Press Release

DBRS Morningstar Confirms Rating on Bumper UK 2021-1 Finance plc

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February 24, 2023

DBRS Ratings Limited (DBRS Morningstar) confirmed its AAA (sf) rating on the Class A Notes issued by Bumper UK 2021-1 Finance plc.

The rating on the Class A Notes addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date in December 2030.

The confirmation follows an annual review of the transaction and is based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults and losses, as of the January 2023 payment date;
-- Probability of default (PD), loss given default (LGD), residual value (RV) haircut and expected loss assumptions on the remaining receivables; and
-- Current available credit enhancement to the Class A Notes to cover the expected losses at the AAA (sf) rating level.

The transaction is a securitisation of auto lease agreements originated and serviced by LeasePlan UK Limited, granted to corporate, small and medium-size enterprises, retail and public-sector clients in England and Wales (Scottish and Northern Irish lessees are excluded). Residual value (RV) claims related to the auto leases are securitised. The transaction had a one-year revolving period which ended in April 2022.

PORTFOLIO PERFORMANCE
As of 31 December 2022, loans two to three months in arrears represented 0.1% of the outstanding portfolio balance, which is stable since December 2021. Loans at least three months in arrears represented 0.7% of the outstanding portfolio balance, up from 0.6% in December 2021. The cumulative default ratio was 1.0%.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted an analysis of the current pool of receivables and updated its expected PD, LGD, and RV haircut assumptions to the following:
-- Expected PD of 3.0%;
-- Expected LGD of 63.3% at the AAA (sf) rating level; and
-- RV haircut of 39.8% at the AAA (sf) rating level.

CREDIT ENHANCEMENT
As of the January 2023 payment date, credit enhancement to the Class A Notes was 39.2%, up from 27.3% at the time of DBRS Morningstar’s initial rating. Credit enhancement consists of subordination of the junior notes.

The transaction benefits from a liquidity reserve, which covers senior fees, swap payments, and interest payments on the Class A Notes. The liquidity reserve is currently funded to its floor of GBP 2,000,000.

The transaction also benefits from a maintenance reserve which may be withdrawn to cover maintenance costs upon the occurrence of certain triggers. The maintenance reserve is currently not funded.

BNP Paribas London Branch (BNPP) acts as the account bank for the transaction. Based on DBRS Morningstar’s private rating on BNPP, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS Morningstar considers the risk arising from the exposure to the account bank to be consistent with the ratings assigned to the Class A Notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

Banco Santander SA (Santander) acts as the swap counterparty for the transaction. DBRS Morningstar's public Long-Term Critical Obligations Rating on Santander of AA (low) is consistent with the first rating threshold, as described in DBRS Morningstar's "Derivative Criteria for European Structured Finance Transactions" methodology.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant impact on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

DBRS Morningstar analysed the transaction structure in Intex DealMaker.

Notes:
All figures are in British pounds sterling unless otherwise noted.

The principal methodology applicable to the rating is the “Master European Structured Finance Surveillance Methodology” (7 February 2023): https://www.dbrsmorningstar.com/research/409485/master-european-structured-finance-surveillance-methodology.

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found at: https://www.dbrsmorningstar.com/about/methodologies.

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.

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 Morningstar Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrsmorningstar.com/research/401817/global-methodology-for-rating-sovereign-governments.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

The sources of data and information used for this rating include investor reports provided by LeasePlan UK Limited 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 purpose of providing this rating 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 action on this transaction took place on 25 February 2022, when DBRS Morningstar confirmed its rating on the Class A Notes at AAA (sf).

Information regarding DBRS Morningstar ratings, including definitions, policies and methodologies is available at www.dbrsmorningstar.com.

Sensitivity Analysis: 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, LGD, and RV haircut 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.

-- Expected PD of 3.0%;
-- Expected LGD of 63.3% at the AAA (sf) rating level; and
-- RV haircut of 39.8% at the AAA (sf) rating level.

-- The risk sensitivity overview below illustrates the ratings expected if the PD, LGD, and RV haircut increase by a certain percentage over the base case assumption. For example, if the PD and LGD both increase by 50%, the rating on the Class A Notes would be expected to fall to AA (high) (sf), assuming no change in the RV haircut. If the RV haircut increases by 50%, the rating on the Class A Notes would be expected to remain at AAA (sf), assuming no change in the PD or LGD. Furthermore, if the PD, LGD, and RV haircut all increase by 50%, the rating on the Class A Notes would be expected to fall to AA (sf).

Class A Notes Risk Sensitivity:
-- 25% increase in RV haircut, expected rating of AAA (sf)
-- 50% increase in RV haircut, expected rating of AAA (sf)
-- 25% increase in both PD and LGD, expected rating of AAA (sf)
-- 50% increase in both PD and LGD, expected rating of AA (high) (sf)
-- 25% increase in both PD and LGD, and 25% increase in RV haircut, expected rating of AAA (sf)
-- 25% increase in both PD and LGD, and 50% increase in RV haircut, expected rating of AA (high) (sf)
-- 50% increase in both PD and LGD, and 25% increase in RV haircut, expected rating of AA (sf)
-- 50% increase in both PD and LGD, and 50% increase in RV haircut, expected rating of AA (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. DBRS Morningstar understands further information on DBRS Morningstar historical default rates may be published by the Financial Conduct Authority (FCA) on its webpage: https://www.fca.org.uk/firms/credit-rating-agencies.

This rating is endorsed by DBRS Ratings GmbH for use in the European Union.

Lead Analyst: Natalia Coman, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 22 February 2021

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The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at https://www.dbrsmorningstar.com/research/278375.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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

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