DBRS Morningstar Assigns Rating to Cars Alliance Auto Loans Germany Master, Series 2021-10, Class A Notes and Discontinues Rating on Series 2021-01, Class A Notes

DBRS Ratings GmbH (DBRS Morningstar) assigned a AAA (sf) rating to the EUR 310.4 million Series 2021-10, Class A Notes issued by Cars Alliance Auto Loans Germany Master (the Issuer). DBRS Morningstar assigned the rating following the note issuance on the 18 November 2021 payment date. As of the payment date, all portfolio revolving conditions had been met. Additionally, DBRS Morningstar discontinued its AAA (sf) rating on the EUR 195.3 million Series 2021-01, Class A Notes because they were repaid in full.

The rating on the Class A Notes addresses the timely payment of interest and the ultimate repayment of principal by the final legal maturity date in March 2035.

The Issuer is a master trust securitisation backed by a pool of auto loan receivables related to new and used motor vehicles originated in Germany by RCI Banque SA Niederlassung Deutschland, a German subsidiary of RCI Banque SA. The transaction’s revolving period extends until the March 2022 payment date, subject to certain portfolio conditions being met. During the revolving period, the Issuer may acquire additional receivables and issue further series of Class A Notes with different expected maturities based on the amortisation profile of the additional receivables.

The transaction closed on 18 March 2014. Since closing, replenishment of the underlying receivables has met the portfolio revolving conditions on each payment date.

PORTFOLIO PERFORMANCE
As at the November 2021 payment date, loans that were one to two months delinquent and two to three months delinquent represented 1.0% and 0.2% of the portfolio net discounted balance, respectively, while delinquencies greater than three months were 0.1%. The cumulative gross default ratio was 0.7% of the original portfolio and cumulative transferred receivables, with principal cumulative recoveries of 74.9% so far.

PORTFOLIO ASSUMPTIONS AND KEY RATING DRIVERS
DBRS Morningstar maintained its base case probability of default (PD) and loss given default (LGD) based on the worst-case portfolio composition at 1.6% and 44.9%, respectively.

CREDIT ENHANCEMENT
Credit enhancement for the outstanding series of Class A Notes comes from subordination of the Class B Notes and the general reserve fund. The current credit enhancement on the Class A Notes is 9.1%.

HSBC France SA acts as the account bank for the transaction. Based on DBRS Morningstar’s private rating on HSBC France SA, the downgrade provisions outlined in the transaction documents, and structural mitigants, DBRS Morningstar considers the risk arising from the exposure to HSBC France SA to be consistent with the ratings assigned to the notes as described in DBRS Morningstar’s “Legal Criteria for European Structured Finance Transactions” methodology.

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.

A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent rating action.

In DBRS Morningstar’s opinion, the changes under consideration do not warrant the application of the entire principal methodology. Given the master trust structure, no asset or cash flow analysis was conducted as the asset portfolio complies with the composition limits set forth in the transaction legal documents and current transaction performance is within expectations.

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 SA (the Management Company).

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

At the time of the initial rating, DBRS Morningstar was not 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.

This rating concern a newly issued financial instrument. This is the first DBRS Morningstar rating on this financial instrument.

The last rating action on this transaction took place on 20 October 2021, when DBRS Morningstar discontinued its ratings on the Series 2020-12, Series 2021-08, and Series 2021-09 Class A Notes.

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 rating, DBRS Morningstar considered the following stress scenarios, as compared to the parameters used to determine the rating (the Base Case):

-- DBRS Morningstar expected a base case PD and LGD for the portfolio based on an annual review of the transaction in February 2021. Adverse changes to asset performance may cause stresses to base case assumptions and, therefore, have a negative effect on credit ratings.
-- 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 current pool of loans for the Issuer are 1.6% and 44.9%, respectively.
-- The risk sensitivity below illustrates the ratings expected for each series of Class A Notes if the PD and LGD increase by a certain percentage over the base case assumptions. For example, if the LGD increases by 50%, the rating for each series of Class A Notes would be expected to decrease to AA (sf), ceteris paribus. If the PD increases by 50%, the rating for each series of Class A Notes would be expected to decrease to AA (sf), ceteris paribus. Furthermore, if both the PD and LGD increase by 50%, the rating for each series of Class A Notes would be expected to decrease to A (high) (sf), ceteris paribus.

Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf)
-- 50% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD, expected rating of AA (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in PD, expected rating of AA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AA (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (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: 18 March 2014

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The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

-- Legal Criteria for European Structured Finance Transactions (29 July 2021), https://www.dbrsmorningstar.com/research/382171/legal-criteria-for-european-structured-finance-transactions.
-- Master European Structured Finance Surveillance Methodology (8 February 2021), https://www.dbrsmorningstar.com/research/373435/master-european-structured-finance-surveillance-methodology.
-- Operational Risk Assessment for European Structured Finance Originators (16 September 2021), https://www.dbrsmorningstar.com/research/384512/operational-risk-assessment-for-european-structured-finance-originators.
-- 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.
-- Rating European Consumer and Commercial Asset-Backed Securitisations (29 October 2021), https://www.dbrsmorningstar.com/research/387042/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.
-- 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].