DBRS Morningstar Confirms Ratings of FACT S.A., acting in respect of its Compartment 2018-1

DBRS Ratings GmbH (DBRS Morningstar) confirmed the ratings on the following bonds issued by FACT S.A., acting in respect of its Compartment 2018-1 (the Issuer) as follows:

-- Class A Notes at AAA (sf)
-- Class B Notes at AA (sf)

The confirmations follow an annual review of the transaction and are based on the following analytical considerations:

-- Portfolio performance, in terms of delinquencies, defaults and losses.
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables.
-- Current available credit enhancement to the rated notes to cover the expected losses at their respective rating levels.

The static transaction represents the issuance of notes backed by a portfolio of receivables related to both lease (including those associated with the future sale of the associated leased vehicles) and loan contracts granted by Porsche Bank AG to debtors in Austria. The receivables are secured by trust rights associated with vehicles and other collateral.

On 22 October 2019, DBRS Morningstar transferred the ongoing coverage of the ratings assigned to the Issuer to DBRS Ratings GmbH from DBRS Ratings Limited. The lead analyst responsibilities for the transaction have been transferred to Shalva Beshia.

Both DBRS Ratings Limited and DBRS Ratings GmbH are registered with the European Securities and Markets Authority (ESMA) under Regulation (EC) No. 1060/2009 on Credit Rating Agencies, as amended, and are registered Nationally Recognized Statistical Rating Organization (NRSRO) affiliates in the United States and Designated Rating Organization (DRO) affiliates in Canada.

PORTFOLIO PERFORMANCE
As of September 2019, loans with two- to three-month arrears represented 0.1% of the outstanding portfolio balance, up from 0.0% at closing. The 90+ delinquency ratio was 0.1%, up from 0.0% at closing, and the cumulative default ratio was 0.0%.

PORTFOLIO ASSUMPTIONS
DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of receivables and has maintained its base case PD and LGD assumptions at 1.7% and 35.0%, respectively.

CREDIT ENHANCEMENT
The credit enhancement to the rated notes is provided by the subordination of junior notes. As of September 2019, the credit enhancement to the Class A Notes increased to 12.4% from 10.0% at closing and the credit enhancement to the Class B Notes increased to 7.5% from 6.0% at closing.

The transaction benefits from a EUR 6.4 million commingling reserve fund and a EUR 2.8 million reserve fund. The reserve fund provides liquidity support and is only available to cover senior expenses and interest shortfalls on the rated notes.

Elavon Financial Services DAC, U.K. Branch (Elavon) acts as the Issuers’ account bank for the transaction. Based on DBRS Morningstar’s private rating of Elavon, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structures, DBRS Morningstar considers the risk arising from the exposure to the account bank in this transaction to be consistent with the rating assigned to the notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

ING Bank N.V. (ING) acts as the swap counterparty in this transaction. ING’s DBRS Morningstar Long-Term Critical Obligations Rating (COR) of AA (high) is above the first rating threshold as described in DBRS Morningstar’s “Derivative Criteria for European Structured Finance Transactions” methodology, given the rating assigned to the notes.

The transaction structure was analysed in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is the “Master European Structured Finance Surveillance Methodology”. DBRS Morningstar 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 “Global Methodology for Rating Sovereign Governments” at: https://www.dbrs.com/research/350410/global-methodology-for-rating-sovereign-governments.

The sources of data and information used for these ratings include investor reports provided by Elavon Financial Services DAC, UK Branch and loan-level data provided by the European DataWarehouse GmbH.

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

At the time of the initial rating, DBRS Morningstar was supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS Morningstar considers the data and information available to it for the purposes of providing these ratings to be of satisfactory quality.

DBRS Morningstar does not audit or independently verify the data or information it receives in connection with the rating process.

The last rating actions on the transaction took place on 22 November 2018, when DBRS Morningstar finalised its provisional ratings of AAA (sf) on the Class A Notes and AA (sf) on the Class B Notes.

The lead analyst responsibilities for this transaction have been transferred to Shalva Beshia.

Information regarding DBRS Morningstar 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 Morningstar considered the following stress scenarios as compared with the parameters used to determine the rating (the Base Case):

-- DBRS Morningstar expected a lifetime base case PD and LGD for the pool 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 loans for the Issuer are 1.7% and 35.0%, respectively.
-- The risk sensitivity overview below illustrates the ratings expected if the PD and LGD increase by a certain percentage over the base case assumption. For example, if the LGD increases by 50%, the rating of the Class A Notes would be expected to remain at AAA (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A Notes would be expected to remain at AAA (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected to fall to AA (high) (sf).

Class A Risk Sensitivity:
-- 25% increase of the PD, expected rating of AAA (sf)
-- 50% increase of the PD, expected rating of AAA (sf)
-- 25% increase of the LGD, expected rating of AAA (sf)
-- 50% increase of the LGD, expected rating of AAA (sf)
-- 25% increase of the PD and 25% increase of the LGD, expected rating of AAA (sf)
-- 50% increase of the PD and 25% increase of the LGD, expected rating of AA (high) (sf)
-- 25% increase of the PD and 50% increase of the LGD, expected rating of AA (high) (sf)
-- 50% increase of the PD and 50% increase of the LGD, expected rating of AA (high) (sf)

Class B Risk Sensitivity:
-- 25% increase of the PD, expected rating of AA (sf)
-- 50% increase of the PD, expected rating of AA (sf)
-- 25% increase of the LGD, expected rating of AA (sf)
-- 50% increase of the LGD, expected rating of AA (sf)
-- 25% increase of the PD and 25% increase of the LGD, expected rating of AA (sf)
-- 50% increase of the PD and 25% increase of the LGD, expected rating of AA (sf)
-- 25% increase of the PD and 50% increase of the LGD, expected rating of AA (sf)
-- 50% increase of the PD and 50% increase of the LGD, expected rating of AA (low) (sf)

For further information on DBRS Morningstar 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: Shalva Beshia, Assistant Vice President
Rating Committee Chair: David Lautier, Senior Vice President
Initial Rating Date: 17 October 2018

DBRS Ratings GmbH
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60311 Frankfurt am Main Deutschland
Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

Ratings issued and monitored by DBRS Ratings GmbH are noted as such on the DBRS website; however, the language and related statements in previously published press releases in respect of the relevant ratings 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 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
-- 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 Morningstar 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.