Press Release

DBRS Morningstar Confirms Ratings on Tagus – Sociedade de Titularização de Créditos, S.A. (Victoria Finance No. 1)

Consumer Loans & Credit Cards

July 28, 2021

DBRS Ratings GmbH (DBRS Morningstar) confirmed its ratings of the notes issued by Tagus – Sociedade de Titularização de Créditos, S.A. (Victoria Finance No. 1) (the Issuer) as follows:

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

The confirmations follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, charge-offs, principal payment rates, and yield rates, as of the June 2021 payment date.
-- Current available credit enhancement to the notes to cover the expected losses at their respective rating levels.
-- Current economic environment and an assessment of sustainable performance, as a result of the Coronavirus Disease (COVID-19) pandemic.
-- No revolving termination events have occurred.

The Issuer is a securitisation of credit card receivables granted to individuals under credit card agreements originated and serviced by WiZink Bank, S.A.U. Portuguese branch (WiZink Portugal). WiZink is the rebranding of the BarclayCard operation acquired in Portugal (which was previously acquired from Citigroup). The transaction closed in July 2020 and has a revolving period which is scheduled to end in September 2023.

PORTFOLIO PERFORMANCE
As of the June 2021 payment date, the monthly principal payment rate (MPPR) was 7.0% averaging 7.5% since closing. The annualised gross charge-off rate was 2.2%, averaging 0.9% since closing. The annualised yield rate was 18.3%, averaging 19.1% since closing.

As of June 2021, two- to three-month arrears represented 0.2% of the outstanding portfolio balance, while receivables more than three months in arrears represented 0.9% of the outstanding portfolio balance.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar maintained its base case monthly principal payment rate (MPPR), charge-off rate, and yield rate assumptions at 4.8%, 10.5%, and 15.0%, respectively, and considered portfolio-specific coronavirus adjustments in its analysis.

CREDIT ENHANCEMENT
Credit enhancement available to the rated notes during the amortisation period consists of subordination of the junior notes and SICF note, potential overcollateralisation, and excess spread.

The cash reserve was funded at closing through the proceeds of the Class S Notes. It is funded to its target level of EUR 3.9 million, equal to 1% of the outstanding Class A Notes balance. It is available to cover senior fees and interest on the Class A Notes.

Elavon Financial Services DAC (Elavon) acts as the issuer account bank for the transaction. Based on DBRS Morningstar’s private ratings on Elavon, and the downgrade provisions outlined in the transaction documents, DBRS Morningstar considers the risk arising from the exposure to the issuer account bank to be consistent with the ratings assigned to the notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

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

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

For this transaction, DBRS Morningstar assessed a reduction in the expected yield rate, principal payment rate, and charge-off rate in line with historical sensitivity to unemployment rates.

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 18 June 2021. For details, see the following commentaries: https://www.dbrsmorningstar.com/research/380281/global-macroeconomic-scenarios-june-2021-update and https://www.dbrsmorningstar.com/research/359903/global-macroeconomic-scenarios-application-to-credit-ratings. The DBRS Morningstar analysis considered impacts consistent with the moderate scenario in the referenced reports.

On 8 May 2020, DBRS Morningstar published a commentary outlining how the coronavirus crisis is likely to affect DBRS Morningstar-rated ABS transactions in Europe. For more details please see https://www.dbrsmorningstar.com/research/360734/european-abs-transactions-risk-exposure-to-coronavirus-covid-19-effect and https://www.dbrsmorningstar.com/research/362712/european-structured-finance-covid-19-credit-risk-exposure-roadmap.

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 the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

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 can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at: https://www.dbrsmorningstar.com/research/373262.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is the “Master European Structured Finance Surveillance Methodology” (8 February 2021).

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.

DBRS Morningstar 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 rating action.

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” at: https://www.dbrsmorningstar.com/research/381451/global-methodology-for-rating-sovereign-governments.

The sources of data and information used for these ratings include investor reports provided by WiZink Bank S.A.U. Portuguese branch.

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.

This is the first rating action since the Initial Rating Date on 28 July 2020 when DBRS Morningstar assigned ratings to the Class A, Class B, and Class C Notes of A (high) (sf), BBB (sf), and BB (high) (sf), respectively.

The lead analyst responsibilities for this transaction have been transferred to Daniel Rakhamimov.

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):

-- Base Case Charge-Off Rate: 10.5%
-- Base Case MPPR: 4.8%
-- Base Case Yield Rate: 15.0%

-- Scenario 1: 25% decrease in principal payment rate
-- Scenario 2: 25% increase in charge-off rate
-- Scenario 3: 25% decrease in yield
-- Scenario 4: 15% decrease in yield, 15% decrease in principal payment rate, 15% increase in charge-off rate

DBRS Morningstar concludes that the expected ratings under the four stress scenarios are:
Class A: A (low) (sf), BBB (high) (sf), A (low) (sf), BBB (sf)
Class B: BB (high) (sf), BB (high) (sf), BB (high) (sf), BB (sf)
Class C: BB (sf), BB (sf), BB (sf), B (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. DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage: https://www.fca.org.uk/firms/credit-rating-agencies.

These ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Daniel Rakhamimov, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 28 July 2020

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.

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.

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.

Download This Press Release