DBRS Confirms Ratings of Class A and Class B Notes Issued by Bumper 10

DBRS Ratings Limited (DBRS) confirmed its ratings of the Class A and Class B notes (together, the Rated Notes) issued by Bumper 10 at AAA (sf) and AA (sf), respectively.

The ratings of the Class A and Class B notes address the timely payment of interest and ultimate payment of principal on or before the legal final maturity date.

The confirmations follow an annual review of the transaction and are based on the following analytical considerations:

-- Portfolio performance, in terms of delinquencies, defaults and losses.
-- Probability of default (PD), loss given default (LGD) and residual value (RV) haircut assumptions on the revolving pool of receivables.
-- The current credit enhancement (CE) available to the Rated Notes to cover the expected losses at the respective rating levels.

Bumper 10 is a securitisation of auto lease receivables and RV receivables granted and serviced by LeasePlan France S.A.S. (LPFR) to corporate, small and medium-sized enterprises (SME), retail and public sector clients in France. The transaction is currently in its one-year revolving period, which is scheduled to end on 27 March 2019.

As of 30 November 2018, the EUR 653.0 million revolving portfolio comprised leases for new and used vehicles that represented 99.9% and 0.1% of the outstanding balance, respectively. Corporate customers represented 78.4% of the outstanding collateral balance, whereas SME, retail and public sector clients amounted to 19.9%, 1.5% and 0.2% of the pool balance, respectively. The RV receivables associated with the auto leases were securitised and comprised 55.0% of the current portfolio balance.

PORTFOLIO PERFORMANCE
As of 30 November 2018, lease receivables more than 90 days delinquent represented 0.8% of the outstanding portfolio balance and the cumulative default rate represented 0.2% of the original portfolio balance including the additional replenishment amounts. Both arrears and defaults remained low and within DBRS’s expectations. The cumulative recovery rate amounted to 17.1%. As not all recoveries have been received on all defaulted receivables at the time of reporting, DBRS considers the observed recovery rate to likely be a conservative estimate of actual performance.

PORTFOLIO ASSUMPTIONS
DBRS maintained its base case default rate at 2.0%. The base case recovery rates for the AAA (sf) and AA (sf) rating levels were maintained at 46% and 48%, respectively. The RV haircut assumptions for the AAA (sf) and AA (sf) rating levels were maintained at 39% and 34%, respectively.

CREDIT ENHANCEMENT AND RESERVES
The transaction is scheduled to be revolving until March 2019. As a result, the CE available to the Class A and Class B Notes remained constant since closing at 26.0% and 19.8%, respectively. The source of CE for the Rated Notes consists of their respective subordination. The transaction benefits from an amortising liquidity reserve that provides liquidity support to the Rated Notes. The liquidity reserve is sized at 0.5% of the Rated Notes’ balance and is currently at its target amount of EUR 2.7 million.

Société Générale, S.A. (SocGen) is the main account bank provider in this transaction. Based on the account bank reference rating of SocGen of AA (low), being one notch below the DBRS public Long-Term Critical Obligations Rating (COR) of AA, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS considers the risk arising from the exposure to the account bank to be consistent with the rating assigned to the Class A notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

ABN AMRO Bank N.V. (ABN AMRO) is the Swap Counterparty in the transaction. ABN AMRO’s COR of AA is above the first rating threshold as described in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology, given the rating assigned to the Class A notes.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is the “Master European Structured Finance Surveillance Methodology”. DBRS 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 continues to be based on the worst-case replenishment criteria set forth in the transaction legal documents.

A review of the transaction’s legal documents was not conducted as the legal documents have remained unchanged since the most recent rating action.

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found on www.dbrs.com at: http://www.dbrs.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 “Rating Sovereign Governments” methodology at: http://dbrs.com/research/333487/rating-sovereign-governments.pdf.

The sources of data and information used for these ratings include investor reports provided by LPFR.

DBRS did not rely upon third-party due diligence in order to conduct its analysis.

At the time of the initial rating, DBRS was supplied with third-party assessments. However, this did not impact the rating analysis.

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

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

The is the first rating action since the provisional ratings were finalised on 15 February 2018.

The lead analyst responsibilities for this transaction have been transferred to Nathan Levy.

Information regarding DBRS ratings, including definitions, policies and methodologies is available at www.dbrs.com.

To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios as compared with the parameters used to determine the rating (the “Base Case”):

-- DBRS expected a base case PD, LGD and RV haircut for the revolving collateral pool based on a review of the current assets and the transaction’s eligibility criteria. 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, LGD and RV haircut assumptions for the revolving pool of leases are:
PD of 2.0%, LGD of 54% at AAA (sf) and LGD of 52% at AA (sf), RV haircut of 39% at AAA (sf) and 34% at AA (sf).

-- The Risk Sensitivity overview below illustrates the ratings expected if the PD, LGD and RV haircut increase by a certain percentage over the base case assumptions. For example, if both the PD and LGD increase by 50%, the rating of the Class A notes would be expected to be downgraded to AA (sf), assuming no change in the RV haircut. If the RV haircut increases by 50%, the rating of the Class A notes would be expected to be downgraded to AA (low) (sf), assuming no change in either the PD or LGD. Furthermore, if both the PD and LGD as well as the RV haircut increase by 50%, the rating of the Class A notes would be expected to be downgraded to A (high) (sf).

Class A notes Risk Sensitivity:
-- 25% increase in RV haircut, expected rating of AA (high) (sf)
-- 50% increase in RV haircut, expected rating of AA (low) (sf)
-- 25% increase in both PD and LGD, expected rating of AA (high) (sf)
-- 50% increase in both PD and LGD, expected rating of AA (sf)
-- 25% increase in both PD and LGD and 25% increase in RV haircut, expected rating of AA (sf)
-- 25% increase in both PD and LGD and 50% increase in RV haircut, expected rating of AA (low) (sf)
-- 50% increase in both PD and LGD and 25% increase in RV haircut, expected rating of AA (low) (sf)
-- 50% increase in both PD and LGD and 50% increase in RV haircut, expected rating of A (high) (sf)

Class B notes Risk Sensitivity:
-- 25% increase in RV haircut, expected rating of AA (low) (sf)
-- 50% increase in RV haircut, expected rating of A (sf)
-- 25% increase in both PD and LGD, expected rating of AA (low) (sf)
-- 50% increase in both PD and LGD, expected rating of A (high) (sf)
-- 25% increase in both PD and LGD and 25% increase in RV haircut, expected rating of A (high) (sf)
-- 25% increase in both PD and LGD and 50% increase in RV haircut, expected rating of A (low) (sf)
-- 50% increase in both PD and LGD and 25% increase in RV haircut, expected rating of A (sf)
-- 50% increase in both PD and LGD and 50% increase in RV haircut, expected rating of BBB (high) (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.

Ratings assigned by DBRS Ratings Limited are subject to EU and US regulations only.

Lead Analyst: Nathan Levy, Senior Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 31 January 2018

DBRS Ratings Limited
20 Fenchurch Street
31st Floor
London
EC3M 3BY
United Kingdom
Registered in England and Wales: No. 7139960.

The rating methodologies used in the analysis of these transaction can be found at: http://www.dbrs.com/about/methodologies.

-- Legal Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Originators
-- Operational Risk Assessment for European Structured Finance Servicers
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Interest Rate Stresses for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions
-- Rating CLOs Backed by Loans to European SMEs

A description of how DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375.

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