Press Release

DBRS Morningstar Confirms Rating on Silver Arrow Athlon NL 2021-1 B.V.

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May 29, 2023

DBRS Ratings GmbH (DBRS Morningstar) confirmed its AAA (sf) rating on the Class A Notes issued by Silver Arrow Athlon NL 2021-1 B.V. (the Issuer).

The rating on the Class A Notes addresses the timely payment of interest and the ultimate repayment of principal by the legal final maturity date in April 2031.

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 March 2023 payment date;
-- The one-year base case probability of default (PD) and default and recovery rates on the current pool of 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 lease instalments and residual value claims (vehicle realisation proceeds) related to operational lease agreements granted by Athlon Car Lease Nederland B.V. (Athlon) to corporate, small and medium-size enterprise, and entrepreneurial clients in the Netherlands for the purpose of leasing passenger and commercial vehicles. The transaction incorporated a 12-month revolving period, during which the Issuer purchased additional receivables that met the eligibility and replenishment criteria outlined in the transaction documents. The revolving period ended as scheduled with the July 2022 payment date.

PORTFOLIO PERFORMANCE
As of the March 2023 payment date, loans two to three months in arrears represented 0.1% of the outstanding portfolio balance, up from 0.0% in March 2022. The 90+-day delinquency ratio and the cumulative default ratio both remained at 0.0% in the same period.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of the receivables and maintained the one-year base case PD at 0.7% and updated its lifetime default assumptions to 1.6% and the recovery assumptions to 68.4%.

CREDIT ENHANCEMENT
The credit enhancement to the Class A Notes is provided by the subordination of the Class B Notes. Due to the end of the revolving period and the amortisation of the Class A Notes, the credit enhancement to the Class A Notes increased to 33.0%, up from 25.1% at the last annual review.

The transaction benefits from a general reserve fund of EUR 2.0 million, which provides liquidity support to the Class A Notes. The target amount is 0.5% of the Class A Notes’ balance with a floor of EUR 2.0 million.

The transaction also benefits from a commingling reserve fund to ensure protection in respect of the risks associated with commingling and the loss of collections if an insolvency event of Athlon occurs. The commingling reserve will be funded upon the occurrence of trigger events and will equal to 100.0% of the expected next month’s lease interest and principal collections and scheduled monthly sale of purchased vehicles (vehicle realisation proceeds), reduced by the commingling reserve reduction amount.

The transaction also benefits from a maintenance reserve fund, which ensures the continued provision of maintenance services embedded in the vehicle leases. It will be funded upon the occurrence of trigger events and will equal to 1.5% of the outstanding aggregate discounted balance, subject to a floor of 1.0% of the initial aggregate discounted balance.

The maintenance and commingling reserves (if funded) do not form part of the available funds but can only be used in case the relevant counterparties’ obligations are breached.

Elavon Financial Services DAC (Elavon) acts as the account bank for the transaction. Based on DBRS Morningstar’s private rating on Elavon, 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 rating assigned to the Class A Notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

Skandinaviska Enskilda Banken AB (Skandinaviska) acts as the swap counterparty for the transaction. DBRS Morningstar's public Long Term Critical Obligations Rating on Skandinaviska of AA is above 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 euros 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.

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 Athlon 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 15 June 2022, when DBRS Morningstar confirmed its AAA (sf) rating on the Class A Notes.

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 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 RR of the current pool of loans for the Issuer are 1.6% and 68.4%, 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 on the Class A Notes would be expected to fall to AA (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Class A Notes would be expected to fall to AA (high) (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating on the Class A Notes would be expected to fall to AA (low) (sf).

Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AA (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 50% increase in PD and 50% increase in 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: https://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. For further information on DBRS Morningstar historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

This rating is endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Shalva Beshia, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 10 May 2021

DBRS Ratings GmbH
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Tel. +49 (69) 8088 3500
Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

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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