Press Release

DBRS Morningstar Finalises Provisional Ratings on Bumper FR 2022-1

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April 07, 2022

DBRS Ratings GmbH (DBRS Morningstar) finalised its provisional ratings of AAA (sf) on the Class A Notes and AA (high) (sf) on the Class B Notes (the Rated Notes; together with the unrated Class C Notes, the Notes) issued by Bumper FR 2022-1 (the Issuer). The Issuer is a French Fonds Commun De Tritrisation (FCT), acting as a special-purpose entity specifically for the purpose of this transaction.

The rating assigned to the Class A Notes addresses the timely payment of scheduled interest and the ultimate repayment of principal by the final maturity date. The rating assigned to the Class B Notes addresses the ultimate payment of interest (timely when most senior) and the ultimate repayment of principal by the final maturity date.

The transaction represents the issuance of Notes backed by lease receivables and residual value (RV) claims related to auto lease agreements granted by LeasePlan France S.A.S. (LPFR; the Seller) to private individuals, corporates, small and medium-size enterprises (SME), and public-sector clients in France. The underlying receivables represent the right to receive payment of regular lease instalments and vehicle realisation proceeds that are linked to the rights to receive all proceeds from the sale of the underlying vehicles.

The transaction incorporates a 12-month revolving period, during which the Seller may offer additional receivables and their related RV receivables that the Issuer will purchase subject to eligibility criteria, replenishment criteria, performance triggers, and other conditions set out in the transaction documents.

DBRS Morningstar based its ratings on a review of the following analytical considerations:
-- The transaction capital structure, including form and sufficiency of available credit enhancement;
-- Relevant credit enhancement in the form of subordination, excess spread, and the availability of the liquidity reserve. Credit enhancement levels are sufficient to support DBRS Morningstar-projected expected cumulative net losses and RV losses under various stress scenarios;
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested;
-- LPFR’s capabilities with regard to originations, underwriting, 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 portfolios;
-- The sovereign rating on the Republic of France, currently at AA (high) with a Stable trend by DBRS Morningstar; 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 incorporates a single waterfall that facilitates the distribution of the available distribution amount. The Notes will amortise sequentially, subject to required principal redemption amounts, and funds are not allocated to the redemption of principal of the Class B Notes until the Class A Notes have been redeemed in full.

An amortising liquidity reserve, initially set at 0.75% of the Class A Notes and Class B Notes, is available to the structure with a floor of EUR 2,500,000. The reserve provides liquidity to the Rated Notes, while also ultimately providing credit enhancement. The reserve is available to repay principal on the Notes when the outstanding principal balance of the portfolio reaches zero.

All underlying contracts are fixed rate while the Notes are floating rate. The Rated Notes are indexed to one-month Euribor. Interest rate risk for the Rated Notes is mitigated through an interest rate swap provided by ABN AMRO Bank N.V. (ABN AMRO).

The transaction structure was analysed in Intex Dealmaker.

COUNTERPARTIES
The Issuer accounts are held at BNP Paribas Securities Services SCA (BNPSS). DBRS Morningstar assigned private long-term ratings to BPPSS and also rates its ultimate parent company, BNP Paribas SA. The transaction’s documents contain downgrade provisions relating to the account bank consistent with DBRS Morningstar’s criteria.

ABN AMRO is the swap counterparty for the transaction. DBRS Morningstar’s public Long-Term Issuer Rating on ABN AMRO is at A (high) with a Stable trend. The hedging documents contain downgrade provisions consistent with DBRS Morningstar’s criteria.

CORONAVIRUS DISEASE (COVID-19) CONSIDERATIONS
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 asset-backed securities (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 adjustments to expected default performance to consider exposure of specific industry segment to COVID-19.

On 10 February 2022, DBRS Morningstar updated its 10 May 2020 commentary outlining the impact of the coronavirus crisis on performance of European Structured Credit Transactions. For more details, please see:
https://www.dbrsmorningstar.com/research/392167/two-years-into-covid-19-risks-to-european-structured-credit-transactions

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” (29 October 2021).

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found at: http://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 considers potential portfolio migration based on replenishment criteria set forth in the transaction legal documents.

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 LPFR and LeasePlan Corporation N.V.

DBRS Morningstar received the following data and information:
-- Quarterly dynamic loss data from Q1 2014 to Q4 2021;
-- Quarterly static cumulative gross loss data from Q1 2014 to Q3 2021, split into SME/Retail and Corporate/Government defaults;
-- Quarterly static recovery data from Q1 2014 to Q3 2021 at a total portfolio level;
-- Annual static recovery data from 2014 to 2021, split into SME/Retail and Corporate/Government recoveries;
-- Dynamic monthly delinquency data from January 2014 to October 2021;
-- Static monthly early termination data in annual vintages from 2014 to 2021;
-- Lease-level vehicle realisation proceeds from 2014 to 2021;
-- Lease-by-lease portfolio data as at 28 February 2022; and
-- Monthly originations from January 2014 to October 2021.

DBRS Morningstar did not rely on 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 new financial instruments. These are the first DBRS Morningstar ratings on these financial instruments.

This is the first rating action since the Initial Rating Date.

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 (the base case):
-- Expected default: 2.3%.
-- Expected recovery rate: 68.4%.
-- Loss given default (LGD): 54.2% for the AAA (sf) scenario and 51.2% for the AA (sf) scenario.
-- RV loss: 39.1% for the AAA (sf) scenario and 32.4% for the AA (high) (sf) scenario.

Scenario 1: A 25% increase in the expected default and LGD.
Scenario 2: A 50% increase in the expected default and LGD.
Scenario 3: A 25% increase in the RV loss.
Scenario 4: A 25% increase in the expected default and LGD and a 25% increase in the RV loss.
Scenario 5: A 50% increase in the expected default and LGD and a 25% increase in the RV loss.
Scenario 6: A 50% increase in the expected RV loss.
Scenario 7: A 25% increase in the expected default and LGD and a 50% increase in the RV loss.
Scenario 8: A 50% increase in the expected default and LGD and a 50% increase in the RV loss.

DBRS Morningstar concludes that the expected rating under the eight stress scenarios will be:
-- Class A Notes: AAA (sf), AA (high) (sf), AAA (sf), AA (high) (sf), AA (high) (sf), AA (high) (sf), AA (sf), AA (sf)
-- Class B Notes: AA (sf), AA (sf), AA (sf), AA (low) (sf), A (high) (sf), AA (low) (sf), A (high) (sf), 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: http://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: Xiaoxi Sun, Assistant Vice President
Rating Committee Chair: David Lautier, Senior Vice President
Initial Rating Date: 21 March 2022

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: http://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: http://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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