DBRS Morningstar Assigns Issuer Rating of A (high) With a Stable Trend to BMW Finance N.V.

DBRS Limited (DBRS Morningstar) assigned an Issuer Rating of A (high) with a Stable trend to BMW Finance N.V. (BMWF). BMWF’s credit rating is consistent with that of its ultimate parent, BMW AG (BMW or the Company). BMW provides a parent guarantee in support of BMWF’s most senior class of debt (Medium-Term Notes). This guarantee, as well as DBRS Morningstar’s assessment of additional implicit support considerations (including but not limited to business, reputational, and financial factors that are likely to motivate a parent or affiliated company to support its subsidiary issuer), result in a flow-through of BMW’s Issuer Rating to BMWF.

Given the flow-through of BMW’s credit rating to BMWF, any change in the credit rating of BMW would directly result in a corresponding (i.e., 1-to-1 relationship) change in the credit rating of BMWF. Consistent with the Stable trend, DBRS Morningstar expects the assigned credit rating to remain constant over the medium term, with BMW solidly placed at the current rating category. Though unlikely, a negative credit rating action could result from a significant and sustained deterioration in operating results, leading to a material weakening in the Company’s Financial Risk Assessment. Conversely, an upgrade is also unlikely over a similar time horizon in line with the meaningful cost and investment challenges facing the industry, thereby likely precluding a further strengthening in BMW’s financial profile to positively affect the credit rating.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
Environmental (E) Factors
DBRS Morningstar considered that the E factor, specifically carbon and greenhouse gas costs, represents a relevant factor as BMW is subject to a wide range of compliance requirements relating to (among other factors) carbon dioxide, fuel efficiency, and emissions control. The Company has been actively investing in its vehicle-electrification strategy. By 2030, BMW is targeting an 80% reduction in carbon emissions per vehicle in production, while also targeting at least a 50% reduction in carbon emissions during a vehicle’s use phase. In terms of contribution to sales, the Company is focusing on increasing the share of fully electric vehicle sales to 25% by 2025 and at least 50% by 2030 (from the 2021 level of 4%).

While the E factor could have some negative credit impact, DBRS Morningstar does not deem it sufficient to change the credit ratings or the trends assigned to BMW.

There were no Social or Governance factors that had a significant or relevant effect 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/416784 (July 4, 2023).

Notes:
All figures are in euros unless otherwise noted.

DBRS Morningstar applied the following principal methodology:
-- DBRS Morningstar Global Criteria: Guarantees and Other Forms of Support (March 28, 2023; https://www.dbrsmorningstar.com/research/411694)

The credit 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 analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://www.dbrsmorningstar.com/research/397223.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrsmorningstar.com.

The credit rating was not initiated at the request of the rated entity.

The rated entity or its related entities did not participate in the credit rating process for this credit rating action.

DBRS Morningstar did not have access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is an unsolicited credit rating.

This credit rating is endorsed by DBRS Ratings Limited for use in the United Kingdom, and by DBRS Ratings GmbH for use in the European Union, respectively. The following additional regulatory disclosures apply to endorsed credit ratings:

This credit rating concerns a newly assigned Issuer Rating on this entity.

With respect to the Financial Conduct Authority (FCA) and European Securities and Markets Authority (ESMA) regulations in the United Kingdom and European Union, respectively, this is an unsolicited credit rating. This credit rating was not initiated at the request of the issuer.

With Rated Entity or Related Third-Party Participation: NO
With Access to Internal Documents: NO
With Access to Management: NO

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar trends and credit ratings are under regular surveillance.

For further information on DBRS Morningstar historical default rates published by the ESMA in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on DBRS Morningstar historical default rates published by the FCA in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

Lead Analyst: Robert Streda, Senior Vice President, Diversified Industries
Credit Rating Committee Chair: Timothy O’Brien, Managing Director, Diversified Industries
Initial Credit Rating Date:
BMW – May 10, 2013
BMWF – September 28, 2023

Information regarding DBRS Morningstar credit ratings, including definitions, policies, and methodologies, is available on www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577