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

DBRS Ratings GmbH (Morningstar DBRS) took the following credit rating actions on the Class A 2020-1 and Class B 2020-1 Notes (together, the Rated Notes) issued by Golden Bar (Securitisation) S.r.l. - Series 2020-1 (the Issuer) as follows:

-- Class A 2020-1 Notes confirmed at AAA (sf)
-- Class B 2020-1 Notes upgraded to AAA (sf) from AA (sf)

The credit ratings on the Rated Notes address the timely payment of interest and the ultimate repayment of principal by the legal final maturity date in September 2044.

The credit rating actions 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 2023 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 Rated Notes to cover the expected losses at the AAA credit rating level.

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 2023 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 0.1%. Gross cumulative defaults amounted to 1.6% of the aggregate initial portfolio balance, with cumulative recoveries of 30.8% to date.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
Morningstar DBRS conducted a loan-by-loan analysis of the pool of receivables and maintained its base case PD and LGD assumptions at 3.5% and 80.8%, respectively.

CREDIT ENHANCEMENT
The subordination of the respective junior obligations provides credit enhancement to the Rated Notes. As of the December 2023 payment date, credit enhancement to the Class A 2020-1 and Class B 2020-1 Notes increased to 40.4% and 23.3% from 22.5% and 12.9%, respectively, at the time of the last annual review 12 months ago.

The transaction benefits from an amortising cash reserve, currently at its target level of EUR 3.5 million, available to cover senior expenses and interest payments on the Rated 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 credit 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 Morningstar DBRS’ Long Term Critical Obligations Rating of AA (low) on Santander, Morningstar DBRS’ private credit rating on Citibank-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 banks 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 rated notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents.

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 transaction structure in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

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

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

Morningstar DBRS 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 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://dbrs.morningstar.com/research/421590.

The sources of data and information used for these credit 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.

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 purpose 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 14 February 2023, when Morningstar DBRS upgraded its credit ratings on the Class A 2020-1 and Class B 2020-1 Notes to AAA (sf) and AA (s) from A (high) (sf) and BBB (sf), respectively.

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):

-- Morningstar DBRS 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.

Class A 2020-1 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)

Class B 2020-1 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 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)

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: Daniel Rakhamimov, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Credit Rating Date: 27 February 2020

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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
-- 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
-- Legal Criteria for European Structured Finance Transactions (30 June 2023), https://dbrs.morningstar.com/research/416730
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (23 January 2024), https://dbrs.morningstar.com/research/427030
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2023),
https://dbrs.morningstar.com/research/420572

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].