DBRS Morningstar Finalises Provisional Rating of AAA (sf) on Purple Master Credit Cards Class A2020-1 Notes and Discontinues AAA (sf) Rating of Class A2018-1 Notes

DBRS Ratings GmbH (DBRS Morningstar) finalised the provisional rating of AAA (sf) on the Class A2020-1 notes issued by Purple Master Credit Cards (the Issuer).

DBRS Morningstar did not rate the Class C2020-1 notes issued in this transaction.

The rating of the Class A2020-1 notes addresses the timely payment of scheduled interest and ultimate repayment of principal by the legal final maturity date of 25 October 2034 and is based on information provided by the Issuer and its agents as of the date of this press release.

DBRS Morningstar also discontinued the AAA (sf) rating of Class A2018-1 notes, which were fully repaid.

The notes are backed by a portfolio of receivables from revolving accounts granted to individuals domiciled in France and serviced by BCPE Financement (the originator).

The rating is based on a review of the following analytical considerations:
-- The transaction’s capital structure, including form and sufficiency of available credit enhancement.
-- The credit enhancement level is sufficient to support the projected expected net losses under various stress scenarios.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms of the notes.
-- The originator and servicer’s financial strength and capabilities with respect to originations, underwriting, and servicing.
-- The operational risk review of BPCE Financement, which DBRS Morningstar deems to be an acceptable servicer.
-- The transaction parties’ financial strength regarding their respective roles.
-- The credit quality, diversification of the collateral, and historical and projected performance of the originator’s portfolio.
-- DBRS Morningstar’s sovereign rating of the Republic of France at AA (high) with a Stable trend.
-- The consistency of the transaction’s legal structure with DBRS Morningstar’s “Legal Criteria for European Structured Finance Transactions” methodology.

TRANSACTION STRUCTURE
The transaction includes a scheduled 28-month revolving period. During this period, the Issuer may purchase additional receivables, provided that the eligibility criteria and concentration limits set out in the transaction documents are satisfied. The revolving period may end earlier than scheduled if certain events occur, such as the breach of performance triggers.

The transaction also includes an amortising liquidity reserve available to the Issuer to cover the shortfalls in senior expenses and interests on the Class A2020-1 notes.

There is an interest rate swap in place to mitigate the mismatch between the interest rate of the receivables that could be re-priced and the floating coupon rates on the Class A notes. Such swap arrangement essentially turns the Issuer’s payment obligation into a fixed amount and is considered in the cash flow analysis.

COUNTERPARTIES
Natixis S.A. is the account bank and specially dedicated account bank for the transaction. Based on DBRS Morningstar’s private rating of Natixis S.A., the downgrade provisions outlined in the transaction documents, and structural mitigants, DBRS Morningstar considers the risk arising from the exposure to Natixis S.A. to be commensurate with the assigned rating.

Natixis S.A. is also the swap counterparty for the transaction. DBRS Morningstar’s private rating of Natixis S.A. is consistent with DBRS Morningstar’s criteria.

PORTFOLIO ASSUMPTIONS
The monthly principal payment rates (MPPRs) of the securitised portfolio have been largely stable above 5% over the reported period until April 2020 with a record low level of 4.3% due to the Coronavirus Disease (COVID-19) impact. The most recent performance in July 2020 shows an improved MPPR of 5.66%. DBRS Morningstar notes the MPPRs appear to stabilise but remain slightly below historical levels. Based on the historical trends, macroeconomic factors, and the portfolio-specific coronavirus adjustments, DBRS Morningstar revised the expected MPPR down to 4.5% from 5%.

Similarly, the portfolio yield is largely stable over the reported period until March 2020 with a low level of 11.6%, excluding recoveries. The most recent performance in July 2020 shows an interest yield of 11.7%, a subdued level reflecting the usury rate in place. DBRS Morningstar, nonetheless, maintained the expected cash interest yield at 11.5%, after consideration of the observed trend and potential yield compression due to the forbearance measures.

The reported historical charge-off rates have been declining since 2013. The most recent performance in July 2020 shows an annualised charge-off rate below 1%. Based on the historical trends, macroeconomic factors, and the portfolio-specific adjustment due to the coronavirus impact, DBRS Morningstar reduced the expected charge-off rate to 4.5% from 4.75%.

DBRS Morningstar analysed the transaction cash flow structure in its proprietary tool.

The Coronavirus Disease (COVID-19) and the resulting isolation measures have caused an economic contraction, leading to increases in unemployment rates and adverse financial impact on many borrowers. DBRS Morningstar anticipates that delinquencies would continue to arise, and payment and yield rates would remain subdued in the coming months for many credit card portfolios. The rating is based on additional analysis and adjustments to expected performance as a result of the global efforts to contain the spread of the coronavirus. For this transaction, DBRS Morningstar assumed a moderate decline in the expected MPPR and a lower decrease in the expected charge-off rate.

On 16 April 2020, the DBRS Morningstar Sovereign group released a set of macroeconomic scenarios for the 2020-22 period in select economies. These scenarios were last updated on 10 September 2020. For details, see the following commentaries: https://www.dbrsmorningstar.com/research/366542/global-macroeconomic-scenarios-september-update and https://www.dbrsmorningstar.com/research/359903/global-macroeconomic-scenarios-application-to-credit-ratings. DBRS Morningstar’s analysis considered impacts consistent with the moderate scenario in the referenced reports.

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: “Rating European Consumer and Commercial Asset-Backed Securitisations” (3 September 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.

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 Morningstar Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” methodology at: https://www.dbrsmorningstar.com/research/364527global-methodology-for-rating-sovereign-governments.

The sources of data and information used for this rating include performance and portfolio data relating to the receivables provided by the originator directly or through the arrangers, BPCE, and Natixis S.A.

DBRS Morningstar received the following information:
-- Monthly historical dynamic data from January 2006 to July 2020 for the entire managed book and by product types in respect of receivables balances, monthly payment rates, gross charge-offs, yield, delinquencies, recoveries and purchase rates.
-- Static vintage recovery data by monthly cohort from January 2006 to July 2020;

Stratification tables in relation to the loan pool as of 31 July 2020 were also received.

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

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 this rating 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.

This rating concerns a newly issued financial instrument. This is the first DBRS Morningstar rating on this financial instrument.

This is the first rating action since the Initial Rating Date.

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

To assess the impact of changing the transaction parameters on the ratings, DBRS Morningstar considered the following stress scenarios, as compared to the parameters used to determine the rating:

-- Expected Yield Rate: 11.5%
-- Expected MPPR: 4.5%
-- Expected Charge-Off Rate: 4.5%

Scenario 1: A 25% decrease in the Expected Yield Rate
Scenario 2: A 25% decrease in the Expected MPPR
Scenario 3: A 25% increase in the Expected Charge-Off Rate
Scenario 4: A 15% decrease in the Expected Yield Rate, 15% decrease in the Expected MPPR and 15% increase in the Expected Charge-Off Rate.

DBRS Morningstar concludes that the expected ratings of the Class A2020-1 Notes under the four stress scenarios are AAA (sf), AAA (sf), AAA (sf), and AA (high) (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 US regulations only.

Lead Analyst: Petter Wettestad, Senior Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 1 October 2020

DBRS Ratings GmbH
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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.

-- Rating European Consumer and Commercial Asset-Backed Securitisations (3 September 2020), https://www.dbrsmorningstar.com/research/355533/rating-european-consumer-and-commercial-asset-backed-securitisations
-- Rating European Structured Finance Transactions Methodology (21 July 2020),
https://www.dbrsmorningstar.com/research/364305/rating-european-structured-finance-transactions-methodology
-- Legal Criteria for European Structured Finance Transactions (11 September 2019),
https://www.dbrsmorningstar.com/research/350234/legal-criteria-for-european-structured-finance-transactions
-- Operational Risk Assessment for European Structured Finance Originators (30 September 2020), https://www.dbrsmorningstar.com/research/367603/operational-risk-assessment-for-european-structured-finance-originators
-- 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
-- Interest Rate Stresses for European Structured Finance Transactions (28 September 2020), https://www.dbrsmorningstar.com/research/367292/interest-rate-stresses-for-european-structured-finance-transactions
-- Derivative Criteria for European Structured Finance Transactions (24 September 2020),
https://www.dbrsmorningstar.com/research/367092/derivative-criteria-for-european-structured-finance-transactions

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.