Morningstar DBRS Finalises Provisional Credit Ratings on Brignole CO 2024 S.r.l.

DBRS Ratings GmbH (Morningstar DBRS) finalised the provisional credit ratings on the following classes of notes (collectively, the Rated Notes) issued by Brignole CO 2024 S.r.l. (the Issuer):

-- Class A Notes at AAA (sf)
-- Class B Notes at AA (low) (sf)
-- Class C Notes at BBB (low) (sf)
-- Class D Notes at BB (high) (sf)
-- Class E Notes at BB (low) (sf)
-- Class X1 Notes at B (low) (sf)

Morningstar DBRS did not rate the Class F, Class X2 and Class R Notes also issued in the transaction.

The credit rating of the Class A Notes addresses the timely payment of scheduled interest and the ultimate repayment of principal on or before the legal final maturity date. The credit ratings of the Class B, 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 senior-most tranche and the ultimate repayment of principal on or before the legal final maturity date. The credit rating of the Class X1 Notes addresses the ultimate payment of interest and the ultimate repayment of principal on or before the legal final maturity date.

The transaction is backed by a portfolio of fixed-rate unsecured consumer loans without a specific purpose granted by Creditis Servizi Finanziari S.p.A. (Creditis or the originator) to private individuals residing in Italy. Creditis is also the initial servicer with Zenith Global S.p.A. named as the back-up servicer at closing.

CREDIT RATING RATIONALE
The credit ratings are based on the following analytical considerations:
-- The transaction's structure, including the form and sufficiency of available credit enhancement to withstand stressed cash flow assumptions and repay the Issuer's financial obligations according to the terms under which the Rated Notes are issued;
-- The credit quality and the diversification of the collateral portfolio, its historical performance and the projected performance under various stress scenarios;
-- The operational risk review of Creditis with regard to its originations, underwriting, and servicing;
-- The transaction parties' financial strength with regard to their respective roles;
-- Morningstar DBRS sovereign credit rating on the Republic of Italy, currently at BBB (high) with a Stable trend; and
-- The consistency of the transaction's structure with Morningstar DBRS' Legal Criteria for European Structured Finance Transactions and Derivative Criteria for European Structured Finance Transactions methodologies.

TRANSACTION STRUCTURE
The transaction is static and allocates collections through separate interest and principal priority of payments and benefits from a cash reserve initially funded at closing with the Class X1 Notes' issuance proceeds. The cash reserve will amortise to a target amount equal to 1.2% of the outstanding principal balance of the Class A, Class B, Class C, Class D, Class E and Class F Notes with a floor at 0.6% of initial portfolio principal amount at closing and can be used to cover senior expenses, senior swap costs, interest on the Class A Notes and if not deferred, interest payments on the Class B, Class C, Class D and Class E Notes.

After the transaction closing, the Class A, Class B, Class C, Class D, Class E and Class F Notes will be redeemed pro rata in the principal waterfalls based on the relative tranche thickness at closing (i.e., 80.0%, 5.8%, 5.7%, 4.5%, 2.5% and 1.5% for Class A, Class B, Class C, Class D, Class E and Class F Notes, respectively) until a sequential redemption event occurs, after which the non-reversible, fully sequential redemption of the Class A, Class B, Class C, Class D, Class E and Class F Notes will start.

On the other hand, the Class X1 Notes will also begin to amortise immediately after the transaction closing in the interest waterfalls according to a fixed scheduled amortization in 20 instalments until full redemption. The redemption of the Class X2 Notes will only commence after the full redemption of the Class X1 Notes in 30 scheduled equal instalments.

The interest rate risk for the transaction is considered limited as an interest rate swap is in place to reduce the mismatch between the fixed-rate collateral and the floating-rate collateralised Notes.

TRANSACTION COUNTERPARTIES
Crédit Agricole Corporate and Investment Bank (CA-CIB) is the account bank for the transaction. Morningstar DBRS has a private credit rating on CA-CIB, which meets the criteria to act in such capacity.

Natixis is the initial swap counterparty for the transaction. Morningstar DBRS private credit rating on Natixis meets the criteria to act in such capacity. The transaction documents contain downgrade provisions consistent with Morningstar DBRS criteria.

PORTFOLIO ASSUMPTIONS
As the originator has a long operating history of consumer lending in Italy, Morningstar DBRS considers the performance data to be meaningful for detailed vintage analysis. Morningstar DBRS maintained its expected default of 3.3%. Morningstar DBRS also maintained the expected recovery at 30%.

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. The associated financial obligations for each of the Rated Notes are the related Interest Payment Amount and the initial Principal Amount Outstanding.

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.

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 Rating European Consumer and Commercial Asset-Backed Securitisations (8 January 2024), https://dbrs.morningstar.com/research/426219.

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.

An asset and a cash flow analysis were both conducted.

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 were received from the originator through one of the arrangers, BofA Securities, and include the following:
-- Static quarterly defaults from Q2 2008 to Q1 2024;
-- Static quarterly recoveries from Q1 2009 to Q1 2024;
-- Static quarterly prepayments from Q2 2008 to Q1 2024;
-- Dynamic monthly prepayments from May 2008 to March 2024; and
-- Dynamic quarterly delinquencies from May 2008 to March 2024.

Morningstar DBRS also received a set of stratification tables for the loan pool as of 15 May 2024 and its related contractual amortisation profile.

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

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.

These credit ratings concern newly issued new financial instruments. These are the first Morningstar DBRS credit ratings on these financial instruments.

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

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:

-- Expected default of 3.3%: a 25% and 50% increase.
-- Expected recovery of 30% or loss given default (LGD) of 70%: a 25% increase in the expected 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 25% increase in the expected LGD.
Scenario 5: A 50% increase in the expected default and 25% increase in the expected LGD.

Morningstar DBRS concludes that the expected credit ratings under the five stress scenarios are as follows:
-- Class A Notes: AA (sf), AA (sf), AA (sf), A (high) (sf), A (sf)
-- Class B Notes: A (high) (sf), A (low) (sf), A (sf), BBB (high) (sf), BBB (sf)
-- Class C Notes: BBB (low) (sf), BB (high) (sf), BBB (low) (sf), BB (high) (sf), BB (high) (sf)
-- Class D Notes: BB (high) (sf), BB (low) (sf), BB (high) (sf), BB (low) (sf), B (sf)
-- Class E Notes: B (high) (sf), B (low) (sf), B (sf), below B (low) (sf), below B (low) (sf)

No sensitivity was conducted on the Class X1 Notes.

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 may be published by the Financial Conduct Authority (FCA) in a central repository: https://data.fca.org.uk/#/ceres/craStats.

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

Lead Analyst: Kevin Chiang, Senior Vice President
Credit Rating Committee Chair: David Lautier, Senior Vice President
Initial Credit Rating Date: 7 June 2024

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.

-- 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
-- Operational Risk Assessment for European Structured Finance Originators (7 March 2024),
https://dbrs.morningstar.com/research/429054
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2023),
https://dbrs.morningstar.com/research/420572
-- Interest Rate Stresses for European Structured Finance Transactions (15 September 2023),
https://dbrs.morningstar.com/research/420602
-- Derivative Criteria for European Structured Finance Transactions (18 September 2023),
https://dbrs.morningstar.com/research/420754
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (23 January 2024),
https://dbrs.morningstar.com/research/427030

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].