DBRS Morningstar Confirms Ratings on Golden Bar (Securitisation) S.r.l. - Series 2016-1

DBRS Ratings GmbH (DBRS Morningstar) confirmed its ratings on the bonds issued by Golden Bar (Securitisation) S.r.l. - Series 2016-1 (the Issuer) as follows:

-- Class A Notes at A (low) (sf)
-- Class B Notes at BBB (high) (sf)
-- Class C Notes at BBB (sf)
-- Class D Notes at BB (sf)

The rating on the Class A Notes addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date in July 2040. The ratings on the Class B Notes, Class C Notes, and Class D Notes address the ultimate payment of interest and principal on or before the legal final maturity date.

The confirmations 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 April 2020 payment date.
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables.
-- Current available credit enhancement to the notes to cover the expected losses at their respective rating levels.
-- No revolving termination events have occurred.

The Issuer is a securitisation of salary assignment, pension assignment, and delegation of payment receivables originated in Italy by Santander Consumer Bank S.p.A. The transaction is currently in its four-year ramp-up period, scheduled to terminate in July 2020 (inclusive). During the ramp-up period, the Seller may assign subsequent portfolios to the Issuer, subject to certain conditions. The additional portfolios are funded through principal collections on the receivables or additional subscription of the notes up to the programme limit of EUR 1.3 billion.

PORTFOLIO PERFORMANCE
As of the April 2020 payment date, loans that were 30 to 60 days, and 60 to 90 days delinquent represented 0.2%, and 0.1% of the outstanding portfolio balance, respectively, while loans more than 90 days delinquent represented 0.1%. Gross cumulative defaults represented 7.1% of the aggregate original portfolio balance.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of receivables and has maintained its base case PD at 15.2% and updated its base case LGD to 39.6%, based on a worst-case portfolio composition as permitted by the concentration limits applicable during the revolving period.

CREDIT ENHANCEMENT
The subordination of the junior notes and the cash reserve provides credit enhancement to the rated notes. As of the April 2020 payment date, credit enhancement to the Class A, Class B, Class C, and Class D Notes was 20.5%, 18.0%, 14.5%, and 9.5%, respectively, stable since the DBRS Morningstar initial rating due to the transaction ramp-up period.

The transaction benefits from a cash reserve which covers senior fees, interest shortfall, and principal losses on the Class A to D Notes. The cash reserve is currently at its target level of EUR 27.5 million. Following additional subscriptions of the notes, the cash reserve can reach a level of EUR 32.5 million. The cash reserve is permitted to amortise providing certain conditions have been met.

The transaction also benefits from a non-amortising liquidity reserve funded to its target level of EUR 22.0 million, which covers senior fees and any interest shortfall on the Class A Notes. The target balance of the liquidity reserve is 2.0% of the total subscription amount, and can therefore reach EUR 26.0 million following additional subscriptions.

Banco Santander SA acts as the account bank for the transaction. Based on the account bank reference rating of Banco Santander SA at A (high), which is one notch below the DBRS Morningstar public Long-Term Critical Obligations Rating of AA (low), 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.

DBRS Morningstar analysed the transaction structure in Intex DealMaker.

The Coronavirus Disease (COVID-19) and the resulting isolation measures have caused an economic contraction, leading to sharp increases in unemployment rates and income reductions for many borrowers. DBRS Morningstar anticipates that delinquencies may arise in the coming months for many ABS transactions, some meaningfully. The ratings are based on additional analysis and adjustments to expected performance as a result of the global efforts to contain the spread of the coronavirus.

On 16 April 2020, the DBRS Morningstar Sovereign group published its outlook on the impact to key economic indicators for the 2020-22 time frame. These scenarios were updated on 1 June 2020. For details see the following commentaries: https://www.dbrsmorningstar.com/research/361867/global-macroeconomic-scenarios-june-update and https://www.dbrsmorningstar.com/research/359903/global-macroeconomic-scenarios-application-to-credit-ratings.

For more information on DBRS Morningstar considerations for European ABS transactions and Coronavirus Disease (COVID-19), please see the following commentary: https://www.dbrsmorningstar.com/research/360734.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is the “Master European Structured Finance Surveillance Methodology” (22 April 2020). DBRS Morningstar 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. Due to the inclusion of a revolving period in the transaction, the analysis continues to be based on the worst-case replenishment criteria set forth in the transaction legal documents.

A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent rating action.

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found at: http://www.dbrsmorningstar.com/about/methodologies.

For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrsmorningstar.com/research/350410/global-methodology-for-rating-sovereign-governments.

The sources of data and information used for these ratings include investor reports provided by Santander Consumer Bank SpA (Italy), and loan-level data provided by the European DataWarehouse GmbH.

DBRS Morningstar did not rely upon third-party due diligence in order to conduct its analysis.

At the time of the initial rating, DBRS Morningstar was supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS Morningstar considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.

DBRS Morningstar does not audit or independently verify the data or information it receives in connection with the rating process.

The last rating action on this transaction took place on 28 June 2019, when DBRS Morningstar confirmed the ratings of the Class A Notes, Class B Notes, Class C Notes, and Class D Notes.

The lead analyst responsibilities for this transaction have been transferred to Petter Wettestad.

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies is available at www.dbrsmorningstar.com.

To assess the impact of changing the transaction parameters on the rating, DBRS Morningstar considered the following stress scenarios as compared with the parameters used to determine the rating (the base case):

-- DBRS Morningstar 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 15.2% and 39.6%, 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. For example, if the LGD increases by 50%, the rating on the Class A Notes would be expected to fall to BBB (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Class A Notes would be expected to fall to BBB (high) (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating on the Class A Notes would be expected to fall to BB (sf).

Class A Notes Risk Sensitivity: -- 25% increase in LGD, expected rating of A (low) (sf) -- 50% increase in LGD, expected rating of BBB (high) (sf) -- 25% increase in PD, expected rating of A (low) (sf) -- 50% increase in PD, expected rating of BBB (high) (sf) -- 25% increase in PD and 25% increase in LGD, expected rating of BBB (high) (sf) -- 25% increase in PD and 50% increase in LGD, expected rating of BBB (low) (sf) -- 50% increase in PD and 25% increase in LGD, expected rating of BBB (low) (sf) -- 50% increase in PD and 50% increase in LGD, expected rating of BB (sf) Class B Notes Risk Sensitivity: -- 25% increase in LGD, expected rating of BBB (high) (sf) -- 50% increase in LGD, expected rating of BBB (low) (sf) -- 25% increase in PD, expected rating of BBB (sf) -- 50% increase in PD, expected rating of BBB (low) (sf) -- 25% increase in PD and 25% increase in LGD, expected rating of BB (high) (sf) -- 25% increase in PD and 50% increase in LGD, expected rating of BB (high) (sf) -- 50% increase in PD and 25% increase in LGD, expected rating of BB (sf) -- 50% increase in PD and 50% increase in LGD, expected rating of B (high) (sf) Class C Notes Risk Sensitivity: -- 25% increase in LGD, expected rating of BBB (low) (sf) -- 50% increase in LGD, expected rating of BB (sf) -- 25% increase in PD, expected rating of BBB (low) (sf) -- 50% increase in PD, expected rating of BB (sf) -- 25% increase in PD and 25% increase in LGD, expected rating of BB (sf) -- 25% increase in PD and 50% increase in LGD, expected rating of B (high) (sf) -- 50% increase in PD and 25% increase in LGD, expected rating of B (high) (sf) -- 50% increase in PD and 50% increase in LGD, expected rating of B (high) (sf) Class D Notes Risk Sensitivity: -- 25% increase in LGD, expected rating of BB (low) (sf) -- 50% increase in LGD, expected rating of B (high) (sf) -- 25% increase in PD, expected rating of BB (low) (sf) -- 50% increase in PD, expected rating of B (high) (sf) -- 25% increase in PD and 25% increase in LGD, expected rating of B (high) (sf) -- 25% increase in PD and 50% increase in LGD, expected rating of B (high) (sf) -- 50% increase in PD and 25% increase in LGD, expected rating of B (high) (sf) -- 50% increase in PD and 50% increase in LGD, expected rating below B (sf)

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see:
http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings GmbH are subject to EU and U.S. regulations only.

Lead Analyst: Petter Wettestad, Senior Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 2 August 2016

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 rating methodologies used in the analysis of this transaction can be found at: http://www.dbrsmorningstar.com/about/methodologies.

-- Legal Criteria for European Structured Finance Transactions (11 September 2019)
https://www.dbrsmorningstar.com/research/350234/legal-criteria-for-european-structured-finance-transactions
-- Master European Structured Finance Surveillance Methodology (22 April 2020)
https://www.dbrsmorningstar.com/research/359884/master-european-structured-finance-surveillance-methodology.
-- Operational Risk Assessment for European Structured Finance Servicers (28 February 2020)
https://www.dbrsmorningstar.com/research/357429/operational-risk-assessment-for-european-structured-finance-servicers.
-- Operational Risk Assessment for European Structured Finance Originators (28 February 2020)
https://www.dbrsmorningstar.com/research/357430/operational-risk-assessment-for-european-structured-finance-originators.
-- Rating European Consumer and Commercial Asset-Backed Securitisations (13 January 2020)
https://www.dbrsmorningstar.com/research/355533/rating-european-consumer-and-commercial-asset-backed-securitisations.
-- Rating CLOs and CDOs of Large Corporate Credit (28 February 2020)
https://www.dbrsmorningstar.com/research/357452/rating-clos-and-cdos-of-large-corporate-credit
-- Rating European Structured Finance Transactions Methodology (28 February 2020)
https://www.dbrsmorningstar.com/research/357428/rating-european-structured-finance-transactions-methodology.

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at http://www.dbrsmorningstar.com/research/278375.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.