DBRS Morningstar Confirms Ratings on Bumper DE S.A. 2019-1

DBRS Ratings GmbH (DBRS Morningstar) confirmed its AAA (sf) ratings on the Class A and Class B Notes (together, the Notes) issued by Bumper DE S.A. 2019-1 (the Issuer).

The ratings on the Notes address the timely payment of interest and the ultimate payment of principal on or before the legal final maturity date.

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.
-- Current available credit enhancement to the Notes to cover the expected losses at their AAA (sf) rating level.
-- Current economic environment and an assessment of sustainable performance, as a result of the Coronavirus Disease (COVID-19) pandemic.

The transaction is a securitisation of auto lease agreements granted and serviced by LeasePlan Deutschland GmbH (LeasePlan Germany) to corporate, small and medium-size enterprises (SMEs), retail, and public-sector clients in Germany. The residual value (RV) claims related to the auto leases are securitised in the transaction. The transaction included a 12-month revolving period, which ended on 22 December 2020. The legal final maturity date of the transaction is on the payment date in May 2028.

PORTFOLIO PERFORMANCE
As of the September 2021 payment date, delinquencies above one month have been low since closing. Leases that were two to three months delinquent or more than three months delinquent were both marginal at 0.0% of the portfolio outstanding balance, down from 0.1% at the last annual review.

The defaults are based on a 90-day-in-arrears (in principal and/or interest) definition. According to this definition, the cumulative defaults are low, representing 0.2% of the total receivables purchased since closing as of the September 2021 payment date, up from 0.1% at the last annual review.

As of the September 2021 payment date, no leases had payment holidays. The securitised portfolio marginally experienced payment holiday since the start of the coronavirus pandemic with an exposure limited to 0.7% of the portfolio outstanding balance at the July 2020 payment date.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of receivables and has decreased its base case PD to 2.3% from 2.8% at the last annual review, and has maintained its LGD assumption at 27.8%. The decrease in the base case PD reflects the decrease in the weighted-average life of the transaction since the end of the revolving period. DBRS Morningstar maintained its RV haircut of 39.7% at the AAA (sf) rating level. DBRS Morningstar’s assumptions incorporate adjustments related to the coronavirus pandemic.

CREDIT ENHANCEMENT
The credit enhancement (CE) to the Notes consists of the subordination of their respective junior notes and subordinated loans. As of the September 2021 payment date, CE to the Notes increased as follows compared to the last annual review:
-- CE to the Class A Notes increased to 37.7% from 29.2%
-- CE to the Class B Notes increased to 29.6% from 22.9%.

The increase in the CE reflects the amortisation of the portfolio following the end of the revolving period.

The transaction benefits from a liquidity reserve. The liquidity reserve covers senior fees, swap payments, and interest payments on the notes. The liquidity reserve is currently at its target amount of EUR 2.0 million.

The transaction also benefits from a commingling reserve, a set-off reserve, and a maintenance reserve, which are funded upon the breach of the Reserve Trigger Event, which has not occurred at the September 2021 payment date.

ABN AMRO Bank N.V. (ABN AMRO) acts as the account bank for the transaction. Based on the account bank reference rating of ABN AMRO at AA (low) - being one notch below the DBRS Morningstar Long Term Critical Obligations Rating (COR) of AA, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, DBRS Morningstar considers the risk arising from the exposure to the account bank to be consistent with the ratings assigned to the notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions" methodology.

ABN AMRO also acts as the swap counterparty for the transaction. DBRS Morningstar's Long Term COR of ABN AMRO at AA is above the First Rating Threshold as described in 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 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 applied an additional haircut to its base case recovery rate.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. These scenarios were last updated on 8 September 2021. 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 the ratings is: “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.

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 and loan-level data provided by LeasePlan Germany.

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 23 October 2020, when DBRS Morningstar confirmed its AAA (sf) ratings on both, the Class A and Class B Notes.

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 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 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 assumptions, and the RV haircut assumption at the AAA (sf) rating level are: PD of 2.3%, LGD of 27.8%, and RV haircut at AAA (sf) of 39.7%.
-- The Risk Sensitivity overview below illustrates the ratings expected if the PD, LGD, and RV haircut increase by a certain percentage over the base case assumption.

For example, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected to remain at AAA (sf), assuming no change in the RV haircut. If the RV haircut increases by 50%, the rating of the Class A Notes would also be expected to remain at AAA (sf), assuming no change in either the PD or LGD. Furthermore, if both the PD and LGD as well as the RV haircut increase by 50%, the rating of the Class A Notes would be expected to remain at AAA (sf).

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

Class B Notes Risk Sensitivity:
-- 25% increase in RV haircut, expected rating of AAA (sf)
-- 50% increase in RV haircut, expected rating of AA (high) (sf)
-- 25% increase in PD and LGD, expected rating of AAA (sf)
-- 50% increase in PD and LGD, expected rating of AAA (sf)
-- 25% increase in PD and LGD, and 25% increase in RV haircut, expected rating of AAA (sf)
-- 25% increase in PD and LGD, and 50% increase in RV haircut, expected rating of AA (high) (sf)
-- 50% increase in PD and LGD, and 25% increase in RV haircut, expected rating of AA (high) (sf)
-- 50% increase in PD and LGD, and 50% increase in RV haircut, expected rating of AA (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: 27 September 2019

DBRS Ratings GmbH
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Tel. +49 (69) 8088 3500
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The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

-- Master European Structured Finance Surveillance Methodology (8 February 2021), https://www.dbrsmorningstar.com/research/373435/master-european-structured-finance-surveillance-methodology.
-- 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 (30 July 2021), https://www.dbrsmorningstar.com/research/382486/rating-european-structured-finance-transactions-methodology.
-- Rating CLOs Backed by Loans to European SMEs (28 June 2021) and the Diversity Model v.2.5.0.0, https://www.dbrsmorningstar.com/research/380640/rating-clos-backed-by-loans-to-european-smes.
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2021), https://www.dbrsmorningstar.com/research/384920/interest-rate-stresses-for-european-structured-finance-transactions.
-- Derivative Criteria for European Structured Finance Transactions (20 September 2021), https://www.dbrsmorningstar.com/research/384624/derivative-criteria-for-european-structured-finance-transactions.
-- Legal Criteria for European Structured Finance Transactions (29 July 2021),
https://www.dbrsmorningstar.com/research/382171/legal-criteria-for-european-structured-finance-transactions.
-- Operational Risk Assessment for European Structured Finance Servicers (16 September 2021), https://www.dbrsmorningstar.com/research/384513/operational-risk-assessment-for-european-structured-finance-servicers.
-- 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].