DBRS Ratings GmbH (DBRS) took the following rating actions on the Notes issued by Bavarian Sky France, Compartment French Auto Leases 3 (the Issuer):
-- Class A Notes confirmed at AAA (sf);
-- Class B Notes upgraded to A (high) (sf) from A (sf).
The ratings on the Notes address the timely payment of interest and ultimate payment of principal on or before the legal final maturity date in April 2025.
The rating actions follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults and losses as of the February 2019 payment date.
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables.
-- Current available credit enhancement (CE) to the Notes to cover the expected losses at their respective rating levels.
The Issuer is is a securitisation of auto lease receivables originated in France by BMW Finance S.N.C. (BMW Finance). As of the February 2019 payment date, the EUR 420.4 million portfolio, consisted of new (89.7% of the pool balance) and used (10.3%) auto leases, granted to both private individuals (70.6%) and commercial (29.4%) borrowers. The transaction closed in March 2018, with no revolving period.
As of the February 2019 payment date, 31- to 60-day delinquencies and 61- to 90-day delinquencies represented 0.2% and 0.1% of the portfolio discounted balance, respectively, while delinquencies greater than 90 days amounted to 0.2%. The gross cumulative default ratio was 0.3%, of which 7.1% has been recovered so far.
DBRS conducted an analysis of the remaining pool of receivables and has updated its base case PD and LGD assumptions to 2.1% and 36.8%, respectively. The residual value (RV) haircuts were updated to 36.9% at the AAA (sf) rating level and 28.3% at the A (high) (sf) rating level.
CE is provided primarily by the subordination of the respective junior obligations. As of the February 2019 payment date, CE for the Class A Notes increased to 34.4% from 23.5% at closing while the CE for the Class B Notes increased to 22.0% from 13.5%.
The transaction benefits from a non-amortising cash reserve available to cover senior fees and interest due on the Notes, funded at closing using part of the proceeds of a subordinated loan. In the event of Issuer default, as well as at the legal final maturity date, it can also be used to cover principal payments on the Notes. It has been at its target level of EUR 2.6 million since closing.
BNP Paribas Securities Services SCA acts as the account bank for the transaction. Based on the DBRS private rating of BNP Paribas Securities Services SCA, 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.
DZ BANK AG Deutsche Zentral-Genossenschaftsbank (DZ Bank) acts as the swap counterparty for the transaction. DBRS's public Long-Term Critical Obligations Rating of DZ Bank at AA is above the First Rating Threshold as described in DBRS's "Derivative Criteria for European Structured Finance Transactions" methodology.
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.
A review of the transaction 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 and servicer reports provided by France Titrisation (as the Management Company) and BMW Finance (as the Servicer).
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 last rating action on this transaction took place on 28 March 2018, when DBRS finalised its provisional ratings assigned on the Initial Rating Date.
The lead analyst responsibilities for this transaction have been transferred to Daniel Rakhamimov.
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 residual value loss (RV loss) for the portfolio 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 assets of receivables are 2.1% and 36.8%, respectively. For the Class A and Class B Notes, RV loss rates of 36.9% and 28.3% were assumed considering their respective rating levels.
Class A Notes risk sensitivity:
-- 25% increase in RV loss, expected rating of AAA (sf)
-- 50% increase in RV loss, expected rating of AA (high) (sf)
-- 25% increase in both PD and LGD, expected rating of AAA (sf)
-- 50% increase in both PD and LGD, expected rating of AAA (sf)
-- 25% increase in both PD and LGD and 25% increase in RV loss, expected rating of AAA (sf)
-- 25% increase in both PD and LGD and 50% increase in RV loss, expected rating of AA (sf)
-- 50% increase in both PD and LGD and 25% increase in RV loss, expected rating of AA (high) (sf)
-- 50% increase in both PD and LGD and 50% increase in RV loss, expected rating of AA (low) (sf)
Class B Notes risk sensitivity:
-- 25% increase in RV loss, expected rating of A (high) (sf)
-- 50% increase in RV loss, expected rating of BBB (high) (sf)
-- 25% increase in both PD and LGD, expected rating of A (high) (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 loss, expected rating of A (sf)
-- 25% increase in both PD and LGD and 50% increase in RV loss, expected rating of BBB (sf)
-- 50% increase in both PD and LGD and 25% increase in RV loss, expected rating of A (low)(sf)
-- 50% increase in both PD and LGD and 50% increase in RV loss, expected rating of BBB (low) (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 GmbH are subject to EU and US regulations only.
Lead Analyst: Daniel Rakhamimov, Senior Financial Analyst
Rating Committee Chair: Vito Natale, Managing Director
Initial Rating Date: 12 March 2018
DBRS Ratings GmbH
Neue Mainzer Straße 75
60311 Frankfurt am Main Deutschland
Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259
The rating methodologies used in the analysis of this 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 Servicers
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Interest Rate Stresses for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions
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.