Morningstar DBRS Places Credit Ratings on Vine 2020-1 Under Review With Negative Implications

DBRS, Inc. (Morningstar DBRS) placed the credit ratings on three securities issued by the Vine 2020-1 asset-backed securities (ABS) transaction Under Review with Negative Implications (UR-Neg.) as follows:

-- Class A Notes at A (sf)
-- Class B Notes at A (low) (sf)
-- Class C Notes at BBB (high) (sf)

The UR-Neg. designations are based on the following analytical considerations:

-- The transaction entered early amortization on the August 9, 2023, Quarterly Calculation Date as a result of noncompliance with the Annual Series 2020-1 debt service coverage ratio (DSCR) trigger (Annual Trigger). The transaction was also not in compliance with the Quarterly Series 2020-1 DSCR Trigger (Quarterly Trigger) on the August 9, 2023, Quarterly Calculation Date, which was cured on the November 9, 2023, Quarterly Calculation date. Subsequently, the Annual Trigger was cured on the February 9, 2024, Quarterly Calculation Date.

-- The trigger breaches were driven by steep declines in the transaction’s film library collections during Q1 2023 and Q2 2023. Village Roadshow Entertainment Group USA Inc. (VREG), the servicer, notified Morningstar DBRS of the declines in the collections.

-- The decline in film library collections that initiated the triggers prompted VREG to expand the scope of already in-progress audits of film revenue receipts in an effort to help identify reasons for the declines in collections. It was determined that the collections declines were primarily driven by delayed distributions resulting from operational limitations of a counterparty. The audits of the film revenue receipts are ongoing and are expected to ensure that cashflows due to the transaction are identified and transferred to the transaction’s collection account.

-- VREG has indicated that it expects the operational issues to be resolved in due course, resulting in the film revenue receipts due to the transaction to return to being timely. As a result, the transaction has been placed UR-Neg. pending resolution of the operational limitations of the counterparty. Upon the realization of the resolution, Morningstar DBRS expects to resolve the UR-Neg. designation and will likely confirm rather than downgrade the outstanding ratings.

-- The transaction assumptions consider Morningstar DBRS’ baseline macroeconomic scenarios for rated sovereign economies, available in its commentary “Baseline Macroeconomic Scenarios for Rated Sovereigns: December 2023 Update,” published on December 19, 2023. These baseline macroeconomic scenarios replace Morningstar DBRS’ moderate and adverse COVID-19 pandemic scenarios, which were first published in April 2020.

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 (January 23, 2024).

Notes:
The principal methodology applicable to the credit ratings is DBRS Morningstar Master U.S. ABS Surveillance (October 22, 2023), https://dbrs.morningstar.com/research/422279.

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

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

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

-- Operational Risk Assessment for U.S. ABS Servicers (July 20, 2023),
https://dbrs.morningstar.com/research/417415

-- Operational Risk Assessment for U.S. ABS Originators (July 20, 2023),
https://dbrs.morningstar.com/research/417416

-- Legal Criteria for U.S. Structured Finance (December 7, 2023),
https://dbrs.morningstar.com/research/425081

-- Rating U.S. Structured Finance Transactions (October 30, 2023),
https://dbrs.morningstar.com/research/422592

-- Rating Film Rights Securitizations (May 11, 2023)
https://dbrs.morningstar.com/research/413768

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