Morningstar DBRS Takes Credit Rating Actions on Three Sunrise Transactions

DBRS Ratings GmbH (Morningstar DBRS) took the following credit 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 C Notes confirmed at AAA (sf)

The credit rating on the Class C Notes addresses 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 confirmed at AAA (sf)
-- Class B Notes upgraded to AAA (sf) from AA (high) (sf)
-- Class C Notes upgraded to AA (high) (sf) from AA (sf)
-- Class D Notes upgraded to AA (high) (sf) from A (high) (sf)
-- Class E Notes upgraded to AA (low) (sf) from BBB (high) (sf)

The credit ratings on the Class A and Class B Notes address the timely payment of scheduled interest and the ultimate repayment of principal on or before the legal final maturity date in July 2046. The credit ratings on the 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 most senior tranche, and the ultimate repayment of principal on or before the legal final maturity date.

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

The credit 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 credit 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 credit 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 December 2023 payment date.
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables.
-- Current available credit enhancement to the rated notes to cover the expected losses at their respective credit 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.

PORTFOLIO PERFORMANCE
-- For Sunrise 2019-1, as of the December 2023 payment date, loans that were one to two months and two to three months delinquent represented 1.2% and 0.5% of the portfolio balance, respectively, while loans more than three months delinquent represented 1.0%. Gross cumulative defaults amounted to 2.5% of the aggregate original and subsequent portfolios, of which 20.5% has been recovered so far.

-- For Sunrise 2021-1, as of the December 2023 payment date, loans that were one to two months and two to three months delinquent represented 0.4% and 0.3% of the portfolio balance, respectively, while loans more than three months delinquent represented 0.6%. Gross cumulative defaults amounted to 1.8% of the aggregate original and subsequent portfolios, of which 39.5% has been recovered so far.

-- For Sunrise 2022-1, as of the December 2023 payment date, loans that were one to two months and two to three months delinquent represented 0.5% and 0.2% of the portfolio balance, respectively, while loans more than three months delinquent represented 0.7%. Gross cumulative defaults amounted to 1.9% of the aggregate original and subsequent portfolios, of which 3.2% has been recovered so far.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
Morningstar DBRS 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, Morningstar DBRS updated its PD and LGD assumptions to 5.7% and 90.4%, respectively.
-- For Sunrise 2021-1, Morningstar DBRS updated its PD and LGD assumptions to 5.2% and 90.2%, respectively.
-- For Sunrise 2022-1, Morningstar DBRS updated its PD and LGD assumptions to 5.1% and 90.1%, respectively.

This takes into account the current portfolio composition for all transactions.

CREDIT ENHANCEMENT
The subordination of the respective junior notes and the cash reserve provide credit enhancement to the rated notes. As of the December 2023 payment date, the credit enhancement (CE) was as follows:
-- For Sunrise 2019-1, CE to the Class C Notes was 70.7%, up from 48.1% 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 60.3%, 44.7%, 31.1%, 21.4%, and 12.4%, respectively, up from 42.0%, 31.1%, 21.7%, 14.9%, and 8.7%, 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 41.5%, 29.4%, 18.9%, 13.1%, and 9.6%, respectively, up from 30.3%, 21.5%, 13.8%, 9.6%, and 7.0%, respectively, at the last annual review.

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 transactions.

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 5.5 million, EUR 20.6 million, and EUR 20.5 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 from a rata posticipata cash reserve, which mitigates the liquidity risk arising from flexible loans. This reserve will only be 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 December 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 Morningstar DBRS’ private credit rating on CACIB Milan, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, Morningstar DBRS considers the risk arising from the exposure to the account bank to be consistent with the credit ratings assigned to the rated notes, as described in Morningstar DBRS' "Legal Criteria for European Structured Finance Transactions" methodology.

Morningstar DBRS’ credit ratings on the notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations for the notes are the related Interest Payment Amounts and the related Class Balances.

Morningstar DBRS’ credit ratings do not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction documents 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.

ENVIRONMENTAL, SOCIAL, AND 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 Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://dbrs.morningstar.com/research/427030.

Morningstar DBRS analysed the transactions’ structures in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the credit ratings is: “Master European Structured Finance Surveillance Methodology” (11 December 2023), https://dbrs.morningstar.com/research/425148.

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

Morningstar DBRS 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 credit rating actions.

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 Morningstar DBRS Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://dbrs.morningstar.com/research/421590.

The sources of data and information used for these credit ratings include investor reports provided by CACIB Milan and loan-level data provided by the European DataWarehouse GmbH. Additionally, Morningstar DBRS was provided with updated historical performance data as follows:
-- Static prepayment rates by annual vintages from 2003 to 2023;
-- Monthly dynamic arrears from June 2008 to June 2023;
-- Quarterly static default vintage analysis from Q1 2012 to Q2 2023; and
-- Quarterly recovery data vintage analysis from Q1 2012 to Q2 2023.

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 affect 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 for Sunrise 2019-1 took place on 25 October 2023, when Morningstar DBRS discontinued its credit rating on the Class B Notes. Prior to that, the last credit rating action took place on 9 March 2023, when Morningstar DBRS upgraded its credit ratings on the Class B and Class C Notes to AAA (sf), from AA (high) (sf) and A (high) (sf), respectively.
-- The last credit rating action for Sunrise 2021-1 took place on 9 March 2023, when Morningstar DBRS upgraded its credit ratings on the Class A, Class B, Class C, Class D, and Class E Notes to AAA (sf), AA (high) (sf), AA (sf), A (high) (sf), and BBB (high) (sf), respectively, from AA (high) (sf), A (high) (sf), BBB (high) (sf), BBB (sf), and BB (high) (sf), respectively.
-- The last credit rating action for Sunrise 2022-1 took place on 9 March 2023, when Morningstar DBRS confirmed its credit ratings on the Class B, Class C, and Class D Notes at AA (sf), A (sf), and BBB (high) (sf), respectively, and upgraded its credit ratings on the Class A and Class E Notes to AAA (sf) and BBB (sf), from AA (high) (sf) and BBB (low) (sf), respectively.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on 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):
-- For Sunrise 2019-1, the base-case PD and LGD of the current pool of loans are 5.7% and 90.4%, respectively.
-- For Sunrise 2021-1, the base-case PD and LGD of the current pool of loans are 5.2% and 90.2%, respectively.
-- For Sunrise 2022-1, the base-case PD and LGD of the current pool of loans are 5.1% and 90.1%, respectively.

-- Morningstar DBRS 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 credit 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 credit rating on the Sunrise 2019-1 Class C Notes would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the credit rating on the Sunrise 2019-1 Class C 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 credit rating on the Sunrise 2019-1 Class B Notes would be expected to remain at AAA (sf).

Sunrise 2019-1 Class C Notes Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD, expected credit rating of AAA (sf)
-- 50% increase in PD, expected credit rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of AAA (sf)

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

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

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

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

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

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

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

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

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

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

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

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

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 credit rating methodologies used in the analysis of these transactions 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
-- Legal Criteria for European Structured Finance Transactions (30 June 2023), https://dbrs.morningstar.com/research/416730
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2023), https://dbrs.morningstar.com/research/420572
-- Operational Risk Assessment for European Structured Finance Originator (15 September 2023), https://dbrs.morningstar.com/research/420573
-- Rating European Consumer and Commercial Asset-Backed Securitisations (8 January 2024), https://dbrs.morningstar.com/research/426219
-- Rating European Structured Finance Transactions Methodology (11 December 2023), https://dbrs.morningstar.com/research/425149
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (23 January 2024), https://dbrs.morningstar.com/research/427030
-- Interest Rate Stresses for European Structured Finance Transactions (15 September 2023), https://dbrs.morningstar.com/research/420602

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 info-DBRS@morningstar.com.