Morningstar DBRS Upgrades and Confirms Credit Ratings on Sunrise SPV Z80 S.r.l. - Sunrise 2019-2

DBRS Ratings GmbH (Morningstar DBRS) took the following credit rating actions on the notes (the rated notes) issued by Sunrise SPV Z80 S.r.l. - Sunrise 2019-2 (the Issuer):

-- Class D Notes upgraded to AAA (sf) from AA (high) (sf)
-- Class E Notes confirmed at AA (high) (sf)

The credit ratings on the Class D Notes address the timely payment of scheduled interest, and the ultimate repayment of principal by the legal final maturity date in October 2044. The credit ratings on the Class E Notes address the ultimate payment of scheduled interest while subordinated, but timely payment of scheduled interest as the most-senior class, and the ultimate repayment of principal by the legal final maturity date.

CREDIT RATING RATIONALE
The credit rating actions follow an annual review of the transaction and are 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 remaining receivables.
-- Current available credit enhancement to the rated notes to cover the expected losses at their respective credit rating levels.

The transaction is a securitisation of unsecured Italian consumer loan receivables underwritten to retail clients and originated by Agos Ducato S.p.A. (the originator), which also acts as the servicer of the transaction portfolio. The EUR 190.0 million portfolio, as of the August 2024 payment date, comprised new and used auto loans, personal loans, furniture loans, and loans for other purposes. The majority (79.3%) of loans in the portfolio are flexible loans that allow the borrower the option to skip one monthly instalment per year (up to a maximum of five times during the life of the loan) and modify the amount of the monthly instalments. The transaction closed in October 2019 and included an initial one-year revolving period, which ended on the November 2020 payment date.

PORTFOLIO PERFORMANCE
As of the August 2024 payment date, loans that were one-to-two months and two-to-three months delinquent represented 1.0% and 0.4% of the portfolio balance, respectively, while loans more than three months delinquent represented 1.1%. Gross cumulative defaults amounted to 3.0% of the aggregate original portfolio balance, while the cumulated recoveries including those deriving from repurchases of defaulted receivables amounted to 21.2% of the cumulative defaults.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
Morningstar DBRS conducted an analysis of the pool of receivables and updated its base case PD and LGD assumptions to 5.4% and 90.3%, respectively, based on updated historical vintage data received by the originator.

CREDIT ENHANCEMENT
The subordination of the respective junior obligations and the cash reserve provides credit enhancement to the rated notes. As of the August 2024 payment date, credit enhancements to the Class D Notes, and Class E Notes were 66.1%, and 43.8%, up from 40.3% and 25.6%, at the last annual review, respectively.

The transaction benefits from several funded reserves. The non-amortizing Payment Interruption Risk Reserve Account with a current balance of EUR 5.7 million is available to cover senior expenses and interest payments on the rated notes, providing liquidity support to the transaction. Credit support is provided through an amortising cash reserve with a target balance equal to 2.5% of the outstanding performing collateral principal. The current balance of the cash reserve is EUR 5.7 million, which can be used to offset the principal losses of defaulted receivables. All reserves are currently at their target levels.

The transaction structure additionally provisions for a rata posticipata cash reserve, which mitigates the liquidity risk arising from flexible loans. This reserve will only be funded if, for two consecutive payment dates, the outstanding balance of the flexible loans in relation to which the debtors have exercised the contractual right to postpone the payments is higher than 5% of the outstanding balance of all flexible loans. As of the August 2024 payment date, this condition had not been breached.

Crédit Agricole Corporate and Investment Bank S.A., Italian branch (CACIB-Italy) acts as the account bank for the transaction. Based on the Morningstar DBRS private credit rating of CACIB-Italy, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, Morningstar DBRS considers the risk arising from the exposure to the account bank to be consistent with the credit ratings assigned to the rated notes, as described in the 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 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, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) 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 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 surveillance section of 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 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 CACIB-Milan, and loan-level data provided by the European DataWarehouse GmbH. In the context of a newer transaction from the same originator, Morningstar DBRS received updated historical performance data as follows:
-- Static prepayment rates by annual vintages from 2003 to 2024;
-- Monthly dynamic arrears from June 2008 to July 2024;
-- Quarterly static default vintage analysis from Q1 2012 to Q2 2024; and
-- Quarterly recovery data vintage analysis from Q1 2012 to Q2 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 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.

The last credit rating actions on this issuer took place on 4 September 2024 and 3 January 2024, respectively, when Morningstar DBRS discontinued the credit ratings on the Class C and Class B Notes, respectively, following the full repayment of the notes. Prior to that, the last annual review took place for this transaction on 4 October 2023, when Morningstar DBRS upgraded its credit ratings on the Class B, Class C, Class D and Class E notes to AAA (sf), AAA (sf), AA (high) (sf) and AA (high) (sf) from AA (high) (sf), AA (high) (sf), AA (sf), and A (sf), respectively.

The lead analyst responsibilities for this transaction have been transferred to Helvia Meana Ramon.

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 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 lifetime base case PD and LGD for the pool 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 ratings.
-- The base case PD and LGD of the pool of loans for the Issuer are 5.4% and 90.3%, 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 D 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)

Class E Notes Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of AA (high) (sf)
-- 50% increase in LGD, expected credit rating of AA (high) (sf)
-- 25% increase in PD, expected credit rating of AA (high) (sf)
-- 50% increase in PD, expected credit rating of AA (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AA (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of AA (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of AA (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of AA (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: Helvia Meana Ramon, Assistant Vice President
Rating Committee Chair: Mark Wilder, Senior Vice President
Initial Rating Date: 15 October 2019

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 Structured Finance Transactions Methodology (25 June 2024),
https://dbrs.morningstar.com/research/434970
-- Legal Criteria for European Structured Finance Transactions (28 June 2024),
https://dbrs.morningstar.com/research/435165
-- Master European Structured Finance Surveillance Methodology (6 August 2024),
https://dbrs.morningstar.com/research/437540
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August 2024),
https://dbrs.morningstar.com/research/437781
-- 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 (22 August 2024), https://dbrs.morningstar.com/research/438224
-- Interest Rate Stresses for European Structured Finance Transactions (28 June 2024), https://dbrs.morningstar.com/research/435278

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.