DBRS Takes Rating Actions on RevoCar 2018 UG (haftungsbeschränkt)

DBRS Ratings GmbH (DBRS) took the following rating actions on the bonds issued by RevoCar 2018 UG (haftungsbeschränkt) (the Issuer):

-- Class A Notes confirmed at AAA (sf) -- Class B Notes upgraded to A (high) (sf) from A (sf)
-- Class C Notes upgraded to A (low) (sf) from BBB (high) (sf)
-- Class D Notes confirmed at BB (sf)

The ratings on the Class A Notes, B, C and D Notes (the Rated Notes) address the timely payment of interest and ultimate payment of principal on or before the legal final maturity date.

The rating actions follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults and losses as of the April 2019 payment date.
-- Probability of default (PD), loss given default (LGD) and expected loss assumptions on the remaining receivables.
-- Current available credit enhancement (CE) to the Rated Notes to cover the expected losses at their respective rating levels.

The Issuer is a securitisation of German auto loan receivables originated and serviced by Bank11 für Privatkunden und Handel GmbH (Bank11). The initial portfolio included loans granted to private and corporate clients for the purchase of new and used vehicles. Most of the receivables have equal monthly instalments; however, 12.67% of the loans included a final balloon payment. The transaction closed on 22 May 2018.

PORTFOLIO PERFORMANCE
As of the April 2019 payment date, one- to two month and two- to three-month delinquencies were 0.01% and 0.02% of the portfolio balance, respectively, while delinquencies greater than three months were zero. Gross cumulative defaults, as a percentage of the original portfolio, were 0.2%, with cumulative recoveries of 17.6%.

CREDIT ENHANCEMENT
As of the April 2019 payment date, CE to the Class A Notes was 12.6%, up from 9.0% at the DBRS initial rating. CE to the Class B Notes was 5.5%, up from 3.9% at the DBRS initial rating. CE to the Class C Notes was 4.5%, up from 3.2% at the DBRS initial rating. CE to the Class D Notes was 1.37%, up from 1.0% at the DBRS initial rating. CE is provided by subordination of junior classes.
The transaction benefits from a liquidity reserve of EUR 1.9 million, as of April 2019. The reserve target is 0.65% of the outstanding principal amount of all purchased receivables and is able to cover senior expenses, servicing fees, swap payments and interest on the Class A Notes only after a servicer termination event.

The commingling reserve in the transaction was funded by Bank11 at closing to EUR 10.4 million. The reserve is adjusted according to the scheduled collections for the next period plus 0.5% of the Aggregated Principal Balance at the beginning of such collection period and stood at EUR 8.5 million as of the April 2019 payment date.

Borrowers in Germany have the right to set off claims against the Issuer that they had at the time of the assignment of receivables or at the time they become aware of the assignment from the Seller to the Issuer. The set-off risk is mitigated by the loan eligibility criterion at closing that borrowers do not hold deposits with Bank11 and the undertaking of Bank11 to fund the Set-Off Risk Reserve upon the occurrence of certain events. As of the April 2019 payment date, the set-off risk reserve account is equal to EUR 5,844.21.

The Bank of New York Mellon Corporation, Frankfurt Branch (BNY-Frankfurt) acts as the Account Bank for the transaction. Based on DBRS’s private rating of BNY-Frankfurt, the downgrade provisions outlined in the transaction documents, and structural mitigants, DBRS considers the risk arising from the exposure to BNY-Frankfurt to be consistent with the ratings assigned to the Notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

There is a swap agreement in place for the Class A Notes. Under the swap agreement, the Issuer pays a fixed annualised rate and receives one-month Euribor, based on the notional amount equal to the outstanding Class A Notes subject to a lower and upper bound given an expected amortisation profile for the Class A Notes assuming, inter alia, certain prepayment rates.

UniCredit Bank AG acts as the swap counterparty for the transaction. DBRS private rating of UniCredit Bank AG, as well as the downgrade provisions included in the swap documentation, are consistent with DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology to act in such capacity.

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 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 “Rating Sovereign Governments” methodology at: http://dbrs.com/research/333487/rating-sovereign-governments.pdf.

The sources of data and information used for these ratings include Investor reports provided by Bank11 and loan-level data provided by the 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 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 these ratings 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 22 May 2018 when DBRS assigned ratings of AAA (sf), A (sf), BBB (high) (sf) and BB (sf) to the Class A, B, C and D Notes, respectively.

The lead analyst responsibilities for this transaction have been transferred to Alfonso Candelas.

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 with the parameters used to determine the rating (the Base Case):

-- DBRS 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 1.68% and 60.0%, 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 stay 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 stay 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 (sf).

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

Class B Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (sf)
-- 50% increase in LGD, expected rating of A (low) (sf)
-- 25% increase in PD, expected rating of A (sf)
-- 50% increase in PD, expected rating of A (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of A (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating BBB (low) (sf)

Class C Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (low) (sf)
-- 50% increase in LGD, expected rating of BBB (sf)
-- 25% increase in PD, expected rating of A (low) (sf)
-- 50% increase in PD, expected rating of BBB (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BBB (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BBB (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating BB (high) (sf)

Class D Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of B (low) (sf)
-- 50% increase in LGD, expected rating below B (sf)
-- 25% increase in PD, expected rating of B (sf)
-- 50% increase in PD, expected rating below B (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating below B (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating below B (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating below B (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating below B (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 GmbH are subject to EU and US regulations only.

Lead Analyst: Alfonso Candelas, Senior Vice President
Rating Committee Chair: Gareth Levington, Managing Director
Initial Rating Date: 22 May 2018

DBRS Ratings GmbH
Neue Mainzer Straße 75
60311 Frankfurt am Main Deutschland
Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

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 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.