Morningstar DBRS Upgrades and Confirms Credit Ratings on Fortuna Consumer Loan ABS 2022-1 Designated Activity Company

DBRS Ratings GmbH (Morningstar DBRS) took the following credit rating actions on the notes (the rated notes) issued by Fortuna Consumer Loan ABS 2022-1 Designated Activity Company (the Issuer):

-- Class B Notes confirmed at AAA (sf)
-- Class C Notes upgraded to AAA (sf) from AA (low) (sf)
-- Class D Notes upgraded to AA (sf) from A (sf)
-- Class E Notes upgraded to BBB (high) (sf) from BB (high) (sf)
-- Class F Notes upgraded to BB (high) (sf) from BB (low) (sf)
-- Class X Notes confirmed at CCC (sf)

The credit ratings on the Class B and Class C Notes address the timely payment of scheduled interest and the ultimate repayment of principal by the legal final maturity date in July 2031. The credit ratings on the Class D, Class E, and Class F Notes address the ultimate payment of interest (timely when most senior) and the ultimate repayment of principal by the legal final maturity date. The credit rating on the Class X Notes addresses the ultimate payment of interest 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;
-- Updated probability of default (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables; and
-- Current available credit enhancement to the rated notes to cover the expected losses at their respective credit rating levels.

The transaction is a static securitisation backed by a portfolio of unsecured consumer loans brokered through auxmoney GmbH (auxmoney) in co-operation with Süd-West-Kreditbank Finanzierung GmbH, granted to individuals domiciled in Germany and serviced by CreditConnect GmbH, a fully owned subsidiary of auxmoney. The transaction closed in May 2022 and the Issuer acquired the total EUR 225.0 million collateral portfolio in three phases: EUR 176.5 million at closing, EUR 39.3 million on 30 May 2022, and EUR 9.2 million on 30 June 2022.

PORTFOLIO PERFORMANCE
As of the July 2024 cut-off date, loans that were in dunning levels 1 and 2 represented 6.4% and 2.0% of the outstanding collateral balance, respectively, while loans that were in dunning levels 3 and 4 represented 1.6%. Gross cumulative defaults amounted to 9.3% of the aggregate portfolio initial balance, 35.9% of which has been recovered to date.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
Morningstar DBRS received updated historical vintage data from the originator and conducted a loan-by-loan analysis of the remaining pool of receivables. Morningstar DBRS updated its base case PD assumption to 12.7% and maintained its LGD assumption at 72.5%.

CREDIT ENHANCEMENT
The subordination of the respective junior obligations provides credit enhancement to the rated notes.
As of the August 2024 payment date, credit enhancement to the Class B, Class C, Class D, Class E, and Class F Notes was 89.2%, 56.4%, 37.7%, 20.5%, and 14.9%, respectively, up from 49.2%, 31.3%, 21.1%, 11.7%, and 8.7%, as of the September 2023 payment date. The Class X Notes do not benefit from credit enhancement and are repaid using any available excess spread remaining in the transaction following the payment of senior items in the revenue priority of payments.

As of the August 2024 payment date, the unrated junior-most Class G Notes recorded an uncleared PDL debit balance of EUR 2.66 million, as the absolute level of excess spread in the transaction is insufficient to offset the monthly defaults on the portfolio as a result of the high prepayments, which greatly reduced the portfolio's balance.

As a result of the uncured PDL, the sequential redemption trigger was breached on the December 2022 payment date and the notes began to amortise sequentially starting from the January 2023 payment date, resulting in a significant increase in credit enhancement levels.

The transaction benefits from liquidity support provided by an amortising cash reserve, available to cover senior expenses and interest payments on the Class A to Class F Notes. The reserve has a target balance equal to 0.7% of the outstanding balance of the Class A to Class E Notes, subject to a floor of EUR 422,000. As of the August 2024 payment date, the reserve was at its floor level.

Elavon Financial Services DAC acts as the account bank for the transaction. Based on Morningstar DBRS' private credit 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 ratings assigned to the notes, as described in Morningstar DBRS' "Legal Criteria for European Structured Finance Transactions" methodology.

BNP Paribas SA (BNP) acts as the hedging counterparty in the transaction. Morningstar DBRS' public Long Term Critical Obligations Rating of AA (high) on BNP is consistent with the First Rating Threshold as described in Morningstar DBRS' "Derivative 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 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: "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 these credit ratings include monthly transaction reports provided by U.S. Bank Global Corporate Trust Limited (the Cash Administrator), servicer reports and additional information provided by auxmoney, and loan-level data provided by European DataWarehouse GmbH. Additionally, Morningstar DBRS was provided with updated historical performance data from the originator as follows:
-- Static default data from Q2 2014 to Q1 2024
-- Recovery data from June 2017 to April 2024
-- Dynamic delinquency information from June 2018 to May 2024
-- Prepayment rates from May 2016 to May 2024

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 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 action on this transaction took place on 26 March 2024 when Morningstar DBRS discontinued its AAA (sf) credit rating on the Class A Notes following their full repayment. Prior to that, on 29 September 2023, Morningstar DBRS confirmed its credit ratings on the Class A and Class X Notes at AAA (sf) and CCC (sf), respectively, and upgraded its credit ratings on the Class B, Class C, Class D, Class E, and Class F Notes to AAA (sf), AA (low) (sf), A (sf), BB (high) (sf), and BB (low) (sf), respectively, from AA (low (sf), A (sf), BBB (sf), BB (sf) and B (high) (sf), respectively.

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 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 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 current pool of loans for the Issuer are 12.7% and 72.5%, respectively.

Class B 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 C 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 AA (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of AA (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of AA (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of AA (low) (sf)

Class D 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 (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of A (high) (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)

Class E Notes Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of BBB (sf)
-- 50% increase in LGD, expected credit rating of BBB (low) (sf)
-- 25% increase in PD, expected credit rating of BBB (low) (sf)
-- 50% increase in PD, expected credit rating of BB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of BB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of BB (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of BB (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of BB (low) (sf)

Class F Notes Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of BB (high) (sf)
-- 50% increase in LGD, expected credit rating of BB (high) (sf)
-- 25% increase in PD, expected credit rating of BB (high) (sf)
-- 50% increase in PD, expected credit rating of B (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of B (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of B (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating below B (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating below B (sf)

No sensitivity analysis is conducted for the Class X 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 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: Alice Comastri, Senior Analyst
Rating Committee Chair: Alfonso Candelas, Associate Managing Director
Initial Rating Date: 5 May 2022

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.

-- 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
-- Interest Rate Stresses for European Structured Finance Transactions (28 June 2024),
https://dbrs.morningstar.com/research/435278
-- 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
-- Rating European Structured Finance Transactions Methodology (25 June 2024),
https://dbrs.morningstar.com/research/434970
-- Derivative Criteria for European Structured Finance Transactions (6 September 2024),
https://dbrs.morningstar.com/research/439043
-- 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.