DBRS Morningstar Confirms and Withdraws Rating for Senior Notes Issued by CarFin Finance International DAC

DBRS, Inc. (DBRS Morningstar) confirmed the rating on the Senior Notes issued by CarFin Finance International DAC at A (sf) and subsequently discontinued-withdrew the rating. The rating relates to a securitization of Avis Budget EMEA Limited’s (Avis Europe or the Sponsor) rental car fleet in certain European jurisdictions. Avis Europe is a subsidiary of Avis Budget Group. Inc. (the Company). The Sponsor requested the discontinuation and withdrawal of the rating.

The rating rationale for the confirmation of the rating includes the following key analytical considerations:
-- Transaction capital structure, current rating, and form and sufficiency of available credit enhancement.
-- The transaction is a securitization of rental car receivables generated by rental car operations in Germany, Italy, France, Spain, and the Netherlands. The credit enhancement level is adjusted periodically based upon various vehicle pool characteristics. As of the date of the review, vehicle composition with respect to both program and nonprogram vehicles and the credit ratings of the vehicle manufacturers were consistent with credit enhancement levels.
-- The analysis considers DBRS Morningstar’s set of macroeconomic scenarios for select economies related to the Coronavirus Disease (COVID-19), available in its commentary “Global Macroeconomic Scenarios: September Update,” published on September 10, 2020. DBRS Morningstar initially published macroeconomic scenarios on April 16, 2020, which were last updated on September 10, 2020, and are reflected in DBRS Morningstar’s rating analysis.
-- The assumptions consider the moderate macroeconomic scenario outlined in the commentary, with the moderate scenario serving as the primary anchor for the current rating. The moderate scenario remains predicated on a more rapid return of confidence and a steady recovery heading into 2021.
-- In response to the coronavirus pandemic, the Company and Sponsor have aggressively taken all available measures to right-size the fleet given the present constraints, including canceling a substantial number of previously ordered vehicles and have aggressively reduced employee headcount and cut nonessential expenses.
-- In addition, the majority of the fleet are program vehicles, reducing exposure to used vehicle value volatility and potential disruption of used vehicle disposition channels if mandatory business shutdowns were to be put in place again.
-- The transaction parties’ capabilities with regard to managing rental car operations.
-- The credit quality of the collateral pool and historical performance.
-- DBRS Morningstar confirmed the rating of Avis at B with a Negative trend on August 18, 2020, removing the rating from Under Review with Negative Implications. Previously, DBRS Morningstar downgraded Avis to B from BB (low) on May 7, 2020, putting the rating Under Review with Negative Implications. The Negative trend reflects DBRS Morningstar’s view that the current economic downturn driven by the coronavirus pandemic will continue to place significant pressure on the Company’s rental car franchise, especially its on-airport business. The Negative trend also takes into consideration that the full impact of the coronavirus pandemic remains unclear, including the severity of the disease, as well as its duration before it runs its course and the economy approaches pre-coronavirus levels.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at https://www.dbrsmorningstar.com/research/357792.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is DBRS Morningstar Master U.S. ABS Surveillance (May 27, 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

This rating is endorsed by DBRS Ratings Limited for use in the European Union. The following additional regulatory disclosures apply to endorsed ratings:

The last rating action on these transactions took place on April 23, 2020, when securities referenced herein were confirmed.

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.

Lead Analyst: Hollie Reddington, Vice President, U.S. ABS – Global Structured Finance
Rating Committee Chair: Chris D’Onofrio, Managing Director, Credit Ratings – Global Structured Finance
Initial Rating Date: August 14, 2013

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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-- DBRS Morningstar Master U.S. ABS Surveillance (May 27, 2020): https://www.dbrsmorningstar.com/research/361480/dbrs-morningstar-master-us-abs-surveillance