DBRS Morningstar Confirms CarFin Finance International DAC Rating

DBRS, Inc. (DBRS Morningstar) confirmed the rating on the Senior Notes issued by CarFin Finance International DAC at A (sf). The rating relates to a securitization of Avis Budget EMEA Limited’s (Avis Europe or the Sponsor) rental fleet in certain European jurisdictions. Avis Europe is a subsidiary of Avis Budget Group, Inc. (the Company).

RATING RATIONALE/DESCRIPTION
The rating rationale includes the following key analytical considerations:

-- Transaction capital structure, current rating, and form and sufficiency of available credit enhancement.
-- The transaction parties’ capabilities with regard to managing rental car operations.
-- The credit quality of the collateral pool and historical performance.
-- An examination of the potential effects of the Coronavirus Disease (COVID-19) pandemic.

The transaction is a securitization of rental car receivables generated by rental car operations in Germany, Italy, France, Spain, and the Netherlands. The credit enhancement level is adjusted periodically based upon various vehicle pool characteristics. As of the date of the review, vehicle composition with respect to both program and nonprogram vehicles and the credit ratings of the vehicle manufacturers were consistent with credit enhancement levels. The average ratio of sales proceeds from vehicles to their respective net book value was greater than 100% as measured over the most recent three-month and six-month periods for Germany, France, Spain, and Italy. The Netherlands did not generate any activity during the period.

DBRS Morningstar presently believes the coronavirus will most likely be contained in Q2 2020, resulting in a gradual relaxation of restrictions, enabling most economies to begin a gradual economic recovery in Q3 2020. While such a scenario would likely still present formidable challenges for the Sponsor, it is believed that Avis Europe possesses the management skills and financial wherewithal to navigate through such potential difficulties. Additional information regarding DBRS Morningstar's set of macroeconomic scenarios for select economies related to the coronavirus pandemic can be found in its commentary <a href="https://www.dbrsmorningstar.com/research/359679/" target="_blank">“Global Macroeconomic Scenarios: Implications for Credit Ratings.”</a>

The factors that are likely to contribute to the company’s ability to manage through the coronavirus crisis are as follows:

-- The majority of the fleet are program vehicles, mitigating any residual value losses as disposition channels open up and supply potentially overwhelms demand, resulting in depressed prices for risk vehicles.
-- The rental mix includes a large portion of off-airport business, which should support recovery to the extent consumers are wary of resuming normal air travel patterns.
-- The Company and Sponsor have aggressively taken all available measures to right-size the fleet given the present constraints, including cancelling a substantial number of previously ordered vehicles.
-- The Company is aggressively furloughing staff and cutting all nonessential expenses.
-- With more than $1.00 billion in liquidity and no significant debt maturities until 2023, DBRS Morningstar believes the Company can maintain continuity in fleet funding through the remainder of 2020 without accessing public markets.

DBRS Morningstar downgraded Avis Budget Group, Inc. to BB (low) from BB on April 3, 2020. However, as noted above, DBRS Morningstar believes the Company has the management acumen and financial wherewithal to navigate through a scenario whereby the coronavirus is contained during Q2 2020, resulting in a gradual relaxation of restrictions and gradual global economic recovery in Q3 2020.

ESG CONSIDERATIONS
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 U.S. dollars unless otherwise noted.

The principal methodology is the DBRS Master U.S. ABS Surveillance Methodology (July 31, 2019), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

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 Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar did have access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

This rating is endorsed by DBRS Ratings Limited (DBRS Morningstar) for use in the European Union. The following additional regulatory disclosures apply to endorsed ratings:

The last rating action on this transaction took place on April 12, 2019, when the rating was confirmed at A (sf).

For further information on DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Lead Analyst: Jayce Fox, Senior Vice President, US ABS Surveillance – Global Structured Finance
Rating Committee Chair: Chris D’Onofrio, Managing Director, Credit Ratings – Global Structured Finance
Initial Rating Date: August 14, 2013

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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-- DBRS Master U.S. ABS Surveillance Methodology (July 31, 2019), https://www.dbrsmorningstar.com/research/348707/dbrs-master-us-abs-surveillance-methodology