Press Release

DBRS Morningstar Finalises Provisional Ratings on Cars Alliance Auto Loans Germany V 2023-1

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March 27, 2023

DBRS Ratings GmbH (DBRS Morningstar) finalised its provisional ratings on the Class A Notes and Class B Notes (together, the Rated Notes) issued by Cars Alliance Auto Loans Germany V 2023-1 (the Issuer) as follows:

-- Class A Notes at AAA (sf)
-- Class B Notes at AAA (sf)

DBRS Morningstar did not assign a provisional rating to the Class C Notes (together with the Rated Notes, the Notes) also issued in this transaction.

The finalised rating on the Class B Notes is one notch higher than the provisional rating DBRS Morningstar assigned due to the lower fixed rate on the Class B Notes swap, which improved the cash flow analysis on the Class B Notes in its rating stress scenario.

The ratings on the Rated Notes address the timely payment of scheduled interest and ultimate repayment of principal by the legal final maturity date.

The transaction represents the issuance of Notes backed by a portfolio of auto loan receivables granted by the German branch of RCI Banque SA (RCIB or the Seller) to private individuals residing in Germany. The portfolio of approximately EUR 757 million will comprise both balloon and standard amortising loans granted for the purchase of new and used vehicles. RCIB will also service the collateral portfolio.

DBRS Morningstar based its ratings on a review of the following analytical considerations:
-- The transaction's capital structure, including form and sufficiency of available credit enhancement;
-- Available credit enhancement in the form of subordination, a cash reserve account, and excess spread.
-- Credit enhancement levels that are sufficient to support DBRS Morningstar’s projected cumulative net loss assumption under various stressed cash flow assumptions for the Notes;
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested;
-- RCIB’s capabilities with regard to originations, underwriting, servicing, and its financial strength;
-- The transaction parties’ financial strength with regard to their respective roles;
-- The credit quality of the collateral and historical and projected performance of the Seller’s portfolio;
-- DBRS Morningstar's sovereign rating on the Federal Republic of Germany, currently at AAA with a Stable trend; and
-- The consistency of the transaction’s legal structure with DBRS Morningstar’s “Legal Criteria for European Structured Finance Transactions’ methodology and the presence of legal opinions that address the true sale of the assets to the Issuer.

TRANSACTION STRUCTURE
The transaction includes a 12-month revolving period during which the Issuer shall purchase additional collateral. During this period, the transaction will be subject to receivables eligibility criteria and concentration limits designed to limit the potential deterioration of the portfolio quality, with which the Issuer will have to comply.

The transaction incorporates a single waterfall that facilitates the distribution of the available distribution amount. The Notes amortise sequentially subject to a note-specific target principal redemption amount.

The Seller funded an amortising general reserve account equal to 1.25% of the outstanding principal balance of the Rated Notes on the closing date that will be available to the structure. The general reserve provides liquidity support to the Rated Notes and is available to pay senior transaction fees, swap payments, and interest payments on the Rated Notes. The general reserve also ultimately provides credit enhancement to the Rated Notes.

COUNTERPARTIES
Société Générale, S.A. (SG) has been appointed as the Issuer’s account bank for the transaction. DBRS Morningstar maintains a public Long-Term Issuer Rating of A (high) on SG and concluded that SG meets DBRS Morningstar’s minimum criteria to act in its capacity and the transaction contains downgrade provisions relating to the account bank consistent with DBRS Morningstar’s criteria.

The transaction is exposed to interest rate risk due to the mismatch between the fixed-rate assets and the floating-rate liabilities. RCIB is the swap counterparty for the transaction while BNP Paribas SA (BNPP) is the standby swap counterparty. DBRS Morningstar rates RCIB privately and rates BNPP publicly with a Long Term Critical Obligations Rating of AA (high). The swap agreements contain downgrade provisions with respect to the Issuer standby swap counterparty that are consistent with DBRS Morningstar’s criteria.

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.

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: 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. 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.

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 replenishment criteria set forth in the transaction legal documents.

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
-- Static quarterly gross loss and net loss data from Q1 2012 to Q4 2022;
-- Dynamic monthly delinquency and prepayments data from January 2016 to December 2022;
-- Portfolio stratification tables for the final portfolio as of 28 February 2023; and
-- A theoretical amortisation profile of the provisional portfolio.

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. These are the first DBRS Morningstar ratings on these financial instruments.

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

Information regarding DBRS Morningstar 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 rating, DBRS Morningstar considered the following stress scenarios as compared with the parameters used to determine the rating (the base case):

-- Expected default rate: 1.6%
-- Expected recovery rate: 61.1%
-- Loss given default (LGD): 60.3% for the AAA (sf).

DBRS Morningstar concludes that the expected ratings under the eight stress scenarios will be:

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

DBRS Morningstar concludes that the expected ratings under the eight stress scenarios will be:
-- Class A Notes: AAA (sf), AA (high) (sf), AAA (sf), AA (high) (sf), AA (sf), AA (sf), AA (sf), A (high) (sf)
-- Class B Notes: AA (sf), AA (low) (sf), AA (sf), AA (sf), AA (low) (sf), A (high) (sf), A (high) (sf), A (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: Guglielmo Panizza, Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 20 February 2023

DBRS Ratings GmbH
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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.

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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