DBRS Ratings Limited (DBRS) confirmed its AAA (sf) rating on the Class A Notes (the Notes) issued by Cars Alliance DFP Germany 2017 (CA Germany 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 June 2026.
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 Germany is a securitisation of auto wholesale receivables originated by RCI Banque S.A. Niederlassung Deutschland (RCI Germany), part of the automobile group Renault S.A.. The portfolio consists of term loans to Renault, Nissan and Infiniti dealers in Germany, which are secured by new vehicles (including demonstration vehicles), used vehicles and spare parts. Only the principal component of the receivables is securitised. Interest on the Notes is paid by RCI Germany on the relevant Payment Date. The transaction is currently in its revolving period, scheduled to terminate in August 2022.
On 12 July 2019, DBRS transferred the ongoing coverage of the rating assigned to CA Germany 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.
The collateral is subject to certain concentration limits on the product type securing the receivables (spare parts, second-hand vehicles), which have all been met as of the May 2019 payment date. The largest single dealer concentration, the second-largest dealer concentration, the third-to-fifth largest single dealer concentration and the ‘other’ dealer concentration are limited to 6.0%, 4.0%, 2.5% and 2.0%, respectively. DBRS has addressed the concentration risk in its analysis. As of the May 2019 payment date, the three-month average principal payment rate was 46.5%. As of the May 2019 payment date, cumulative defaults represented 1.7% of the transferred receivables and cumulative recoveries are zero.
Subordination to the Notes is provided by a Class B Loan. The subordination level is subject to a minimum balance and is variable according to the three-month average payment rate on the portfolio. As of the May 2019 payment date, the required subordination is equal to EUR 176.8 million or 20.76% of the portfolio balance. The Notes benefit from liquidity and credit support provided by a General Reserve. The General Reserve currently at its target amount of EUR 10.1 million, with the target set at 1.5% of the Notes balance with a floor at EUR 2.5 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 credit enhancement level, one component of which is determined by the amounts standing in the dealers’ accounts held at the seller.
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 cash flow engine.
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 Paris Titrisation 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.
The last rating action on this transaction took place on 24 July 2018, when the Notes were confirmed at AAA (sf).
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 9.4%, 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
Whilst holding the MPPR constant:
-- 25% increase in Default Rate and 25% decrease in Yield, expected rating of AAA (sf)
-- 50% increase in Default Rate and 50% decrease in Yield, expected rating of AAA (sf)
Whilst holding the Yield constant:
-- 25% decrease in MPPR and 25% increase in Default Rate, expected rating of AAA (sf)
-- 50% decrease in MPPR and 50% increase in Default Rate, expected rating of AAA (sf)
Whilst holding the Default Rate constant:
-- 25% decrease in Yield and 25% decrease in MPPR, expected rating of AAA (sf)
-- 50% decrease in Yield and 50% decrease in MPPR, expected rating of AAA (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
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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(s).
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 email@example.com.