Press Release

DBRS Morningstar Confirms Rating on Class A Notes Issued by Rosenkavalier 2015 UG

Structured Credit

November 30, 2022

DBRS Ratings GmbH (DBRS Morningstar) confirmed its rating on the Class A Notes issued by Rosenkavalier 2015 UG (the Issuer) at A (high) (sf).

The confirmation follows an annual review of the transaction and is based on the following analytical considerations:
-- The portfolio performance, in terms of level of delinquencies and defaults, as of the October 2022 payment date;
-- The one-year base case probability of default (PD) and default and recovery rates on the receivables;
-- The fact that no early amortisation event has occurred; and
-- The current available credit enhancement to the Class A Notes to cover the expected losses assumed in line with the A (high) (sf) rating level.

The transaction is a cash flow securitisation backed by a portfolio of loans originated and serviced by UniCredit Bank AG (UCB) to large corporations, small and medium-size enterprises, entrepreneurs, and self-employed individuals based in Germany. The transaction includes a three-year revolving period, which was originally scheduled to end in December 2021 but was extended to 30 November 2024 following a transaction restructuring executed on 30 November 2021. During the revolving period, UCB has the option to sell new loans at par to the Issuer so long as the eligibility criteria and replenishment criteria are met. However, the revolving period could end prematurely based on the occurrence of replenishment termination events, including if the cumulative default rate exceeds 1.0% of the initial portfolio balance or the cumulative delinquency rate exceeds 5.5% of the initial portfolio balance. To date, no replenishment termination events have occurred.

The transaction cash flow structure resembles that of a typical synthetic securitisation rather than a cash securitisation as excess spread cannot be used to cover principal defaults. Once a loan loss has been realised, it will be allocated to reduce the principal balance of the notes in reverse order of priority (i.e., starting from the most junior to the most senior).

The interest on the Class A Notes can defer and is ultimately extinguishable without resulting in an event of default under the agreements. Principal collections can also be used to cover interest shortfalls. DBRS Morningstar’s rating on the Class A Notes addresses the likelihood of ultimate payment of interest and principal on or before the maturity date in November 2045.

PORTFOLIO PERFORMANCE
The portfolio is performing within DBRS Morningstar’s expectations. As of October 2022, no cumulative defaults were reported and the cumulative delinquency ratio remained low at 0.1%.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar updated the portfolio’s one-year base case PD assumption to 1.9%, following the removal of Coronavirus Disease (COVID-19)-related adjustments. DBRS Morningstar conducted an analysis on the worst-case portfolio based on the eligibility and replenishment criteria and updated its portfolio default and recovery assumptions on the outstanding portfolio to 32.0% and 23.4%, respectively, at the A (high) (sf) rating level.

CREDIT ENHANCEMENT
As of the October 2022 payment date, credit enhancement to the Class A Notes was 37.5%, down from 39.9% before the 2021 restructuring. Credit enhancement to the Class A Notes considers the subordination of the Class B Notes.

UCB is the main account bank provider of the transaction. Based on DBRS Morningstar’s private rating on UCB, the downgrade provisions outlined in the transaction documents, and structural mitigants inherent in the transaction, DBRS Morningstar considers the risk arising from the exposure to UCB 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.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS

There were no Environmental/Social/Governance factors that had a significant or relevant impact 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 (17 May 2022).

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

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is: “Rating CLOs Backed by Loans to European SMEs” (10 June 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 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 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/401817/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 this rating include investor reports and additional information provided by UCB as well as 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 and at the November 2021 amendment, 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.

The last rating action on this transaction took place on 30 November 2021, when DBRS Morningstar confirmed its rating of the Class A Notes at A (high) (sf) following amendment.

The lead analyst responsibilities for this transaction have been transferred Baran Cetin.

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

Sensitivity Analysis: 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.
-- PD Rates Used: Base case PD of 1.9%, a 10% and 20% increase on the base case PD.
-- Recovery Rates Used: Base case recovery rates of 23.4% at the A (high) (sf) stress level for the Class A Notes, a 10% and 20% decrease in the base case recovery rates. Note that the percentage decreases in the recovery rates are assumed for the other stress recovery rate levels.

DBRS Morningstar concludes that a hypothetical increase of the base case PD by 20% or a hypothetical decrease of the recovery rate by 20%, ceteris paribus, would lead to a confirmation of the Class A Notes at A (high) (sf). A scenario combining both an increase in the PD by 10% and a decrease in the recovery rate by 10%, ceteris paribus, would also lead to a confirmation of the Class A Notes at A (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: 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.

This rating is endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Baran Cetin, Senior Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 18 December 2015

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.

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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