Press Release

DBRS Morningstar Confirms Ratings on Aurorus 2020 B.V.

Consumer Loans & Credit Cards

July 15, 2022

DBRS Ratings GmbH (DBRS Morningstar) confirmed its ratings on the notes issued by Aurorus 2020 B.V. as follows:

-- Class A Notes at AAA (sf)
-- Class B Notes at AA (sf)
-- Class C Notes at A (sf)
-- Class D Notes at BBB (sf)
-- Class E Notes at BB (sf)
-- Class F Notes at B (sf)

The ratings on the Class A and Class B notes address the timely payment of interest and the ultimate payment of principal on or before the legal final maturity date. The ratings on the Class C, Class D, Class E, and Class F notes address the timely payment of interest when most senior class of notes outstanding otherwise the ultimate payment of interest and the ultimate payment of 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 and cumulative net losses, as of the June 2022 payment date;
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions on a potential portfolio migration according to the replenishment criteria;
-- Current available credit enhancement available to the notes to cover the expected losses at their respective rating levels; and
-- No early amortisation events have occurred.

The transaction is a securitisation of instalment loans, unsecured amortising credit cards receivables where further drawings are not allowed, and revolving credit facilities originated by Qander Consumer Finance B.V. (Qander) in the Netherlands. The receivables are serviced by Qander, with Vesting Finance Servicing B.V. acting as the backup servicer. The transaction is currently in its revolving period scheduled to end in October 2023. The end of the revolving period coincides with the First Optional Redemption Date and a step-up in the coupon on the rated notes. The transaction closed in August 2020 and the legal final maturity is in August 2046.

At the end of Q1 2020, Qander withdrew from the credit card market and has blocked all associated revolving facilities, resulting in these receivables becoming fully amortising and carrying a fixed rate of interest. The terms and conditions of the revolving loan product also changed in May 2019, which resulted in a significantly shorter tenor and restrictions on drawing capabilities.

PORTFOLIO PERFORMANCE
Delinquency ratios have been low since closing. As of the June 2022 payment date, two- to three-month arrears and 90+-day delinquency ratios were at 0.4% and 0.3% of the portfolio’s outstanding balance, slightly up from 0.3% and 0.1%, respectively, at the last annual review. As of the June 2022 payment date, cumulative defaults represented 2.0% of the total receivables purchased, up from 1.2% at the last annual review. Defaulted loans are based on a 120-day arrears definition.

PORTFOLIO ASSUMPTIONS
DBRS Morningstar maintained its base case PD assumption on each of the product types at 10.0%, 5.0%, and 12.5% on revolving facilities, amortising credit cards receivables, and instalment loans, respectively, leading to a weighted-average PD of 8.1%. DBRS Morningstar also maintained its base case LGD assumption of 75.0% across the three product types.

CREDIT ENHANCEMENT AND RESERVES
Credit enhancement (CE) to the rated notes consists of the subordination of their respective junior notes. Given that the transaction is in its revolving period, the CE to the rated notes remained stable since closing as follows:

-- CE to the Class A Notes at 36.0%
-- CE to the Class B Notes at 24.0%
-- CE to the Class C Notes at 16.5%
-- CE to the Class D Notes at 11.5%
-- CE to the Class E Notes at 9.0%
-- CE to the Class F Notes at 6.0%

The transaction benefits from a liquidity reserve, currently at its target level of EUR 2.7 million, equal to 0.9% of the original Class A, Class B, Class C, and Class D Notes balances. After the revolving period, the target increases to 1.5% of the Class A, Class B, Class C, and Class D Notes balances and is funded from the proceeds available according to the interest priority of payments. It is nonamortising and, following the redemption of the Class D Notes, it becomes available to pay interest on the most senior class of notes outstanding, subject to no amount being recorded in the applicable note-specific principal deficiency ledger (PDL). The reserve can be used to cover balances recorded on the class-specific PDLs subject to conditions. As of the June 2022 payment date, all PDLs were clear.

ABN AMRO Bank N.V. (ABN AMRO) acts as the account bank for the transaction. Based on the account bank’s reference rating of ABN AMRO at AA (low), which is one notch below the DBRS Morningstar Long Term Critical Obligations Rating (COR) of AA, 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.

BNP Paribas SA (BNP) acts as the swap counterparty for the transaction. DBRS Morningstar's Long Term COR of BNP at AA (high) is above the First Rating Threshold as described in DBRS Morningstar's "Derivative Criteria for European Structured Finance Transactions" methodology.

DBRS Morningstar analysed the transaction structure in Intex DealMaker.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

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/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is: “Master European Structured Finance Surveillance Methodology” (19 May 2022).

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found at: https://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.

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 consider potential portfolio migration based on 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.

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 DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings

The sources of data and information used for these ratings include investor reports provided by Qander and loan-level data from 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 ratings, 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 17 August 2021, when DBRS Morningstar confirmed its ratings on the rated notes.

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 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 weighted-average PD and LGD on a potential portfolio migration based on replenishment criteria are 8.1% and 75.0%, 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 of the Class A Notes would be expected to fall to AA (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A Notes would be expected to fall to AA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected to fall to A (high) (sf).

Class A 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 (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 A (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)

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

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

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

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

Class F Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating below B (sf)
-- 50% increase in LGD, expected rating below B (sf)
-- 25% increase in PD, expected rating below B (sf)
-- 50% increase in PD, expected rating below B (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating below B (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating below B (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating below B (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: https://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: Shalva Beshia, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 2 July 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: https://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: https://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.

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