DBRS Morningstar Confirms Ratings on RevoCar 2018 UG (haftungsbeschränkt)

DBRS Ratings GmbH (DBRS Morningstar) confirmed its AAA (sf) ratings on the Class A, Class B, and Class C Notes as well as its BB (sf) rating on the Class D Notes (collectively, the Rated Notes) issued by RevoCar 2018 UG (haftungsbeschränkt) (the Issuer).

The ratings address the timely payment of interest and the ultimate payment of principal on or before the legal final maturity date in April 2031.

The confirmations follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of level of delinquencies and defaults, as of the April 2022 payment date.
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables.
-- Current available credit enhancement to the Rated Notes to cover the expected losses at their respective rating levels.

The transaction is a securitisation of German auto loan receivables originated and serviced by Bank11 für Privatkunden und Handel GmbH (Bank11). The initial portfolio included loans granted to private and corporate clients for the purchase of new and used vehicles. Most of the receivables have equal monthly instalments; however, 12.7% of loans at closing included a final balloon payment. The transaction closed on 22 May 2018.

PORTFOLIO PERFORMANCE
As of the April 2022 payment date, loans that were one month and two months in arrears represented 0.9% and 0.2% of the outstanding portfolio balance, respectively, while loans that were three months in arrears represented 0.04%. Gross cumulative defaults amounted to 0.8% of the initial collateral balance, with cumulative recoveries of 50.3% to date.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of receivables, and maintained its base case PD at 1.3% and updated its base case LGD to 60.8% following removal of the Coronavirus Disease (COVID-19) adjustments.

DBRS Morningstar opted to elect mid-range core multiples. The inclusion of incremental balloon stresses means the derived adjusted multiple is above the higher range used at a AAA (sf) level.

CREDIT ENHANCEMENT AND RESERVES
The subordination of the respective junior obligations provides credit enhancement to the Rated Notes. As of the April 2022 payment date, credit enhancement to the Class A Notes increased to 72.5% from 33.6% at the last annual review 12 months ago; credit enhancement to the Class B Notes increased to 31.6% from 14.7%; credit enhancement to the Class C Notes increased to 25.8% from 12.0%; and credit enhancement to the Class D Notes increased to 7.9% from 3.6%.

The transaction benefits from an amortising liquidity reserve, which will only become available to the Issuer upon a servicer termination event, with a target balance equal to 0.7% of the outstanding collateral balance. The reserve would be available to cover senior fees and expenses, swap payments, and interest payments on the Class A Notes. As of the April 2022 payment date, the reserve was at its target of EUR 0.3 million.

The transaction additionally benefits from a commingling reserve funded by Bank11 at closing to EUR 10.4 million. This reserve is maintained at a balance equal to the scheduled collections amount for the next collection period plus 0.5% of the outstanding performing collateral balance. As of the April 2022 payment date, the reserve was funded to EUR 3.0 million.

Borrowers in Germany have the right to set off claims against the Issuer that they had at the time of the assignment of receivables or at the time they become aware of the assignment from the Seller to the Issuer. Set-off risk is mitigated by loan eligibility criteria that stipulates borrowers cannot hold deposits with Bank11 and that Bank11 will fund a set-off risk reserve if certain events occur. As of the April 2022 payment date, the set-off risk reserve account was unfunded.

The Bank of New York Mellon Corporation, Frankfurt Branch (BNY-Frankfurt) acts as the account bank for the transaction. Based on DBRS Morningstar’s private rating on BNY-Frankfurt, the downgrade provisions outlined in the transaction documents, and structural mitigants, DBRS Morningstar consider the risk arising from the exposure to BNY-Frankfurt to be consistent with the ratings assigned to the Rated Notes, as described in DBRS Morningstar’s “Legal Criteria for European Structured Finance Transactions” methodology.

UniCredit Bank AG acts as the swap counterparty for the transaction. DBRS Morningstar's private rating on UniCredit Bank AG is consistent with the First Rating Threshold as described in DBRS Morningstar's "Derivative Criteria for European Structured Finance Transactions" methodology.

ESG CONSIDERATIONS
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/373262.

DBRS Morningstar analysed the transaction structure in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is the “Master European Structured Finance Surveillance Methodology” (8 February 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 principal methodology.

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/381451/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 investor reports provided by Bank11 and 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 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 10 May 2021, when DBRS Morningstar confirmed its ratings on the Class A Notes and Class D Notes at AAA (sf) and BB (sf), respectively, and upgraded its ratings on the Class B Notes and Class C Notes to AAA (sf) from AA (high) (sf) and AA (low) (sf), respectively.

The lead analyst responsibilities for this transaction have been transferred to Preben Cornelius Overas.

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 ratings, DBRS Morningstar considered the following stress scenarios as compared with the parameters used to determine the ratings (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 PD and LGD of the current pool of loans for the Issuer are 1.3% and 60.8%, 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 of 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 of the Class A Notes would be expected to remain at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected to remain at AAA (sf).

Class A, Class B, and Class C 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 AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AAA (sf)

Class D Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of B (high) (sf)
-- 50% increase in LGD, expected rating of B (high) (sf)
-- 25% increase in PD, expected rating below B (sf)
-- 50% increase in PD, expected rating below 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 (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. 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.

These ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Preben Cornelius Overas, Senior Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 22 May 2018

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 rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

-- Legal Criteria for European Structured Finance Transactions (29 July 2021),
https://www.dbrsmorningstar.com/research/382171/legal-criteria-for-european-structured-finance-transactions.
-- Master European Structured Finance Surveillance Methodology (8 February 2022), https://www.dbrsmorningstar.com/research/392000/master-european-structured-finance-surveillance-methodology.
-- Operational Risk Assessment for European Structured Finance Servicers (16 September 2021), https://www.dbrsmorningstar.com/research/384513/operational-risk-assessment-for-european-structured-finance-servicers.
-- Rating European Consumer and Commercial Asset-Backed Securitisations (29 October 2021), https://www.dbrsmorningstar.com/research/387042/rating-european-consumer-and-commercial-asset-backed-securitisations.
-- Rating European Structured Finance Transactions Methodology (30 July 2021),
https://www.dbrsmorningstar.com/research/382486/rating-european-structured-finance-transactions-methodology.
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (3 February 2021),
https://www.dbrsmorningstar.com/research/373262/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.
-- Derivative Criteria for European Structured Finance Transactions (20 September 2021), https://www.dbrsmorningstar.com/research/384624/derivative-criteria-for-european-structured-finance-transactions.
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2021), https://www.dbrsmorningstar.com/research/384920/interest-rate-stresses-for-european-structured-finance-transactions.

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.