Press Release

DBRS Finalises Provisional Ratings on Cars Alliance Auto Loans Germany V 2019-1

Auto
May 29, 2019

DBRS Ratings GmbH (DBRS) finalised its provisional ratings of AAA (sf) and AA (high) (sf) on the Class A notes and Class B notes, respectively, issued by Cars Alliance Auto Loans Germany V 2019-1 (CAALG 2019-1 or the Issuer). The securitised receivables consist of auto loans related to both used and new motor vehicles originated by the German branch of RCI Banque S.A. (RCIB).

The ratings are based on DBRS’s review of the following considerations:

-- Transaction capital structure, including available credit enhancement in the form of subordination, liquidity support and excess spread.
-- Sufficient credit enhancement levels to support DBRS’s expected credit losses under various stress scenarios at a AAA (sf) standard for the Class A notes and AA (high) (sf) standard for the Class B notes issued by CAALG 2019-1.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested. The ratings address the timely payment of scheduled interest and ultimate repayment of principal by the legal maturity date.
-- The transaction parties’ financial strength with regard to their respective roles.
-- RCIB’s capabilities with respect to originations, underwriting, cash management, servicing and financial strength.
-- An operational risk review of RCIB, which DBRS deems to be an acceptable Servicer.
-- The credit quality, diversification and historical and projected performance of the collateral as well as the ability of the Servicer to perform collection activities on the collateral.
-- The consistency of the legal structure with DBRS’s “Legal Criteria for European Structured Finance Transactions” and the presence of legal opinions that address the true sale of the assets to the Issuer.

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.

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 is 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 the rating includes performance data relating to the receivables provided by RCIB via the Arrangers and the Joint Lead Managers, Crédit Agricole Corporate and Investment Bank S.A. and HSBC Bank plc. DBRS received historical performance data relating to RCIB’s German branch’s originations by quarterly vintage on a cumulative net loss basis going back to 2007. Data was also provided relating to delinquencies, prepayments and initial portfolio stratification tables that allowed DBRS to further assess the collateral.

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

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 the 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.

These ratings concern a newly issued financial instrument. These are the first DBRS ratings on this financial instrument.

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 rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating:

-- Probability of Default (PD) used: expected PD of 2.2%, a 25% and 50% increase on the expected PD.
-- Recovery Rate used: expected Recovery Rate of 58.0%.
-- Loss Given Default (LGD): expected LGD of 42.0%, a 25% and 50% increase on the expected LGD.

DBRS concludes that, for the Class A notes:
-- A hypothetical increase of the expected PD by 25% or a hypothetical increase of the LGD by 25%, ceteris paribus, would not lead to a change in the rating on the Class A notes.
-- A hypothetical increase of the expected PD by 50% would lead to a downgrade of the Class A Notes to AA (high).
-- A hypothetical increase of the LGD by 50% would not lead to a change in the rating on the Class A notes.
-- A hypothetical increase of the expected PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A notes to AA (high)
-- A hypothetical increase of the expected PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class A Notes to AA (sf).
-- A hypothetical increase of the expected PD by 25% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A notes to AA (sf).
-- A hypothetical increase of the expected PD by 50% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class A notes to AA (sf).

DBRS concludes that, for the Class B notes:
-- A hypothetical increase of the expected PD by 25% or a hypothetical increase of the LGD by 25%, ceteris paribus, would not lead to a change in rating on the Class B notes.
-- A hypothetical increase of the expected PD by 50%, would lead to a downgrade of the Class B Notes to AA (sf).
-- A hypothetical increase of the LGD by 50%, would not lead to a change in rating on the Class B notes to AA.
-- A hypothetical increase of the expected PD by 25% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the rating on the Class B notes to AA (sf).
-- A hypothetical increase of the expected PD by 50% and a hypothetical increase of the LGD by 25%, ceteris paribus, would lead to a downgrade of the Class B notes to AA (low) (sf).
-- A hypothetical increase of the expected PD by 25% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class B notes to AA (low) (sf).
-- A hypothetical increase of the expected PD by 50% and a hypothetical increase of the LGD by 50%, ceteris paribus, would lead to a downgrade of the Class B notes to AA (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: Ronja Dahmen, Assistant Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director, Head of European Structured Finance
Initial Rating Date: 16 April 2019

DBRS Ratings GmbH
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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.

-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Legal Criteria for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions
-- Operational Risk Assessment for European Structured Finance Servicers
-- Operational Risk Assessment for European Structured Finance Originators
-- Interest Rate Stresses 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 info@dbrs.com.

ALL DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.