DBRS Ratings Limited (DBRS) confirmed its AA (sf) rating on the Series 2018-1 FCT Notes (the Notes) issued by FCT Cars Alliance DFP France (CA France or the Issuer).
The rating on the Notes addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date of July 2028.
The confirmation follows an annual review of the transaction and is based on the following analytical considerations:
-- Portfolio performance, in terms of realised losses, principal payment rates and yield.
-- Current available credit enhancement to the Notes to cover the expected losses at the AA (sf) rating level in various dealer concentration and liquidation scenarios.
-- No early amortisation events have occurred.
CA France is a securitisation of auto wholesale receivables originated in France by Diac S.A., a subsidiary of RCI Banque S.A. and part of the automobile group Renault S.A. The portfolio consists of term loans and revolving credit lines to Renault, Nissan and Infiniti (the luxury segment of Nissan) dealers in France, which are secured by new vehicles (including demonstration vehicles), used vehicles and spare parts. The transaction is currently in its revolving period, scheduled to terminate in July 2023.
On 12 July 2019, DBRS transferred the ongoing coverage of the rating assigned to CA France to DBRS Ratings Limited from DBRS, Inc. The lead analyst responsibilities for this transaction have been transferred to Andrew Lynch.
DBRS Ratings Limited is registered with the European Securities and Markets Authority (ESMA) under Regulation (EC) No. 1060/2009 on Credit Rating Agencies, as amended, and is a registered Nationally Recognized Statistical Rating Organization (NRSRO) affiliate in the United States and Designated Rating Organization (DRO) affiliate in Canada. DBRS, Inc. is a registered NRSRO in the United States and DRO affiliate in Canada.
As of the June 2019 payment date, the three-month average principal payment rate was 47.6% and the annualised portfolio yield was 6.4% (including additional interest income generated through the discount mechanism). Realised losses were zero.
The collateral is subject to certain concentration limits on the product type securing the receivables (spare parts, second-hand vehicles) and on the exposure to Renault-branded dealers. As of the June 2019 payment date, all the limits had been met. The concentration to a dealer group is limited to 2.5% of the portfolio balance. DBRS has addressed the concentration risk in its analysis.
The subordination to the Notes is subject to a minimum, calculated as a percentage of the Notes balance, and is variable according to the three-month average payment rate on the portfolio. As of the June 2019 payment date, the required subordination represents 14.3% of the Notes balance. The Notes benefit from liquidity and credit support provided by a General Reserve. The General Reserve is amortising and is currently at its target amount of EUR 5.8 million.
Commingling risk in the transaction is limited, as the collections are transferred to the account bank on a daily basis. Set-off risk in the transaction is mitigated by a minimum overcollateralisation level driven by the amounts standing in the dealers’ factory accounts held at the manufacturer. As of the June 2019 payment date, the portfolio balance is EUR 1,209 million, which is above the required portfolio balance of EUR 1,194 million.
Société Générale acts as the account bank for the transaction. Based on the account bank reference rating of Société Générale at AA (low), which is one notch below the DBRS public Long-Term Critical Obligations Rating 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 Notes, as described in DBRS's "Legal Criteria for European Structured Finance Transactions" methodology.
The transaction structure was analysed in DBRS’s proprietary excel-based cash flow model.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the rating 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 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: https://www.dbrs.com/research/333487/rating-sovereign-governments.
The sources of data and information used for this rating include investor reports and issuer data provided by Eurotitrisation as well as 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 this rating to be of satisfactory quality.
DBRS does not audit or independently verify the data or information it receives in connection with the rating process.
This is the first rating action since the Initial Rating Date on 23 July 2018.
The lead analyst responsibilities for this transaction have been transferred to Andrew Lynch.
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 (the Base Case):
Separate stresses were applied in its analysis of dealer concentration and liquidation scenarios.
-- Default Rate: base case of 5.8%, stressed with a 25% and 50% increase
-- Monthly Principal Payment Rate (MPPR): base case of 25% (in line with the payment rate early amortisation trigger), stressed with a 25% and 50% decrease
-- Yield: base case of 3.2%, stressed with a 25% and 50% decrease
Whilst holding the MPPR and the Yield constant:
-- 25% increase in Default Rate, expected rating of AA (sf)
-- 50% increase in Default Rate, expected rating of AA (sf)
Whilst holding the Default Rate and the Yield constant:
-- 25% decrease in MPPR, expected rating of AA (low) (sf)
-- 50% decrease in MPPR, expected rating of BB (low) (sf)
Whilst holding the MPPR and the Default Rate constant:
-- 25% decrease in Yield, expected rating of AA (sf)
-- 50% decrease in Yield, expected rating of AA (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: Andrew Lynch, Assistant Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 23 July 2018
DBRS Ratings Limited
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Ratings issued and monitored by DBRS Ratings Limited are noted as such on the DBRS website; however, the language and related statements in previously published press releases in respect of the relevant rating(s) will not be changed retroactively and will remain as part of DBRS’s historical record. The ratings issued and monitored in the European Union are marked as such in their respective rating tables. As part of this transfer, these markings will remain unchanged on all active ratings related to the above-mentioned issuer.
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
Operational Risk Assessment for European Structured Finance Originators
Rating European Auto Wholesale Securitisations
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 firstname.lastname@example.org.