DBRS Ratings Limited (DBRS) assigned a rating of AAA (sf) to the EUR 393.3 million Series 2018-12, Class A Notes issued by Cars Alliance Auto Loans Germany Master (the Issuer), discontinued the AAA (sf) rating on the EUR 370.6 million Series 2018-01, Class A Notes as result of its full repayment and confirmed the following remaining outstanding series at AAA (sf):
-- EUR 257.7 million Series 2018-03, Class A Notes
-- EUR 280.9 million Series 2018-04, Class A Notes
-- EUR 268.6 million Series 2018-05, Class A Notes
-- EUR 254.8 million Series 2018-06, Class A Notes
-- EUR 255.5 million Series 2018-07, Class A Notes
-- EUR 229.0 million Series 2018-08, Class A Notes
-- EUR 206.9 million Series 2018-09, Class A Notes
-- EUR 185.5 million Series 2018-10, Class A Notes
-- EUR 255.3 million Series 2018-11, Class A Notes
The rating actions reflect the issuance of the Series 2018-12, Class A Notes and an annual review of the transaction, and are based on the following analytical considerations:
-- No Revolving Period Termination Events have occurred;
-- The overall portfolio performance as of the February 2019 payment date, particularly with regard to delinquencies and cumulative net losses;
-- Updated base case assumptions, considering the updated quarterly vintage performance data received by DBRS;
-- The current available credit enhancement (CE) to the Class A Notes to cover the expected losses assumed in line with the AAA (sf) rating level.
The ratings address the timely payment of interest and ultimate payment of principal payable on or before the Final Legal Maturity Date in March 2035.
The Issuer is a French securitisation fund (“fonds commun de titrisation”) operating as a master trust in the context of a securitisation programme established on 18 March 2014. The securitised portfolio consists of auto loan receivables related to new and used motor vehicles originated in Germany by RCI Banque S.A. Niederlassung Deutschland (the Seller), a German subsidiary of RCI Banque.
As of 18 February 2019, the aggregate balance of the outstanding series of Class A Notes was EUR 2,587.5 million, the balance of the Class B Notes was EUR 226.0 million and the balance of the Residual Units was EUR 300. The EUR 2,587.5 million securitised portfolio (excluding defaulted receivables) consisted of auto loans granted to finance the purchase of new (89.9%) and used vehicles (10.1%).
The transaction closed in March 2014 and had an original revolving period of four years, which was extended for an additional four years to March 2022. During the revolving period, the Issuer may acquire additional receivables and issue further series of notes with different expected maturities based on the amortisation profile of the additional receivables. The purchase of new receivables and the issuance of new series of notes is subject to certain conditions and limitations, including certain concentration limits in the portfolio and a minimum subordination ratio for the outstanding notes. The revolving period will prematurely end if these conditions are not met or in other events, such as the insolvency of the Seller.
As at the February 2019 payment date, one- to two-month and two- to three-month delinquencies represented 0.5% and 0.2% of the portfolio net discounted balance, respectively, while delinquencies greater than three months represented 0.1%. Gross cumulative defaults represented 0.7% of the original portfolio and cumulative transferred receivables, with cumulative recoveries of 68.6%.
DBRS received updated vintage performance data, split between vehicle (e.g. new versus used) and product (e.g., amortising versus balloon) type. With the updated data, DBRS recalibrated its base case assumptions for each loan type and updated the base case probability of default (PD) and recovery rates to 3.5% and 35.9%, respectively. The base case assumptions include adjustments to address the risks associated to set off and credit insurances.
CE for the outstanding series of Class A Notes is provided by the subordination of the Class B Notes and the General Reserve Account. As of the February 2019 payment date, the CE for Class A Notes was 9.0%.
The structure includes an amortising General Reserve Account, which is available to cover senior expenses and missed interest payments on the Class A Notes. This account is currently funded with EUR 28.1 million, and its target balance is equal to 1.0% of the aggregate notes’ balance.
The structure also includes a Commingling Reserve Account and a Set-off Reserve Account, which will be funded if certain triggers are breached.
HSBC France S.A. acts as the Account Bank for the transaction. On the basis of the DBRS private rating of HSBC France S.A., the downgrade provisions outlined in the transaction documents, and structural mitigants, DBRS considers the risk arising from the exposure to HSBC France S.A. to be consistent with the ratings assigned to the notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the ratings is: “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.
A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent rating action.
An asset and a cashflow 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.
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: https://www.dbrs.com/research/333487/rating-sovereign-governments.
The sources of data and information used for these ratings include performance data relating to the receivables provided by the Seller via is agents. Other sources of data and information include monthly reports provided by EuroTitrisation (the Management Company) and loan-level data from European DataWarehouse GmbH.
DBRS did not rely upon third-party due diligence in order to conduct its analysis.
At the time of the initial rating, DBRS was not 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 last rating action on the transaction took place on 18 January 2019, when DBRS assigned a rating of AAA (sf) to the Series 2018-11 Class A Notes and discontinued its rating on the Series 2018-02 Class A Notes.
Information regarding DBRS ratings, including definitions, policies and methodologies, is available on www.dbrs.com.
To assess the impact of changing the transaction parameters on the ratings, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the “Base Case”):
-- DBRS expected a base case PD and loss given default (LGD) for the portfolio based on a review of the current assets and the transaction’s replenishment 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 and LGD of the current pool of receivables are 3.5% and 64.1%, respectively, including stresses to address the risks associated to set off and credit insurances. At the AAA (sf) rating level, the corresponding PD is 12.7% and the LGD is 67.6%.
-- The Risk Sensitivity below illustrates the ratings expected for the Class A Notes if the PD and LGD increase by a certain percentage over the base case assumptions. For example, if the LGD increases by 50%, the rating for each series of Class A Notes would be expected to decrease to AA (sf), all else being equal. If the PD increases by 50%, the rating for each series of Class A Notes would be expected to decrease to AA (sf), all else being equal. Furthermore, if both the PD and LGD increase by 50%, the rating for each series of Class A Notes would be expected to decrease to A (sf), all else being equal.
Class A Notes risk sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD, expected rating of AA (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD, expected rating of AA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of 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.
Ratings assigned by DBRS Ratings Limited are subject to EU and US regulations only.
Lead Analyst: Joana Seara da Costa, Assistant Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 18 March 2014
DBRS Ratings Limited
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The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies.
-- Master European Structured Finance Surveillance Methodology
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Legal Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators
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 firstname.lastname@example.org.