Press Release

DBRS Morningstar Upgrades and Confirms Ratings on Aurorus 2020 B.V. Following Amendment

Consumer Loans & Credit Cards

May 16, 2023

DBRS Ratings GmbH (DBRS Morningstar) took the following rating actions on the notes issued by Aurorus 2020 B.V.:

-- Class A Notes confirmed at AAA (sf)
-- Class B Notes confirmed at AA (sf)
-- Class C Notes confirmed at A (sf)
-- Class D Notes confirmed at BBB (sf)
-- Class E Notes upgraded to BB (high) (sf) from BB (sf)
-- Class F Notes upgraded to B (high) (sf) from 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 they are the 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 rating actions 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 April 2023 payment date;
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions on a potential portfolio migration according to the replenishment criteria;
-- Updated historical data provided by Qander;
-- Current available credit enhancement available to the notes to cover the expected losses at their respective rating levels;
-- No early amortisation events to date; and
-- An amendment to the transaction executed on 21 April 2023.

AMENDMENT
The amendment to the transaction includes the following:
-- An increase in the minimum concentration of fixed-rate loans to 70.0% from 42.0%.
-- A decrease in the minimum margin on revolving loans to 4.0% from 6.0%.

The transaction is a securitisation of fixed-rate 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. Qander services the receivables while Vesting Finance Servicing B.V. acts 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 blocked all associated revolving facilities, resulting in these receivables 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 April 2023 payment date, two- to three-month arrears and 90+-day delinquency ratios were at 0.4% and 0.1% of the portfolio’s outstanding balance, respectively, compared with 0.4% and 0.3% at the last annual review, respectively. As of the April 2023 payment date, cumulative defaults represented 2.5% of the total receivables purchased, up from 2.0% at the last annual review. Defaulted loans are based on a 120-day arrears definition.

PORTFOLIO ASSUMPTIONS
DBRS Morningstar reviewed the updated historical data provided by Qander and maintained its base case PD assumption of 10.0%, 5.0%, and 12.5% on the revolving facilities, fixed-rate instalment loans, and amortising credit cards receivables, respectively. DBRS Morningstar also maintained its base case LGD assumption of 75.0% on the three product types but adjusted the weighted-average PD to 6.7% from 8.1% at closing, given the increase in the minimum concentration of fixed-rate loans following the amendment executed on 21 April 2023. The decrease in overall portfolio expected loss outweighs the decrease in the minimum margin for the revolving portion of the portfolio and drives the upgrades on the Class E and Class F Notes.

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 have 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 Note balances. After the revolving period, the target increases to 1.5% of the Class A, Class B, Class C, and Class D Note balances and is funded from the proceeds available according to the interest priority of payments. The liquidity reserve is nonamortising and, following the redemption of the Class D Notes, becomes available to pay interest on the most senior class of notes outstanding, provided that no amount is 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 certain conditions. As of the April 2023 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 reference rating of AA (low) on ABN AMRO (which is one notch below its 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 (BNPP) acts as the swap counterparty for the transaction. DBRS Morningstar's Long Term COR of AA (high) on BNPP 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 methodologies applicable to the ratings are : “Master European Structured Finance Surveillance Methodology” (7 February 2023), https://www.dbrsmorningstar.com/research/409485/master-european-structured-finance-surveillance-methodology, and “Rating European Consumer and Commercial Asset-Backed Securitisations” (19 October 2022), https://www.dbrsmorningstar.com/research/404212/rating-european-consumer-and-commercial-asset-backed-securitisations.

Other methodologies referenced in this transaction are listed at the end of this press release.

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.

DBRS Morningstar has conducted a review of the amended transaction legal documents provided in the context of the aforementioned amendment. A review of the remaining legal documents has not been conducted.

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 these ratings include loan-level data provided by European DataWarehouse GmbH as well as investor reports and historical data provided by Qander. The historical data included vintage data from Q1 2008 to Q1 2023 on defaults by balance for revolving loans, fixed-rate loans, and credit cards, and vintage data from Q1 2008 to Q1 2023 on recoveries by balance for revolving loans and fixed-rate loans.

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 15 July 2022, 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 6.7% 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 on the Class A Notes would be expected to remain at AAA (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 AA (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 AA (sf).

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

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

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

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

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

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

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. For further information on DBRS Morningstar historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

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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Tel. +49 (69) 8088 3500
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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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