Morningstar DBRS Upgrades and Confirms Credit Ratings on Golden Bar (Securitisation) S.r.l. - Series 2023-2

DBRS Ratings GmbH (Morningstar DBRS) took the following credit rating actions on the notes (collectively, the Rated Notes) issued by Golden Bar (Securitisation) S.r.l. - Series 2023-2 (the Issuer):

-- Class A 2023-2 (Class A Notes) confirmed at AAA (sf)
-- Class B-2023-2 Notes (Class B Notes) upgraded to AA (low) (sf) from A (high) (sf)
-- Class C-2023-2 Notes (Class C Notes) upgraded to A (sf) from A (low) (sf)
-- Class D-2023-2 Notes (Class D Notes) confirmed at BBB (sf)
-- Class E-2023-2 Notes (Class E Notes) confirmed at BB (sf)
-- Class F-2023-2 Notes (Class F Notes) confirmed at B (low) (sf)

Additionally, Morningstar DBRS removed its credit ratings on the Class B Notes, Class C Notes, Class D Notes, Class E Notes, and Class F Notes from Under Review with Positive Implications (UR-Pos.), where they were placed on 13 October 2023 following Morningstar DBRS’ release of an updated sovereign methodology. For more information, please see: https://dbrs.morningstar.com/research/421863.

The credit rating on the Class A Notes addresses the timely payment of scheduled interest and the ultimate repayment of principal by the final maturity date in September 2043. The credit ratings on the Class B to Class E Notes address the ultimate payment of scheduled interest (or timely when most senior class outstanding) and the ultimate repayment of principal by the final maturity date. The credit rating on the Class F Notes addresses the ultimate payment of scheduled interest and the ultimate repayment of principal by the final maturity date.

The credit rating actions follow a 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 2023 payment date;
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions on the receivables;
-- The updated sovereign methodology; and
-- Current available credit enhancement to the Rated Notes to cover the expected losses at their respective credit rating levels.

The Issuer is a special-purpose entity incorporated for the purpose of issuing asset-backed securities. The securitisation is fully segregated from the Issuer’s previous securitisations. The Issuer has already engaged in several securitisation transactions that were also carried out in accordance with Italian securitisation law. Only the Class A to Class E Notes are collateralised and backed by a portfolio of fixed-rate receivables related to Italian standard auto loans and balloon auto loans granted by Santander Consumer Bank S.p.A. (SCB) to private consumers and sole proprietors residing in the Republic of Italy. SCB will also act as the Servicer for the transaction. The Class F Notes are uncollateralised and have been issued to fund the cash reserve at closing.

PORTFOLIO PERFORMANCE
As of the December 2023 payment date, loans 0 to 30 days, 30 to 60 days, and 60 to 90 days in arrears represented 0.3%, 0.06%, and 0.03% of the outstanding portfolio balance, respectively. Gross cumulative defaults amounted to 0.02% of the aggregate original portfolio balance.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
Morningstar DBRS maintained its base case PD and LGD assumptions at 2.3% and 54.0%, respectively. Because of the inclusion of a revolving period in the transaction, Morningstar DBRS’ analysis considers potential portfolio migration based on replenishment criteria set forth in the transaction’s legal documents.

CREDIT ENHANCEMENT
Portfolio overcollateralisation provides credit enhancement the Class A to Class E Notes, which has remained unchanged since the initial credit rating action due to the inclusion of a 15-month revolving period expected to end in December 2024.

The transaction benefits from a fully funded nonamortising cash reserve equal to 1.4% of the Class A to Class E Notes’ initial balance, which the Issuer can use to pay senior expenses, swap payments, and interest on the Class A to Class E Notes. The Class F Notes are only redeemed through available excess spread.

The Bank of New York Mellon SA/NV - Milan Branch (BNYM) has been appointed as the Issuer’s account bank for the transaction. Morningstar DBRS’ Long-Term Senior Debt credit rating and Long-Term Deposits credit rating on BNYM are both AA (high) with Stable trends, which meets the relevant criteria to act in this capacity. The transaction documents contain downgrade provisions relating to the account bank consistent with Morningstar DBRS’s legal criteria.

Banco Santander SA (Banco Santander) has been appointed as the swap counterparty for the transaction. Morningstar DBRS' Long Term Critical Obligations Rating on Banco Santander is AA (low) with a Stable trend, which meets the criteria to act in such capacity. The hedging documents contain downgrade provisions consistent with Morningstar DBRS' derivative criteria.

Morningstar DBRS’ credit ratings on the Rated Notes addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents.

Morningstar DBRS’ credit ratings do not address non-payment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations.

Morningstar DBRS’ long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

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 Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://dbrs.morningstar.com/research/416784/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

Morningstar DBRS analysed the transaction structure in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodologies applicable to the credit ratings are the “Master European Structured Finance Surveillance Methodology” (11 December 2023), https://dbrs.morningstar.com/research/425148/master-european-structured-finance-surveillance-methodology, and “Rating European Consumer and Commercial Asset-Backed Securitisations” (8 January 2024), https://dbrs.morningstar.com/research/426219/rating-european-consumer-and-commercial-asset-backed-securitisations.

Other methodologies referenced in this transaction are listed at the end of this press release.

Morningstar DBRS has applied the principal methodologies consistently and conducted a review of the transaction in accordance with the principal methodologies.

A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent credit rating action.

For a more detailed discussion of the sovereign risk impact on Structured Finance credit 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/421590/global-methodology-for-rating-sovereign-governments.

The sources of data and information used for these credit ratings include investor reports provided by the Servicer and loan-level data provided by the European DataWarehouse GmbH. As of closing, Morningstar DBRS also received the following data:
-- Dynamic delinquency, prepayment, and origination data from Q1 2016 to Q1 2023;
-- Static gross loss default and recovery data from Q1 2016 to Q1 2023; for the total portfolio and split by new and used vehicles;
-- Provisional portfolio data and stratification tables as at 11 September 2023; and
-- A theoretical amortisation of the selected pool.

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

At the time of the initial credit ratings, Morningstar DBRS was supplied with third-party assessments. However, this did not impact the credit rating analysis.

Morningstar DBRS considers the data and information available to it for the purposes of providing these credit ratings to be of satisfactory quality.

Morningstar DBRS does not audit or independently verify the data or information it receives in connection with the credit rating process.

The last credit rating action on this transaction took place on 13 October 2023, when Morningstar DBRS placed its credit ratings on the Class B Notes, Class C Notes, Class D Notes, Class E Notes, and Class F Notes UR-Pos. following the release of the updated sovereign methodology.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available at dbrs.morningstar.com.

Sensitivity Analysis: To assess the impact of changing the transaction parameters on the credit ratings, Morningstar DBRS considered the following stress scenarios as compared with the parameters used to determine the credit ratings (the base case):

-- Expected default rate: 2.3%
-- Expected recovery rate: 46.0%
-- Loss given default (LGD): 72.4% for the AAA (sf) scenario, 68.7% for the AA (low) (sf) scenario, 66.3% for the A (sf) scenario, 62.6% for the BBB (sf) scenario, 58.9% for the BB (sf) scenario, and 54.0% for the B (low) (sf) scenario

Scenario 1: 25% increase in LGD
Scenario 2: 50% increase in LGD
Scenario 3: 25% increase in PD
Scenario 4: 50% increase in PD
Scenario 5: 25% increase in PD and 25% increase in LGD
Scenario 6: 25% increase in PD and 50% increase in LGD
Scenario 7: 50% increase in PD and 25% increase in LGD
Scenario 8: 50% increase in PD and 50% increase in LGD

Morningstar DBRS concludes that the expected credit ratings under the eight stress scenarios would be:
-- Class A Notes: AA (high) (sf), AA (sf), AA (high) (sf), AA (sf), AA (sf), A (high) (sf), AA (low) (sf), and A (high) (sf)
-- Class B Notes: A (sf), A (low) (sf), A (sf), A (low) (sf), A (low) (sf), BBB (high) (sf), BBB (high) (sf), and BBB (sf)
-- Class C Notes: BBB (high) (sf), BBB (sf), BBB (high) (sf), BBB (sf), BBB (low) (sf), BB (high) (sf), BB (high) (sf), and BB (sf)
-- Class D Notes: BB (high) (sf), BB (sf), BB (high) (sf), BB (high) (sf), BB (sf), B (high) (sf), BB (low) (sf), and B (sf)
-- Class E Notes: B (high) (sf), B (sf), B (high) (sf), B (low) (sf), B (low) (sf), below B (low) (sf), below B (low) (sf), and below B (low) (sf)
-- Class F Notes: B (low) and below B (low) (sf) in all other scenarios

For further information on Morningstar DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on Morningstar DBRS historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

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

Lead Analyst: Guglielmo Panizza, Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Credit Rating Date: 26 September 2023

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 credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- Master European Structured Finance Surveillance Methodology (11 December 2023), https://dbrs.morningstar.com/research/425148/master-european-structured-finance-surveillance-methodology,
-- Rating European Consumer and Commercial Asset-Backed Securitisations (8 January 2024), https://dbrs.morningstar.com/research/426219/rating-european-consumer-and-commercial-asset-backed-securitisations.
-- Rating European Structured Finance Transactions Methodology (11 December 2023),
https://dbrs.morningstar.com/research/425149/rating-european-structured-finance-transactions-methodology.
-- Legal Criteria for European Structured Finance Transactions (30 June 2023), https://dbrs.morningstar.com/research/416730/legal-criteria-for-european-structured-finance-transactions.
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (4 July 2023), https://dbrs.morningstar.com/research/416784/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2023), https://dbrs.morningstar.com/research/420572/operational-risk-assessment-for-european-structured-finance-servicers.
-- Operational Risk Assessment for European Structured Finance Originators (15 September 2023), https://dbrs.morningstar.com/research/420573/operational-risk-assessment-for-european-structured-finance-originators.
-- Derivative Criteria for European Structured Finance Transactions (18 September 2023), https://dbrs.morningstar.com/research/420754/derivative-criteria-for-european-structured-finance-transactions.
-- Interest Rate Stresses for European Structured Finance Transactions (15 September 2023), https://dbrs.morningstar.com/research/420602/interest-rate-stresses-for-european-structured-finance-transactions.

A description of how Morningstar DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at https://dbrs.morningstar.com/research/278375.

For more information on this credit or on this industry, visit dbrs.morningstar.com or contact us at [email protected].