Morningstar DBRS Upgrades Credit Rating on Rosenkavalier 2020 UG (haftungsbeschränkt)

DBRS Ratings GmbH (Morningstar DBRS) upgraded its credit rating on the Class A Notes to AA (low) (sf) from A (high) (sf) issued by Rosenkavalier 2020 UG (haftungsbeschränkt) (the Issuer).

The credit rating on the Class A Notes addresses the timely payment of interest and the ultimate repayment of principal by the legal final maturity date in September 2035.

The credit rating upgrade follows an annual review of the transaction and is based on the following analytical considerations:

-- Portfolio performance, in terms of delinquencies, defaults, and losses, as of the August 2024 payment date;
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions on the revolving pool of receivables;
-- Current available credit enhancement to the Class A Notes to cover the expected losses at AA (low) (sf) credit rating level; and
-- No replenishment period termination event has occurred.

The transaction is a securitisation of the revolving pool of receivables consisting of fixed-rate unsecured, amortising personal loans granted to individuals domiciled in Germany, originated and currently serviced by UniCredit Bank AG (UniCredit or the originator). The transaction closed in September 2020 and included a 36-month replenishment period that was originally scheduled to end in September 2023. Following the transaction restructuring in September 2023, the revolving period was extended by another 42 months and it is now scheduled to end on the April 2027 payment date. During this period, the Issuer may purchase additional receivables, provided that the eligibility and replenishment criteria set out in the transaction documents are satisfied. The replenishment period may end earlier than scheduled if certain events, such as a breach of performance triggers, occur. To date, no early amortisation events have occurred.

PORTFOLIO PERFORMANCE
As of the August 2024 payment date, loans that were one to two months and two to three months delinquent represented 0.07% and 0.01% of the portfolio balance, respectively, up from 0.02% and 0.00% at the previous review one year ago. There are no loans more than 90 days in arrears. Gross cumulative defaults amounted to 0.16% of the aggregate original and subsequent portfolios, down from 1.0% in the same time, with the recovery ratio at 52%.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar maintained its base case PD and LGD assumptions on the revolving pool of receivables at 4.0% and 80.0%, respectively.

CREDIT ENHANCEMENT AND RESERVES
The subordination of the Class B Notes provides credit enhancement to the Class A Notes. As of the August 2024 payment date, the credit enhancement to the Class A Notes remained at 16.0%

The transaction includes a liquidity reserve, which the originator would fund when its rating falls below investment grade. The funded liquidity reserve is only available up to the amount that is not transferred by the servicer to cover the shortfalls in senior expenses and interest on the Class A Notes. Morningstar DBRS considers this arrangement to be commensurate with the rating on the Class A Notes.

UniCredit is the account bank for the transaction. Based on Morningstar DBRS' private rating on UniCredit, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS Morningstar considers the risk arising from the exposure to the account bank to be consistent with the rating assigned to the Class A Notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

The originator will fund a deposit reserve for the excess of all borrowers' deposit exposure over 1% of outstanding loan balances if UniCredit's rating falls below investment grade. Morningstar DBRS considers the potential 1% asset set-off in its cash flow analysis.

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 press releases at issuance.

Morningstar DBRS' long-term credit rating provides 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 Factors in Credit Ratings at: https://dbrs.morningstar.com/research/437781.

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" (6 August 2024), https://dbrs.morningstar.com/research/437540.

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 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 investor reports and information provided by Unicredit as well as 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 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 14 September 2023, when Morningstar DBRS confirmed its A (high) (sf) credit rating on the Class A Notes, following restructuring.

The lead analyst responsibilities for this transaction have been transferred to Shalva Beshia.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available at www.dbrsmorningstar.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 revolving pool of 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 revolving pool of receivables for the Issuer are 4.0% and 80.0%, respectively.
-- The risk sensitivity overview below illustrates the credit ratings 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 AA (low) (sf)
-- 50% increase in LGD, expected credit rating of AA (low) (sf)
-- 25% increase in PD, expected credit rating of AA (low) (sf)
-- 50% increase in PD, expected credit rating of A (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of A (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of A (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of A (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of A (low) (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: Shalva Beshia, Assistant Vice President
Rating Committee Chair: Mark Wilder, Senior Vice President
Initial Rating Date: 30 September 2020

DBRS Ratings GmbH
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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://www.dbrsmorningstar.com/about/methodologies.

-- Master European Structured Finance Surveillance Methodology (6 August 2024), https://dbrs.morningstar.com/research/437540.
-- Legal Criteria for European Structured Finance Transactions (28 June 2024),
https://dbrs.morningstar.com/research/435165
-- Operational Risk Assessment for European Structured Finance Originators (6 August 2024), https://dbrs.morningstar.com/research/437541
-- Operational Risk Assessment for European Structured Finance Servicers (6 August 2024), https://dbrs.morningstar.com/research/437543
-- 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 Factors in Credit Ratings
(13 August 2024), https://dbrs.morningstar.com/research/437781

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.