reserve account has a current balance of EUR 5.5 million, EUR 7.0 million, and EUR 5.6 million for Sunrise 2019-1, Sunrise 2021-1, and Sunrise 2022-1, respectively, and is available to cover senior expenses and interest payments on the rated notes, providing liquidity support to the transaction.

Credit support is provided through an amortising cash reserve with a target balance equal to 2.5% of the outstanding performing collateral principal for all transactions. The cash reserves are currently at their target balance of EUR 8.7 million, EUR 29.5 million, and EUR 27.9 million for Sunrise 2019-1, Sunrise 2021-1, and Sunrise 2022-1, respectively, and can be used to offset the principal losses of defaulted receivables.

The transactions also provision for a rata posticipata cash reserve, which mitigates the liquidity risk arising from flexible loans. This reserve will be only funded if, for two consecutive payment dates, the outstanding balance of the flexible loans in relation to which the debtors have exercised the contractual right to postpone the payments is higher than 5.0% of the outstanding balance of all flexible loans. As of the February 2023 payment date, this condition had not been met for any of the transactions.

Crédit Agricole Corporate & Investment Bank, Milan branch (CACIB Milan) acts as the account bank for all the transactions. Based on the DBRS Morningstar private rating on CACIB 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 bank 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 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 analysed the transactions structures in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is: “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 these transactions 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 transactions in accordance with the principal methodology.

A review of the transactions’ 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 CACIB Milan and loan-level data provided by the European DataWarehouse GmbH. Additionally, DBRS Morningstar was provided with updated historical performance data as follows:
-- Quarterly static default data from Q1 2004 to Q4 2021;
-- Quarterly static recovery data from Q1 2001 to Q4 2021;
-- Static prepayment rates by annual vintages from 2003 to 2021; and
-- Monthly dynamic delinquency data from June 2008 to December 2021.

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 Sunrise 2019-1 took place on 14 March 2022, when DBRS Morningstar confirmed its AAA (sf) rating on the Class A Notes and upgraded its ratings on the Class B and Class C Notes to AA (high) (sf) and A (high) (sf), respectively, from AA (sf) and A (low) (sf), respectively.
-- The last rating action on Sunrise 2021-1 took place on 14 March 2022, when DBRS Morningstar confirmed its ratings on the Class A, Class B, Class C, Class D, and Class E Notes at AA (high) (sf), A (high) (sf), BBB (high) (sf), BBB (sf), and BB (high) (sf), respectively.
-- This is the first rating action for Sunrise SPV 94 S.r.l. - Sunrise 2022-1 since the Initial Rating Date.

The lead analyst responsibilities for Sunrise SPV 94 S.r.l. - Sunrise 2022-1 have been transferred to Preben Cornelius Overas.

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available on 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):
-- For Sunrise 2019-1, the base case PD and LGD of the current pool of loans are 5.6% and 90.3%, respectively.
-- For Sunrise 2021-1, the base case PD and LGD of the current pool of loans are 5.1% and 90.2%, respectively.
-- For Sunrise 2022-1, the base case PD and LGD of the current pool of loans are 5.0% and 90.1%, respectively.

-- DBRS Morningstar expected a lifetime base case PD and LGD for the pools based on a review of the current assets. Adverse changes to asset performances may cause stresses to base case assumptions and therefore have a negative effect on credit ratings.
-- 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 Sunrise 2019-1 Class B Notes would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Sunrise 2019-1 Class B Notes would be expected to remain at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating on the Sunrise 2019-1 Class B Notes would be expected to remain at AAA (sf).

Sunrise 2019-1 Class B 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 AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AAA (sf)

Sunrise 2019-1 Class C 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 (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)

Sunrise 2021-1 Class A 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 AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AAA (sf)

Sunrise 2021-1 Class B 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 (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)

Sunrise 2021-1 Class C 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 (sf)
-- 50% increase in PD, expected rating of AA (low) (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 (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)

Sunrise 2021-1 Class D Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in LGD, expected rating of A (high) (sf)
-- 25% increase in PD, expected rating of A (high) (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)

Sunrise 2021-1 Class E Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD, expected rating of BBB (high) (sf)
-- 50% increase in PD, expected rating of BBB (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (sf)

Sunrise 2022-1 Class A 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 AAA (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)

Sunrise 2022-1 Class B 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 (sf)
-- 50% increase in PD, expected rating of AA (low) (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 (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)

Sunrise 2022-1 Class C Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (sf)
-- 50% increase in LGD, expected rating of A (sf)
-- 25% increase in PD, expected rating of A (sf)
-- 50% increase in PD, expected rating of A (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf)

Sunrise 2022-1 Class D Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD, expected rating of BBB (high) (sf)
-- 50% increase in PD, expected rating of BBB (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BBB (sf)

Sunrise 2022-1 Class E Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (sf)
-- 50% increase in LGD, expected rating of BBB (sf)
-- 25% increase in PD, expected rating of BBB (sf)
-- 50% increase in PD, expected rating of BB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BB (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of BB (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.

These ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Preben Cornelius Overas, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President

Initial Rating Dates:
Sunrise 2019-1: 8 May 2019
Sunrise 2021-1: 29 March 2021
Sunrise 2022-1: 28 March 2022

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.

-- Master European Structured Finance Surveillance Methodology (7 February 2023), https://www.dbrsmorningstar.com/research/409485/master-european-structured-finance-surveillance-methodology.
-- Legal Criteria for European Structured Finance Transactions (22 July 2022), https://www.dbrsmorningstar.com/research/400166/legal-criteria-for-european-structured-finance-transactions.
-- 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.
-- 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.
-- 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.
-- 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.

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].