Morningstar DBRS Confirms Credit Rating on Crediper Consumer S.r.l. Following Amendment

DBRS Ratings GmbH (Morningstar DBRS) confirmed its AAA (sf) credit rating on the Class A Notes issued by Crediper Consumer S.r.l. (the Issuer) following a transaction amendment (the Amendment).

The credit rating addresses the timely payment of interest and the ultimate repayment of principal on or before the legal final maturity date in November 2052.

CREDIT RATING RATIONALE
The confirmation follows an entire review of the transaction and is based on the following analytical considerations:
-- The Amendment to the transaction executed on 24 July 2024; consisting of an extension of the revolving period by two years, to August 2026 from August 2024;
-- The portfolio performance, in terms of delinquencies, defaults, and losses, as of the May 2024 payment date;
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions for the remaining collateral pool;
-- Current available credit enhancement to the Class A Notes to cover the expected losses at the AAA (sf) credit rating level; and
-- No purchase termination events or breach of concentration limits to date.

The transaction is a securitisation of consumer loan receivables originated by BCC CreditoConsumo S.p.A. (CreCo), a finance company within the Iccrea banking group, and granted to private individuals in Italy. CreCo services the portfolio, with Zenith Service S.p.A. appointed as backup servicer. The transaction is currently in its revolving period, originally scheduled to end in August 2020, extended initially until August 2022 in an amendment executed on 5 August 2020 and afterwards until August 2024 following an amendment executed on 22 July 2022. Following the Amendment, the revolving period has now been extended until August 2026, and the Class A Notes are expected to start amortising on the November 2026 payment date.
During the revolving period the Issuer may purchase new receivables, provided that certain conditions set out in the transaction documents are satisfied.

PORTFOLIO PERFORMANCE
As of the 31 March 2024 portfolio cut-off date, delinquencies were low, with loans two to three months in arrears representing 0.1% of the outstanding portfolio balance, stable since March 2023 cut-off date. The 90+ days in arrears represented 0.3% of the outstanding portfolio balance, slightly down from 0.4% since March 2023.

The gross cumulative default ratio stood at 0.2% of the initial portfolio balance (including additional portfolios and considering the repurchase of the defaulted claims), down from 0.4% at the last annual review.

PORTFOLIO ASSUMPTIONS AND KEY CREDIT RATING DRIVERS
Morningstar DBRS received updated historical default and recovery data from CreCo. The base case PD and LGD assumptions were maintained at 3.3% and 68.5%, respectively.
The portfolio assumptions continue to consider potential portfolio migration based on replenishment criteria set forth in the transaction legal documents.

CREDIT ENHANCEMENT
Overcollateralisation of the outstanding collateral portfolio provides credit enhancement. As of the May 2024 payment date, credit enhancement to the Class A Notes was 19.6%, slightly up from 19.5% as of the May 2023 payment date.

The transaction structure benefits from two reserves.
The cash reserve is available to cover shortfalls on senior fees, expenses, interest on the Class A Notes; top up the payment interruption risk reserve; and to credit the defaulted account. The reserve, which is currently at its target level of EUR 19.5 million, will start to amortise after the end of the revolving period with a target of 3.0% of the portfolio outstanding balance. The reserve is floored at EUR 3.3 million.

The nonamortising payment interruption risk reserve, which is currently at its target level of EUR 3.25 million, is available to cover shortfalls on senior fees, expenses, and interest on the Class A Notes.

BNP Paribas, Succursale Italia acts as the account bank for the transaction. Based on Morningstar DBRS' private rating on the account bank, the downgrade provisions outlined in the transaction documents, and structural mitigants inherent in the transaction structure, Morningstar DBRS considers the risk arising from the exposure to the account bank to be consistent with the credit rating assigned to the Class A Notes, as described in Morningstar DBRS' "Legal Criteria for European Structured Finance Transactions" methodology.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective private rating letters at issuance.

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 methodologies applicable to the credit rating are: "Rating European Consumer and Commercial Asset-Backed Securitisations" (8 January 2024), https://dbrs.morningstar.com/research/426219 and "Master European Structured Finance Surveillance Methodology" (7 March 2024), https://dbrs.morningstar.com/research/429051.

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.

An asset and a cash flow analysis were both conducted. Due to the inclusion of a revolving period in the transaction, the analysis continues to consider potential portfolio migration based on replenishment criteria set forth in the transaction legal documents.

Morningstar DBRS has conducted a review of the transaction's legal documents provided in the context of the Amendment. A review of any other 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 Credit Ratings on Other Morningstar DBRS Credit Ratings" of the "Global Methodology for Rating Sovereign Governments" at: https://dbrs.morningstar.com/research/436000.

The sources of data and information used for this credit rating include payment and investor reports provided by Accounting Partners S.p.A., servicer reports, additional information, loan-level data, and the following historical performance data provided by CreCo:
-- Quarterly static default data from Q2 2011 to Q1 2024,
-- Quarterly static recovery data from Q2 2011 to Q1 2024,
-- Quarterly static net losses data from Q2 2011 to Q1 2024,
-- Quarterly static prepayment data from Q2 2011 to Q1 2024,
-- Quarterly dynamic prepayment data from Q2 2011 to Q1 2024, and
-- Quarterly dynamic arrears data from Q2 2011 to Q1 2024.

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

At the time of the initial credit rating, Morningstar DBRS was not 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 this credit rating 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 10 July 2023, when Morningstar DBRS confirmed its AAA (sf) credit rating on the Class A Notes.

The lead analyst responsibilities for this transaction have been transferred to Alice Comastri.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on https://dbrs.morningstar.com/.

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

-- Morningstar DBRS expected a base-case PD and LGD for the portfolio 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 rating.
-- The base-case PD and LGD of the current pool of loans for the Issuer are 3.3% and 68.5%, respectively.
-- The risk sensitivity overview below illustrates the credit rating expected if the PD and LGD increase by a certain percentage over the base-case assumption.

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)

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.

This credit rating is endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Alice Comastri, Senior Analyst
Credit Rating Committee Chair: Mark Wilder, Senior Vice President
Initial Credit Rating Date: 18 December 2018

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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.

-- Legal Criteria for European Structured Finance Transactions (28 June 2024), https://dbrs.morningstar.com/research/435165.
-- Master European Structured Finance Surveillance Methodology (7 March 2024), https://dbrs.morningstar.com/research/429051.
-- 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.
-- Rating European Consumer and Commercial Asset-Backed Securitisations (8 January 2024), https://dbrs.morningstar.com/research/426219.
-- Rating European Structured Finance Transactions Methodology (25 June 2024), https://dbrs.morningstar.com/research/434970.
-- 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 info-DBRS@morningstar.com.