DBRS Morningstar Assigns Ratings to RevoCar 2021-1 UG (haftungsbeschränkt)

DBRS Ratings GmbH (DBRS Morningstar) assigned the following ratings to the notes issued by RevoCar 2021-1 UG (haftungsbeschränkt) (the Issuer):

-- Class A Notes at AAA (sf)
-- Class B Notes at A (sf)
-- Class C Notes at BBB (sf)
-- Class D Notes at BB (sf)

DBRS Morningstar does not rate the Class E Notes in this transaction.

The rating of the Class A Notes addresses the timely payment of interest and the ultimate repayment of principal by the legal final maturity date. The rating of the Class B Notes addresses the ultimate (and timely as the most senior class) payment of interest and the ultimate repayment of principal by the legal final maturity date. The ratings of the Class C and Class D Notes address the ultimate payment of interest and the ultimate repayment of principal by the legal final maturity date.

The Notes are backed by a pool of receivables related to auto loan contracts comprising standard amortising and balloon loan receivables granted to private individuals and commercial clients residing in Germany by Bank11 für Privatkunden und Handel GmbH (Bank11 or the Originator). The collateral portfolio will also be serviced by Bank11 (the Servicer). The Issuer is registered at Wilmington Trust SP Services (Frankfurt) GmbH, which is incorporated under German law.

DBRS Morningstar based its ratings on a review of the following analytical considerations:
-- The transaction’s capital structure, including form and sufficiency of available credit enhancement;
-- Relevant credit enhancement in the form of subordination, reserve funds, and excess spread;
-- Credit enhancement levels are sufficient to support DBRS Morningstar’s projected cumulative net loss under various stressed cash flow assumptions for the Class A, Class B, Class C, and Class D notes;
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested;
-- Bank 11’s capabilities with regard to originations, underwriting, and servicing and its financial strength;
-- The transaction parties’ financial strength with regard to their respective roles;
-- The credit quality of the collateral and historical and projected performance of the Seller’s portfolio;
-- The sovereign rating of the Federal Republic of Germany, currently at AAA with a Stable trend; and
-- The consistency of the transaction’s legal structure with DBRS Morningstar’s “Legal Criteria for European Structured Finance Transactions” methodology and the presence of legal opinions that address the true sale of the assets to the Issuer.

TRANSACTION STRUCTURE
The transaction includes a 48-month revolving period during which the Issuer can purchase additional collateral. During this period, the transaction includes comprehensive receivable eligibility criteria and limitations on the type of collateral that can be purchased during the revolving period, which have to be complied with.

The transaction incorporates a single waterfall that facilitates the distribution of the available distribution amount. The notes amortise sequentially subject to a note-specific target principal redemption amount.

On the issue date, Bank11 has funded a liquidity reserve of EUR 1,750,000, with a target balance of 0.25% of the outstanding principal amounts of all purchased receivables. The liquidity reserve is available to cover senior expenses, servicing fees, and interest on the Class A Notes only after the servicer fails to transfer collections under the servicing agreement resulting in the occurrence of a servicer termination event.

The transaction also includes a commingling reserve funded at closing and a set-off reserve mechanism. These reserves will in addition to the liquidity reserve only be available upon the occurrence of certain predefined events.

All underlying contracts are fixed-rate loans and interest paid on the Notes is also fixed, hence there is no interest rate risk in this transaction.

DBRS Morningstar analysed the transaction cash flow structure in Intex DealMaker.

COUNTERPARTIES
The Bank of New York Mellon, Frankfurt Branch (BoNY) has been appointed as the account bank for the transaction. DBRS Morningstar privately rates BoNY and publicly rates The Bank of New York Mellon’s Long-Term Senior Debt at AA (high) with a Stable trend. DBRS Morningstar concluded that BoNY meets the minimum criteria to act in its capacity as the account bank. The transaction also contains downgrade provisions relating to the account bank consistent with DBRS Morningstar criteria.

CORONAVIRUS CONSIDERATIONS
The Coronavirus Disease (COVID-19) and the resulting isolation measures have caused an economic contraction, leading to sharp increases in unemployment rates and income reductions for many borrowers. DBRS Morningstar anticipates that delinquencies may continue to increase in the coming months for many structured finance transactions, some meaningfully. The ratings are based on additional analysis and adjustments to expected performance as a result of the global efforts to contain the spread of the coronavirus. For this transaction, DBRS Morningstar applied a moderate haircut to its expected recovery rate.

On 16 April 2020, the DBRS Morningstar Sovereign group released a set of macroeconomic scenarios for the 2020-22 period in select economies. These scenarios were last updated on 17 March 2021. For details, see the following commentaries: https://www.dbrsmorningstar.com/research/375376/global-macroeconomic-scenarios-march-2021-update and https://www.dbrsmorningstar.com/research/359903/global-macroeconomic-scenarios-application-to-credit-ratings. The DBRS Morningstar analysis considered impacts consistent with the moderate scenario in the referenced reports.

On 8 May 2020, DBRS Morningstar published a commentary outlining how the coronavirus crisis is likely to affect DBRS Morningstar-rated ABS transactions in Europe. For more details, please see: https://www.dbrsmorningstar.com/research/360734/european-abs-transactions-risk-exposure-to-coronavirus-covid-19-effect and https://www.dbrsmorningstar.com/research/362712/european-structured-finance-covid-19-credit-risk-exposure-roadmap.

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

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.

ESG CONSIDERATIONS
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/373262.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is: Rating European Consumer and Commercial Asset-Backed Securitisations (3 September 2020).

DBRS Morningstar has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

An asset and a cash flow analysis were both conducted. Due to the inclusion of a revolving period in the transaction, the analysis considers potential portfolio migration based on replenishment criteria set forth in the transaction legal documents.

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.

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/364527/global-methodology-for-rating-sovereign-governments.

The sources of data and information used for these ratings include Bank11.

DBRS Morningstar received the following data and information:
-- Monthly static default data from March 2016 to March 2021;
-- Monthly static recovery data from March 2016 to March 2021;
-- Monthly dynamic arrears data from March 2016 to March 2021;
-- Monthly dynamic prepayment data from March 2016 to March 2021;
-- Monthly dynamic origination data from March 2016 to March 2021;
-- Portfolio Stratification Tables as at 30 April 2021; and
-- The portfolio amortisation profile related to the selected pool.

DBRS Morningstar did not rely upon third-party due diligence in order to conduct its analysis.

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 purposes of providing these ratings 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.

These ratings concern a newly issued financial instrument. These are the first DBRS Morningstar ratings on this financial instrument.

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

To assess the impact of changing the transaction parameters on the ratings, DBRS Morningstar considered the following stress scenarios, as compared to the parameters used to determine the ratings:

-- Expected default: 1.4%.
-- Expected recovery rate: 29.8%.
-- Loss given default (LGD): 79.2% for the AAA (sf) scenario; 76.2% for the A (sf) scenario; 74.4% for the BBB (sf) scenario, and 72.6% for the BB (sf) scenario

DBRS Morningstar concludes that the expected ratings under the eight stress scenarios will be:

-- Class A Notes:
Scenario 1: 25% increase in PD, expected rating of AA (sf)
Scenario 2: 50% increase in PD, expected rating of AA (sf)
Scenario 3: 25% increase in LGD, expected rating of AA (sf)
Scenario 4: 50% increase in LGD, expected rating of AA (sf)
Scenario 5: 25% increase in both PD and LGD expected rating of AA (low) (sf)
Scenario 6: 25% increase in PD and 50% increase in LGD, expected rating of AA (low) (sf)
Scenario 7: 50% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
Scenario 8: 50% increase in both PD and LGD, expected rating of A (sf)

-- Class B Notes:
Scenario 1: 25% increase in PD, expected rating of BBB (high) (sf)
Scenario 2: 50% increase in PD, expected rating of BBB (sf)
Scenario 3: 25% increase in LGD, expected rating of BBB (high) (sf)
Scenario 4: 50% increase in LGD, expected rating of BBB (sf)
Scenario 5: 25% increase in both PD and LGD expected rating of BBB (sf)
Scenario 6: 25% increase in PD and 50% increase in LGD, expected rating of BBB (low) (sf)
Scenario 7: 50% increase in PD and 25% increase in LGD, expected rating of BBB (low) (sf)
Scenario 8: 50% increase in both PD and LGD, expected rating of BB (high) (sf)

-- Class C Notes:
Scenario 1: 25% increase in PD, expected rating of BBB (low) (sf)
Scenario 2: 50% increase in PD, expected rating of BB (high) (sf)
Scenario 3: 25% increase in LGD, expected rating of BBB (low) (sf)
Scenario 4: 50% increase in LGD, expected rating of BB (high) (sf)
Scenario 5: 25% increase in both PD and LGD expected rating of BB (sf)
Scenario 6: 25% increase in PD and 50% increase in LGD, expected rating of BB (sf)
Scenario 7: 50% increase in PD and 25% increase in LGD, expected rating of BB (sf)
Scenario 8: 50% increase in both PD and LGD, expected rating of B (high) (sf)

-- Class D Notes:
Scenario 1: 25% increase in PD, expected rating of B (high) (sf)
Scenario 2: 50% increase in PD, expected rating of B (high) (sf)
Scenario 3: 25% increase in LGD, expected rating of B (high) (sf)
Scenario 4: 50% increase in LGD, expected rating of B (high) (sf)
Scenario 5: 25% increase in both PD and LGD expected rating of B (high) (sf)
Scenario 6: 25% increase in PD and 50% increase in LGD, expected rating of B (high) (sf)
Scenario 7: 50% increase in PD and 25% increase in LGD, expected rating of B (sf)
Scenario 8: 50% increase in both PD and LGD, expected rating of B (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.
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.

These ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Ronja Dahmen, Assistant Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 11 May 2021

DBRS Ratings GmbH
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60311 Frankfurt am Main Deutschland
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.

-- Rating European Consumer and Commercial Asset-Backed Securitisations (3 September 2020), https://www.dbrsmorningstar.com/research/366294/rating-european-consumer-and-commercial-asset-backed-securitisations.
-- Rating European Structured Finance Transactions Methodology (21 July 2020), https://www.dbrsmorningstar.com/research/364305/rating-european-structured-finance-transactions-methodology.
-- Legal Criteria for European Structured Finance Transactions (6 April 2021), https://www.dbrsmorningstar.com/research/376314/legal-criteria-for-european-structured-finance-transactions.
-- Operational Risk Assessment for European Structured Finance Originators (30 September 2020), https://www.dbrsmorningstar.com/research/367603/operational-risk-assessment-for-european-structured-finance-originators.
-- Operational Risk Assessment for European Structured Finance Servicers (19 November 2020), https://www.dbrsmorningstar.com/research/370270/operational-risk-assessment-for-european-structured-finance-servicers.
-- Interest Rate Stresses for European Structured Finance Transactions (28 September 2020), https://www.dbrsmorningstar.com/research/367292/interest-rate-stresses-for-european-structured-finance-transactions.
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (3 February 2021), https://www.dbrsmorningstar.com/research/373262/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

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 [email protected].