DBRS Morningstar Confirms Ratings on Golden Bar (Securitisation) S.r.l. - Series 2022-1

DBRS Ratings GmbH (DBRS Morningstar) confirmed its ratings on the notes issued by Golden Bar (Securitisation) S.r.l. - Series 2022-1 (the Issuer) as follows:

-- Class A Notes at A (sf)
-- Class B Notes at A (low) (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 December 2044. The rating on the Class B Notes addresses the ultimate payment of interest and principal on or before the legal final maturity date.

The confirmations 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 April 2023 payment date;
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables;
-- The current available credit enhancement to the rated notes to cover the expected losses at their respective rating levels; and
-- No purchase termination events have occurred to date.

The transaction represents the issuance of the Class A, Class B, and Class Z Notes, backed by a portfolio of fixed-rate receivables related to Italian salary- and pension-assignment as well as payment delegation loans granted by Santander Consumer Bank S.p.A. (SCB or the servicer) to individuals residing in Italy. The transaction is structured with a 24-month ramp-up period until the May 2024 payment date (excluded), during which the Issuer may purchase new receivables, provided that certain conditions set out in the transaction documents are satisfied.

PORTFOLIO PERFORMANCE
As of the 27 March 2023 portfolio cut-off date, loans that were two to three months in arrears represented 0.2% of the outstanding portfolio balance, while the 90+ delinquency ratio was 0.6%. The gross cumulative default ratio stood at 0.7% of the total purchased receivables since closing.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted a loan-by-loan analysis of the outstanding pool of receivables and has updated its base-case PD and LGD assumptions to 8.6% and 19.7%, respectively.

DBRS Morningstar continues to base its analysis on the worst-case portfolio constructed to address potential migration towards the riskiest products during the ramp-up period.

CREDIT ENHANCEMENT
Credit enhancement to the rated notes consists of the subordination of the respective junior notes. As of the April 2023 payment date, credit enhancements available to the Class A Notes and Class B Notes were 10.0% and 5.0%, respectively, unchanged from closing because of the ramp-up period.

The transaction benefits from an amortising cash reserve, which was fully funded at closing with a subordinated loan provided by SCB. The cash reserve is available to cover expenses, senior fees, and interest payments on the rated notes. The cash reserve target is equal to 1.7% of the aggregated principal amount outstanding of the rated notes, with a floor of EUR 1,000,000. The cash reserve target will step up to 2.5% if the rating of the servicer’s owner, Santander Consumer Finance S.A. (SCF), falls below BBB, or if SCF ceases to own at least 75% of the share capital of SCB. As of the April 2023 payment date, the cash reserve was at its target of EUR 10.8 million.

Furthermore, the transaction benefits from a set-off reserve, which the servicer will fund in case of a set-off reserve trigger event (i.e., if the rating of SCF falls below BBB or if SCF ceases to own at least 75% of the share capital of SCB). The set-off reserve is designed to mitigate the retention risk deriving from early termination of loans whose financed amount contains capitalised start-up fees and upfront costs. As of the April 2023 payment date, the reserve was not funded.

Banco Santander S.A., Milan Branch acts as the account bank for the transaction. Based on DBRS Morningstar’s private rating on the account bank, the downgrade provisions outlined in the transaction documents, and structural mitigants 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 notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
General Considerations

Social (S) and Governance (G) Factors
The high exposure to public-sector employees, pensioners, and civil servants makes the programme dependent on the creditworthiness of the Italian sovereign. DBRS Morningstar considers some of the key drivers behind the latest rating action on Italy – namely Human Capital and Human Rights (S) and Institutional Strength, Governance & Transparency (G) – to be significant rating factors. According to the IMF Word Economic Outlook, Italy’s GDP per capita of USD 34,113 in 2022 was low compared with its euro area peers. At the same time, according to the World Bank, Italy ranked in the 64.9th percentile for Governance Effectiveness in 2021. DBRS Morningstar took these factors into account in the “Economic Structure and Performance”, “Fiscal Management and Policy”, and “Political Environment” building blocks of its “Global Methodology for Rating Sovereign Governments”.

Credit rating actions on Italy are likely to have an impact on this credit rating. ESG factors that have a significant or relevant effect on the credit analysis of Italy are discussed separately at https://www.dbrsmorningstar.com/research/413261/dbrs-morningstar-confirms-republic-of-italy-at-bbb-high-stable-trend.

There were no Environmental factors that had a significant or relevant effect on the credit analysis.

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” (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.

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 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 these ratings include servicer reports, investor reports and additional performance information provided by SCB as well as 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 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.

This is the first rating action since the Initial Rating Date.

The lead analyst responsibilities for this transaction have been transferred to Pascale Kallas.

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):

• Probability of default (PD) used: Expected PD of 18.5% and 14.5% for the A (sf) and A (low) (sf) rating scenario, respectively, and a 25% and 50% increase on the applicable PD.
  -- Loss given default (LGD) used: Expected LGD of 53.4% and 44.9% for the A (sf) and A (low) (sf) rating scenario, respectively, and a 25% and 50% increase on the applicable LGD.

Scenario 1: A 25% increase in the expected default.
Scenario 2: A 50% increase in the expected default.
Scenario 3: A 25% increase in the expected LGD.
Scenario 4: A 25% increase in the expected default and a 25% increase on the expected LGD.
Scenario 5: A 50% increase in the expected default and a 25% increase on the expected LGD.
Scenario 6: A 50% increase in the expected LGD.
Scenario 7: A 25% increase in the expected default and a 50% increase on the expected LGD.
Scenario 8: A 50% increase in the expected default and a 50% increase on the expected LGD.

DBRS Morningstar concludes that the expected ratings under the eight stress scenarios are:

-- Class A Notes: A (sf), A (low) (sf), A (sf), A (low) (sf), A (low) (sf), A (low) (sf), A (low) (sf), BBB (high) (sf).
-- Class B Notes: A (low) (sf), BBB (high) (sf), A (low) (sf), BBB (high) (sf), BBB (sf), A (low) (sf), BBB (sf), BBB (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. For further information on DBRS Morningstar historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

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

Lead Analyst: Pascale Kallas, Senior Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 30 May 2022

DBRS Ratings GmbH
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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.
-- 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.
-- 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.
-- 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.
-- 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].