Press Release

DBRS Morningstar Finalises Provisional Ratings on Noria 2023

Consumer Loans & Credit Cards

July 20, 2023

DBRS Ratings GmbH (DBRS Morningstar) finalised its provisional ratings on the following classes of notes (the Rated Notes) issued by Noria 2023 (the Issuer):

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

DBRS Morningstar does not rate the Class G Notes also issued in this transaction.

The rating of the Class A Notes addresses the timely payment of scheduled interest and the ultimate repayment of principal by the legal maturity date. The ratings of the other classes of Rated Notes address the ultimate payment of interest while they are subordinated but the timely payment of scheduled interest when they are the senior-most class and the ultimate repayment of principal by the legal maturity date.

The transaction is a securitisation fund of French unsecured consumer loan receivables originated by BNP Paribas Personal Finance as the seller and the servicer, which is part of the BNP Paribas group.

The ratings are based on a review of the following analytical considerations:
-- The transaction’s capital structure, including the form and sufficiency of available credit enhancement to support the projected expected net losses under various stress scenarios.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay the Rated Notes.
-- The seller’s financial strength and capabilities with respect to originations, underwriting, and servicing.
-- The operational risk review of the seller, 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 seller’s portfolio.
-- DBRS Morningstar’s sovereign rating on the Republic of France at AA (high) with a Stable trend.
-- The expected consistency of the transaction’s legal structure with DBRS Morningstar’s “Legal Criteria for European Structured Finance Transactions” methodology.

TRANSACTION STRUCTURE
The transaction represents the issuance of notes backed by a pool of approximately EUR 500 million of fixed-rate, unsecured, and amortising personal loans; debt consolidation loans; and sales finance loans granted to individuals domiciled in France.

The transaction features a 14-month scheduled revolving period during which time the Issuer will purchase new receivables that the seller may offer, provided that certain conditions set out in the transaction documents are satisfied.

The transaction benefits from a liquidity reserve equal to 1.25% of the Rated Notes’ balance funded by the seller at closing. The liquidity reserve will be available to the Issuer at all times when the principal collections are not sufficient to cover the interest deficiencies, which are defined as the shortfalls in senior expenses, swap payments, and interest on the Class A Notes, and if not subordinated, interest on the other classes of Rated Notes. The liquidity reserve is amortising and will be replenished in the transaction waterfalls during the revolving period and the normal redemption period, subject to a floor of 0.5% of the initial balance of the Rated Notes.

The transaction also benefits from a non-amortising general reserve equal to 2.60% of the initial balance of the Rated Notes and Class G Notes, which was also funded by the seller at closing and will be available as part of the available funds to cover any shortfalls up to its replenishment in the interest waterfalls.

A commingling reserve facility is also available to the Issuer if the specially dedicated account bank is rated below the account bank required rating or following a breach of its material obligations. The required amount is equal to the sum of 2.5% of the performing receivables and 0.6% of the outstanding principal balance of the initial receivables.

COUNTERPARTIES
BNP Paribas (acting through its Securities Services department) is the account bank for the transaction. Based on DBRS Morningstar’s Long-Term Issuer Rating of AA (low) with a Stable trend on BNP Paribas, and downgrade provisions outlined in the transaction documents, DBRS Morningstar considers the risk arising from the exposure to the account bank to be commensurate with the ratings assigned.

The seller is the initial swap counterparty for the transaction. DBRS Morningstar's private rating on the seller meets the criteria to act in such capacity. The transaction documents contain downgrade provisions largely consistent with DBRS Morningstar's "Derivative Criteria for European Structured Finance Transactions" methodology and the transaction will be monitored based on DBRS Morningstar’s rating of the seller or its replacement.

PORTFOLIO ASSUMPTIONS
The seller, as the originator, has a long operating history of consumer loan lending. Its performance to date has been stable based on a detailed vintage analysis. DBRS Morningstar also benchmarked the portfolio performance to comparable consumer loan portfolios in France and revised its asset assumptions of lifetime gross default and recovery assumptions to 4.8% and 42%, respectively, based on the more stringent loan eligibility criteria and possible portfolio migration during the scheduled revolving period.

DBRS Morningstar’s credit ratings on the Rated Notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations for each of the Rated Notes are the related Interest Amounts and Initial Principal Amounts.

DBRS Morningstar’s credit ratings do not address non-payment risk associated with contractual payment obligations contemplated in the applicable transaction documents that are not financial obligations.

DBRS Morningstar’s long-term credit ratings provide opinions on risk of default. DBRS Morningstar considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.

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/416784/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

DBRS Morningstar analysed the transaction structure in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the credit ratings is: “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 considers potential portfolio migration based on the replenishment criteria set forth in the transaction legal documents.

For a more detailed discussion of the sovereign risk impact on Structured Finance credit 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 credit ratings include performance and portfolio data relating to the receivables provided by the seller directly or through the arranger, BNP Paribas, as follows:

-- Quarterly default vintage analysis from Q4 2012 to Q4 2022;
-- Quarterly recovery vintage analysis from Q4 2012 to Q4 2022;
-- Dynamic monthly prepayment analysis from January 2014 to December 2022; and
-- Dynamic monthly delinquency data from January 2011 to December 2022.

DBRS Morningstar was also provided with detailed stratification tables as of 5 July 2023 and its related amortisation profile.

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 credit rating analysis.

DBRS Morningstar considers the data and information available to it for the purposes of providing these credit ratings to be of satisfactory quality.

DBRS Morningstar does not audit or independently verify the data or information it receives in connection with the credit rating process.

These credit ratings concern newly issued financial instruments. These are the first DBRS Morningstar credit ratings on these financial instruments.

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

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

Sensitivity Analysis: To assess the impact of changing the transaction parameters on the credit ratings, DBRS Morningstar considered the following stress scenarios, as compared with the parameters used to determine the credit ratings:
-- Expected Default Rate of 4.8%, a 25% and 50% increase.
-- Expected Loss Given Default (LGD) of 58%, a 25% and 50% increase.

Scenario 1: A 25% increase in the expected Default Rate.
Scenario 2: A 50% increase in the expected Default Rate.
Scenario 3: A 25% increase in the expected LGD.
Scenario 4: A 25% increase in the expected Default Rate and 25% increase in the expected LGD.
Scenario 5: A 50% increase in the expected Default Rate and 25% increase in the expected LGD.
Scenario 6: A 50% increase in the expected LGD.
Scenario 7: A 25% increase in the expected Default Rate and 50% increase in the expected LGD.
Scenario 8: A 50% increase in the expected Default Rate and 50% increase in the expected LGD.

DBRS Morningstar concludes that the expected ratings under the eight stress scenarios will be:
-- Class A Notes: A (high) (sf), AA (low) (sf), A (high) (sf), A (low) (sf), BBB (sf), BBB (high) (sf), BBB (sf), BB (high) (sf).
-- Class B Notes: BBB (high) (sf), BBB (low) (sf), BBB (sf), BB (high) (sf), BB (low) (sf), BB (sf), B (high) (sf), B (low) (sf).
-- Class C Notes: BBB (low) (sf), BB (high) (sf), BB (high) (sf), BB (low) (sf), B (high) (sf), BB (low) (sf), B (low) (sf), below B (low).
-- Class D Notes: BB (high) (sf), BB (low) (sf), BB (sf), B (high) (sf), B (low) (sf), B (high) (sf), below B (low), below B (low).
-- Class E Notes: B (sf), below B (low), B (high) (sf), below B (low) for all other scenarios.
-- Class F Notes: B (low) (sf), below B (low), B (low) (sf), below B (low) for all other scenarios.

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication/. 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 credit ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Roberto Perez, Assistant Vice President
Rating Committee Chair: David Lautier, Senior Vice President
Initial Rating Date: 7 July 2023

DBRS Ratings GmbH, Sucursal en España
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Tel. +34 (91) 903 6500

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 credit 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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