Morningstar DBRS Confirms Credit Ratings on Sunrise SPV Z90 S.r.l. - Sunrise 2020-1 Following Amendment

DBRS Ratings GmbH (Morningstar DBRS) took the following credit rating actions on the bonds issued by Sunrise SPV Z90 S.r.l. - Sunrise 2020-1 (the Issuer):

-- Class A Notes confirmed at AAA (sf)
-- Class B Notes confirmed at AA (high) (sf)

The credit rating on the Class A Notes addresses the timely payment of scheduled interest and the ultimate repayment of principal by the legal final maturity date of 27 October 2045. The credit rating on the Class B Notes addresses the ultimate payment of interest but the timely payment of scheduled interest when they are the most senior tranche, 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 December 2024 payment date;
-- Current available credit enhancement to the rated notes to cover the expected losses at their respective credit rating levels.
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions considering the potential portfolio migration based on replenishment criteria set forth in the transaction legal documents;
-- No revolving termination events have occurred;
-- A structural amendment to the transaction (the Amendment) executed on 13 January 2025 which primarily includes an 18 month extension of the revolving period to the initial amortisation date falling in July 2026 payment date; and the definition of "Valuation Date" applicable for each subsequent Portfolio to be assigned after the effective date of the Master Amendment Agreement (27 January 2025).

The transaction is a securitisation of unsecured Italian consumer loan receivables granted to retail clients and originated and serviced by Agos Ducato S.p.A. The initial EUR 1.1 billion portfolio comprised new and used automobile loans, personal loans, furniture loans, and other-purpose loans. The transaction closed on 10 June 2020 and included an initial 18 month revolving period scheduled to end on the November 2021 payment date, however the transaction was amended in November 2021 and June 2023, when the Issuer extended the revolving period by 19 and 18 months, respectively. As a result, the revolving period was scheduled to end in January 2025. With the current Amendment, it has been further extended for another 18 months with initial amortization date falling in July 2026. Concentration limits are in place to mitigate any negative evolution of the portfolio, and performance triggers are included in the revolving period termination events. To date, all triggers have been met.

PORTFOLIO PERFORMANCE
As of the December 2024 payment date, loans that were one to two months and two to three months delinquent represented 0.4% and 0.2% of the portfolio balance, respectively, while loans more than three months delinquent represented 0.5%. Gross cumulative defaults amounted to 2.0% of the aggregate original and subsequent portfolios, of which 24.8% has been recovered to date including those deriving from the repurchases of defaulted receivables.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
Morningstar DBRS maintained its base case PD and LGD assumptions at 5.2% and 90.2%. The analysis continues to consider the replenishment criteria set forth in the transaction legal documents.

CREDIT ENHANCEMENT
The subordination of the respective junior notes and the cash reserve provides credit enhancement to the rated notes. As of the December 2024 payment date, credit enhancement to the Class A and Class B Notes was 34.8% and 24.9%, respectively, stable since the last annual review due to inclusion of the revolving period.

The transaction benefits from several funded reserves. The non amortizing payment interruption risk reserve account has a current balance of EUR 5.7 million and 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 cash reserve is currently at its target balance of EUR 28.6 million and can be used to offset the principal losses of defaulted receivables. The transaction structure also 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 5.0% of the outstanding balance of all flexible loans. As of the December 2024 payment date, this condition had not been met.

Crédit Agricole Corporate & Investment Bank, Milan branch (CACIB Milan) acts as the account bank for the transaction. Based on the Morningstar DBRS private rating on CACIB Milan, 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 ratings assigned to the rated notes, as described in Morningstar DBRS' "Legal and 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 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 the Master European Structured Finance Surveillance Methodology (19 November 2024) https://dbrs.morningstar.com/research/443204.

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.

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 be for surveillance potential portfolio migration based on replenishment criteria set forth in the transaction legal documents.

A review of the Master Amendment Agreement was conducted in the context of the Amendment. A review of the rest 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 investor reports provided by CACIB Milan and loan-level data provided by European DataWarehouse GmbH. Additionally, in the context of a new transaction from the same originator, Morningstar DBRS was provided with updated historical performance data as follows:
-- quarterly static default data from Q1 2012 to Q2 2024
-- quarterly static recovery data from Q1 2013 to Q2 2024
-- monthly dynamic arrears and default data from June 2008 to June 2024
-- static prepayment rates by annual vintages from 2003 to 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 action on this transaction took place on 06 May 2024 when Morningstar DBRS confirmed its credit ratings on the Class A and Class B Notes at AAA (sf) and AA (high) (sf), respectively.

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

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 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 5.2% and 90.2%, respectively.
-- The risk sensitivity overview below illustrates the 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 rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AA (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf)

Class B Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD, expected rating of AA (high) (sf)
-- 50% increase in PD, expected rating of AA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (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, Assistant Vice President,
Rating Committee Chair: Mark Wilder, Senior Vice President,
Initial Rating Date: 10 June 2020

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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.

-- Master European Structured Finance Surveillance Methodology (19 November 2024),
https://dbrs.morningstar.com/research/443204
-- Rating European Consumer and Commercial Asset-Backed Securitisations (18 September 2024), https://dbrs.morningstar.com/research/439583
-- Rating European Structured Finance Transactions Methodology (19 November 2024),
https://dbrs.morningstar.com/research/443199
-- Legal and Derivative Criteria for European Structured Finance Transactions (19 November 2024),
https://dbrs.morningstar.com/research/443196
-- Operational Risk Assessment for European Structured Finance Originators and Servicers (18 September 2024),
https://dbrs.morningstar.com/research/439571
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2024),
https://dbrs.morningstar.com/research/439913
-- 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/439604.

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.