Morningstar DBRS Confirms Credit Ratings on aZul Master Credit Cards DAC

DBRS Ratings GmbH (Morningstar DBRS) confirmed its credit ratings on the Class A and Class B Notes (collectively, the Notes) issued by aZul Master Credit Cards DAC (the Issuer) as follows:

• Series 2023-1, Class A Notes at AA (low) (sf)
• Series 2023-1, Class C Notes at BB (sf)

The credit rating of the Class A Notes addresses the timely payment of scheduled interest and the ultimate repayment of principal by the legal final maturity date. The credit rating of the Class C Notes addresses the ultimate payment of scheduled interest and the ultimate repayment of principal by the legal final maturity date.

CREDIT RATING RATIONALE
The credit rating confirmation follows an annual review of the transaction and is based on the following analytical considerations:
-- The transaction's capital structure, including the form and sufficiency of available credit enhancement to withstand stressed cashflow assumptions and repay the Issuer's financial obligations according to the terms under which the Notes were issued.
-- The credit quality of WiZink Bank S.A.U. (WiZink, the seller or the servicer)'s portfolio, the characteristics of the collateral, its historical performance and Morningstar DBRS' expectation of monthly principal payment rates (MPPRs), yield and charge-off rates under various stress scenarios.
-- The seller's capabilities with respect to originations, underwriting, servicing and its position in the market and financial strength;
-- The transaction parties' financial strength regarding their respective roles;
-- Morningstar DBRS sovereign credit rating on the Kingdom of Spain, currently at "A" with a Positive trend;
-- The consistency of the transaction's legal structure with Morningstar DBRS Legal Criteria for European Structured Finance Transactions methodology; and
-- The non-occurrence of a programme revolving termination event.

TRANSACTION STRUCTURE
The Notes were initially issued in July 2023 and are backed by a portfolio of receivables arising from credit cards granted to individuals domiciled in Spain and originated and serviced by WiZink. The transaction is currently in the revolving period scheduled to end in August 2026.

During the revolving period, the seller may continue to offer additional receivables that the Issuer will purchase, provided that the receivables eligibility criteria and portfolio criteria set out in the transaction documents are satisfied. The revolving period may end earlier than scheduled if certain events occur, such as the breach of performance triggers, insolvency of the seller or replacement of the servicer. At the end of the revolving period, the Notes will be repaid on a fully sequential basis.

The transaction allocates payments in separate interest and principal priorities and the Class A Notes continue to benefit from a general reserve which is equal to 1.2% of the outstanding balance of all Class A notes of the Issuer. The general reserve is available to cover shortfalls in senior expenses and interest payments on all the outstanding Class A notes of the Issuer.

As of today the Notes are the only outstanding note series of the Issuer as the series 2020-1 notes were fully repaid and the related ratings were discontinued in October and November 2023, respectively.

COUNTERPARTIES
Société Générale, Sucursal en España (Société Générale) remains as the account bank for the transaction. Based on the Société Générale's Long-Term Issuer Rating of A (high), Morningstar DBRS conducted further analysis on the exposure to the account banks based on the downgrade rating threshold of BBB (high) outlined in the transaction documents and considers the risk arising from the exposure to the account bank to be commensurate with the credit ratings assigned to the Notes.

PORTFOLIO ASSUMPTIONS
As of the June 2024 payment date, the investor report reported an MPPR of 17.7%, a yield of 16.9% and an annualised charge-off rate of 6.3%. Based on the trends of historical performance, Morningstar DBRS maintained the expected MPPR, yield and charge-off rate at 10.5%, 16.25% and 10.5%, respectively.

Morningstar DBRS credit ratings on the applicable classes of the Notes 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 transaction's respective press releases 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, GOVERNANCE CONSIDERATIONS
Governance (G) Factors
Morningstar DBRS notes there is a significant effect of the Transaction Governance factor on the credit analysis due to an unusual receivables eligibility criterion that excludes the usury law compliance for the agreements originated prior to 12 March 2020. In Morningstar DBRS' view, the carve-out is non-market standard and the legal risk is subjective and highly unpredictable. As there is a reliance on the seller to repurchase non-compliant and disputed receivables, a large loss due to void receivables could incur on the Issuer in respect of all the receivables with interest rates deemed usurious if the seller fails to fulfill its undertaking.

Morningstar DBRS considered adjustments in the cashflow analysis to account for the potential usury rate claims exposure based on the amount provisioned by the seller upon the transaction closing and concluded that such adjustment leads to at least one notch lower credit rating outcome than without such adjustment.

Additionally, there is no clarity of activities to be conducted by the backup servicer as the entity remains unknown. While the backup servicer facilitator undertakes to find a suitable replacement within 60 calendar days of a servicer termination event, the absence of clearly defined tasks to be taken by the future back-up servicer creates uncertainty in respect of the execution timing and resources required. These risks may lead to changes in borrower behaviour that could subsequently impact future defaults and/or repayments. Morningstar DBRS considers such exposure as a relevant Transaction Governance factor within its credit analysis.

There were no Environmental or Social 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.

A review of the transaction 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 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 these credit ratings include investor reports provided by the management company, InterMoney Titulización S.G.F.T., S.A.

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 at the transaction closing. However, this did not impact 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 actions on this transaction took place on 24 July 2023, when Morningstar DBRS assigned its credit ratings of AA (low) (sf) and BB (sf) to the Series 2023-1 Class A Notes and Series 2023-1 Class C Notes, respectively.

The lead analyst responsibilities for these transactions have been transferred to Roberto Perez.

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 to the parameters used to determine the credit ratings:

-- Expected MPPR: 10.5%
-- Expected Yield: 16.25%
-- Expected Charge-Off Rate: 10.5%

-- Scenario 1: 25% decrease in expected MPPR
-- Scenario 2: 25% decrease in expected yield
-- Scenario 3: 25% increase in expected charge-off rate
-- Scenario 4: 15% decrease in expected MPPR, 15% decrease in expected yield, 15% increase in expected charge-off rate

Morningstar DBRS concludes that the expected credit ratings under the four stress scenarios are:
-- Series 2023-1, Class A Notes: AA (low) (sf), AA (low) (sf), A (high) (sf), and A (low) (sf)
-- Series 2023-1, Class C Notes: BB (low) (sf), BB (low) (sf), BB (low) (sf), and B (high) (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: Roberto Perez, Assistant Vice President
Rating Committee Chair: Paolo Conti, Associate Managing Director
Initial Credit Rating Date: 24 July 2023

DBRS Ratings GmbH, Sucursal en España
Paseo de la Castellana 81
Plantas 26 & 27
28046 Madrid, Spain
Tel. +34 (91) 903 6500

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 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 (25 June 2024),
https://dbrs.morningstar.com/research/434970.
-- Interest Rate Stresses for European Structured Finance Transactions (28 June 2024),
https://dbrs.morningstar.com/research/435278.
-- Legal Criteria for European Structured Finance Transactions (28 June 2024),
https://dbrs.morningstar.com/research/435165.
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2023),
https://dbrs.morningstar.com/research/420572.
-- Operational Risk Assessment for European Structured Finance Originators (7 March 2024),
https://dbrs.morningstar.com/research/429054.
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (23 January 2024),
https://dbrs.morningstar.com/research/427030.
-- Master European Structured Finance Surveillance Methodology (7 March 2024),
https://dbrs.morningstar.com/research/429051.

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.