SOCIÉTÉ GÉNÉRALE Series 2020-01, Class A Notes at A (high) (sf)
Series 2020-01, Class
The rating of the Class A Notes addresses timely payment of scheduled interest and ultimate repayment of principal by the legal final maturity date. The rating of the Class
DBRS Morningstar does not rate the seller interest credit facility (SICF).
DBRS Morningstar based its ratings on information provided by the Issuer and its agents as of the date of this press release.
The rated notes are backed by an initial portfolio of approximately
The ratings are based on the following analytical considerations:
The transaction's capital structure including the form and sufficiency of available credit enhancement to support DBRS Morningstar's expectation of charge-off, principal payment, and yield rates under various stress scenarios.
The ability of the transaction to withstand stressed cash flow assumptions and repay the rated notes.
The seller's capabilities with respect to originations, underwriting, and servicing.
An operational risk review of the seller, which DBRS Morningstar deems to be an acceptable servicer.
The transaction parties' financial strength with regard to their respective roles.
The credit quality and diversification of the collateral and historical and projected performance of the securitised portfolio.
The sovereign rating of the Kingdom of
The general consistency of the transaction's legal structure with DBRS Morningstar's 'Legal Criteria for European Structured Finance Transactions' methodology (except for the transaction governance issue discussed in ESG Considerations section below).
TRANSACTION STRUCTURE
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.
An amortising Class A general reserve for liquidity purposes can be used to cover senior fees and any interest shortfall on the Class A Notes of the entire programme but is not meant for providing credit enhancement. The general reserve was funded to its target level of
As both the underlying receivables and the notes carry fixed rates, there is limited risk of interest rating mismatch.
COUNTERPARTIES
PORTFOLIO ASSUMPTIONS
The Coronavirus Disease (COVID-19) and the resulting isolation measures have caused an economic contraction, leading to sharp increases in unemployment rates and adverse financial impact on many borrowers. DBRS Morningstar anticipates that delinquencies would continue to arise, and payment and yield rates would remain subdued in the coming months for many credit card portfolios.
The total payment rates of the core portfolio have been largely stable around 14%-16% over the reported period until
The portfolio yield is largely stable over the reported period. There are no major differences between the cash interest yields between Ruby and the core portfolios. However, the recent Spanish supreme court ruling on the usury rates exposes the transaction to yield uncertainty and potential set-off risk. DBRS Morningstar elected to set the expected cash interest yield at 18.5%, reflecting the observed recent trend, potential yield compression due to the usury rate constraint.
As the Ruby portfolio is in run-off, the charge-off rates are expected to increase continuously due to the declining portfolio balances. the reported historical charge-off rates of the core portfolio tend to be volatile and increasing without clear, stabilising trends, DBRS Morningstar used the arrears roll rates to assess the migration of delinquent balances and eventual charge-offs. Based on the analysis of delinquency trends, the expected future inflows of receivables in arrears, macroeconomic factors, the portfolio-specific adjustment due to the coronavirus impact and the positive selection of eligible assets, the expected charge-off rate is set at 12.5%.
The portfolio asset assumptions above also take into consideration of the migration of the securitised pool to the core portfolio over the next two years.
DBRS Morningstar analysed the transaction structure in its proprietary cash flow tool.
COVID-19 CONSIDERATIONS
The Coronavirus Disease (COVID-19) and the resulting isolation measures have caused an economic contraction, leading to sharp increases in unemployment rates and income reductions for many borrowers. DBRS Morningstar anticipates that payment holidays and delinquencies may arise in the coming months for many ABS, some meaningfully. The rating/ratings is/are based on additional analysis and adjustments to expected performance as a result of the global efforts to contain the spread of the coronavirus.
The DBRS
On
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 structured finance rating methodologies and COVID-19, please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.
ESG CONSIDERATIONS
DBRS Morningstar considers some unusual aspects of general eligibility criteria and related representations and warranties given by the seller to the Issuer regarding the compliance with law (specifically, an usury law carve-out) to have a negative rating impact.
In DBRS Morningstar's view, the legal and regulatory risks arising from the non-standard eligibility criterion fall under the 'transaction governance' in the environmental, social, and governance (ESG) analytical framework for structured finance transactions.
The A (high) (sf) rating assigned to the Class A notes is, consequently, one notch lower than the level implied by the cash flow results. The rating of Class
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.
Notes:
All figures are in euros unless otherwise noted.
The principal methodology applicable to the ratings is the 'Rating European Consumer and Commercial Asset-Backed Securitisations' (13 January 2020).
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.
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.
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 Credit Ratings' of the 'Global Methodology for Rating Sovereign Governments' at: https://www.dbrsmorningstar.com/research/350410/global-methodology-for-rating-sovereign-governments.
The sources of data and information used for these ratings received from the arranger,
DBRS Morningstar also received stratification tables in relation to the collateral pool as of
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 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.
These ratings concern newly issued financial instruments. This is the first DBRS Morningstar rating on these financial instruments.
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 ratings:
Expected Charge-Off Rate: 12.5%
Expected Principal Payment Rate: 9.75%
Expected Yield Rate: 18.5%
Scenario 1: a 25% increase in the expected Charge-Off Rate
Scenario 2: a 25% decrease in the expected Principal Payment Rate
Scenario 3: a 25% decrease in the expected Yield Rate
Scenario 4: a 15% increase in the expected Charge-Off Rate, 15% decrease in the expected Principal Payment Rate and 15% decrease in the expected Yield Rate
DBRS Morningstar concludes that the expected ratings under the four stress scenarios will be:
Class A Notes: A (sf), A (sf), A (high) (sf), A (low) (sf)
Class
For further information on DBRS Morningstar historical default rates published by the
http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.
Ratings assigned by
Lead Analyst:
Rating Committee Chair:
Initial Rating Date:
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The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrsmorningstar.com/about/methodologies.
Rating European Consumer and Commercial Asset-Backed Securitisations (
https://www.dbrsmorningstar.com/research/355533/rating-european-consumer-and-commercial-asset-backed-securitisations
Rating European Structured Finance Transactions Methodology (
https://www.dbrsmorningstar.com/research/364305/rating-european-structured-finance-transactions-methodology
Legal Criteria for European Structured Finance Transactions (
https://www.dbrsmorningstar.com/research/350234/legal-criteria-for-european-structured-finance-transactions
Operational Risk Assessment for European Structured Finance Originators (
https://www.dbrsmorningstar.com/research/357430/operational-risk-assessment-for-european-structured-finance-originators
Operational Risk Assessment for European Structured Finance Servicers (
https://www.dbrsmorningstar.com/research/357429/operational-risk-assessment-for-european-structured-finance-servicers.
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.
Ratings
Date Issued Debt Rated Action Rating Trend Issued
i
US =
CA = Canada Issued, NRSRO
EU = EU Issued, NRSRO
E = EU endorsed
Unsolicited Participating With Access
Unsolicited Participating Without Access
Unsolicited Non-Participating
23-Jul-20 Series 2020-1, Class A Notes New Rating A (high) (sf) -- EU
23-Jul-20 Series 2020-1, ClassC Notes New Rating BB (sf) -- EU
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