Press Release

DBRS Morningstar Confirms Ratings on Cars Alliance Auto Leases France V 2020-1

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October 13, 2021

DBRS Ratings GmbH (DBRS Morningstar) confirmed its ratings on the notes (the Rated Notes) issued by Cars Alliance Auto Leases France V 2020-1 (the Issuer) as follows:

-- Class A Notes at AAA (sf)
-- Class B Notes at AA (low) (sf)

The ratings address the timely payment of scheduled interest and the ultimate repayment of principal by the legal final maturity date in October 2036.

The confirmations 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 September 2021 payment date.
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables.
-- No revolving termination events have occurred.
-- Current available credit enhancement to the Rated Notes to cover the expected losses at their respective rating levels.
-- Current economic environment and an assessment of sustainable performance, as a result of the Coronavirus Disease (COVID-19) pandemic.

The transaction is a securitisation collateralised by lease receivable instalments and specifically exclude, among others, the residual value component. The receivables relate to auto lease agreements granted by Diffusion Industrielle et l’Automobile par le Crédit SA (DIAC or the Seller) to private lessees residing in France. The transaction closed in October 2020 and includes a 21-month revolving period during which time the Seller may offer additional lease receivables that the Issuer will purchase. Concentration limits are in place to mitigate against any negative evolution of the portfolio, and performance triggers are included in the revolving period termination events. When the revolving period ends, the sequential amortisation of the Notes will begin. To date, all triggers are being met.

PORTFOLIO PERFORMANCE
As of the September 2021 payment date, loans that were one to two months and two to three months delinquent represented 0.5% and 0.2% of the portfolio balance, respectively. Gross cumulative defaults amounted to 0.4% of the aggregate original portfolio balance, with cumulative recoveries of 26.2% to date.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted an analysis of the pool of receivables and maintained its base case PD and LGD assumptions at 3.5% and 50.4%, respectively, based on the replenishment criteria set forth in the transaction legal documents.

CREDIT ENHANCEMENT
The subordination of the respective junior obligations provides credit enhancement to the Rated Notes. As of the September 2021 payment date, credit enhancements to the Class A Notes and Class B Notes remained unchanged since closing at 9.0% and 5.0%, respectively, because of the inclusion of the revolving period.

The transaction benefits from the funding of a general reserve on the closing date. Upon the downgrade of the Seller or Servicer below investment grade, a performance and commingling reserve will also be funded.

The transaction benefits from an amortising general reserve account, which is available to cover senior expenses and missed interest payments on the Rated Notes and, on the final maturity date, to repay principal on the Rated Notes. This account was funded at closing with EUR 10.4 million, and its target balance is equal to 1.0% of the aggregate principal balance of the notes. It has been at its target balance since closing, and currently stands at EUR 10.4 million as of the September 2021 payment date.

BNP Paribas Securities Services SCA (BP2S) acts as the account bank for the transaction. Based on the DBRS Morningstar private rating of BP2S, the downgrade provisions outlined in the transaction documents, and structural mitigants, 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.

The Issuer entered into a Swap Agreement with Diac in order to hedge the interest rate mismatch between the notes, indexed to one-month Euribor, and the fixed interest rate payments from the collateral portfolio. The structure also includes a Stand-By Swap, where Société Générale, S.A. provides a financial and operational guarantee to Diac; if Diac fails to meet its obligations as Swap Counterparty, Société Générale, S.A. will step in to hedge the Issuer’s exposure. The Stand-By Swap Agreement defines downgrade provisions consistent with DBRS Morningstar’s “Derivative Criteria for European Structured Finance Transactions” methodology.

DBRS Morningstar analysed the transaction structure in Intex DealMaker.

The Coronavirus Disease (COVID-19) and the resulting isolation measures have caused an immediate economic contraction, leading in some cases to 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 ABS transactions. The ratings are based on additional analysis to expected performance as a result of the global efforts to contain the spread of the coronavirus. For this transaction, DBRS Morningstar conducted additional sensitivity analysis to determine that the transaction benefits from sufficient liquidity support to withstand high levels of payment moratoriums in the portfolio.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. These scenarios were last updated on 8 September 2021. The DBRS Morningstar analysis considered impacts consistent with the baseline scenario in the below referenced report. For details, see the following commentaries: https://www.dbrsmorningstar.com/research/384150/baseline-macroeconomic-scenarios-for-rated-sovereigns and https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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.

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 these ratings is the “Master European Structured Finance Surveillance Methodology” (8 February 2021).

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.

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 continues to consider potential portfolio migration based on replenishment criteria set forth in the transaction legal documents.

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/381451/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 these ratings include investor reports provided by Eurotitrisation, 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 ratings, 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.

The last rating action on this transaction took place on 28 October 2020, when DBRS Morningstar finalised its provisional ratings on the Class A Notes and B Notes at AAA (sf) and AA (low) (sf), respectively.

The lead analyst responsibilities for this transaction have been transferred to Preben Cornelius Overas.

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

To assess the impact of changing the transaction parameters on the ratings, DBRS Morningstar considered the following stress scenarios as compared with the parameters used to determine the ratings (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 LGD of the pool of loans for the Issuer are 3.5% and 50.4%, 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 (low) (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Class A Notes would also be expected to fall to AA (low) (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 A (low) (sf).

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

Class B Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of A (sf)
-- 50% increase in LGD, expected rating of BBB (high) (sf)
-- 25% increase in PD, expected rating of A (sf)
-- 50% increase in PD, expected rating of BBB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BBB (high) (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 of BB (high) (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: Preben Cornelius Overas, Senior Analyst
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 23 September 2020

DBRS Ratings GmbH
Neue Mainzer Straße 75
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.

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].

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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