Press Release

DBRS Morningstar Confirms Ratings on Retail Automotive CP Germany 2021 UG (Haftungsbeschränkt)

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October 24, 2022

DBRS Ratings GmbH (DBRS Morningstar) confirmed its ratings on the notes (the rated notes) issued by Retail Automotive CP Germany 2021 UG (Haftungsbeschränkt) (the Issuer) as follows:

-- Class A Notes at AAA (sf)
-- Class B Notes at AA (high) (sf)
-- Class C Notes at A (high) (sf)
-- Class D Notes at BBB (high) (sf)
-- Class E Notes at BBB (low) (sf)
-- Class F Notes at BB (sf)

The ratings on the Class A, Class B, and Class C Notes address the timely payment of scheduled interest and the ultimate repayment of principal by the legal maturity date. The ratings on the Class D, Class E, and Class F Notes address the ultimate payment of interest and the ultimate repayment of principal by the legal maturity date while junior to other outstanding classes of notes, but the timely payment of interest when they are the senior-most tranche, in accordance with the Issuer’s default definition in the transaction documents.

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 August 2022 payment date;
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables;
-- No early termination event; and
-- Current available credit enhancement to the rated notes to cover the expected losses at their respective rating levels.

The transaction is a securitisation backed by a pool of retail auto loan receivables associated with a portfolio of new and used vehicle loans granted and serviced by CreditPlus Bank AG (CreditPlus) to private individual borrowers residing in Germany. The transaction includes a 21-month revolving period, which is scheduled to end in July 2023 unless an early termination event occurs. At that point, the notes will start to amortise on a pro rata basis until a sequential redemption event is triggered.

PORTFOLIO PERFORMANCE
As of the August 2022 payment date, loans that were one to two months and two to three months delinquent represented 0.2% and 0.05% of the portfolio balance, respectively, while loans more than three months delinquent represented 0.07%. Gross cumulative defaults amounted to 0.1% of the aggregate original portfolio balance, with cumulative recoveries of 34.6% to date.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted a loan-by-loan analysis of the remaining pool of receivables and maintained its base case PD and LGD assumptions at 1.5% and 59.3%, respectively, which continue to consider potential portfolio migration based on replenishment criteria set forth in the transaction legal documents.

DBRS Morningstar elected mid-range core multiples. The inclusion of incremental balloon stresses means the DBRS Morningstar-derived adjusted multiple is higher than the range for the AAA (sf) rating level.

CREDIT ENHANCEMENT
The subordination of the respective junior obligations provides credit enhancement to the rated notes. As of the August 2022 payment date, credit enhancements to the Class A, Class B, Class C, Class D, Class E, and Class F Notes remained unchanged since closing at 10.0%, 6.3%, 5.0%, 4.0%, 3.0%, and 2.0%, respectively, because of the revolving period. Once the revolving period ends, the credit enhancement will continue to remain stable due to the pro rata amortisation of the notes until a sequential redemption event is triggered.

The transaction benefits from liquidity support provided by a liquidity reserve, funded to an amount equal to 0.7% of the initial principal amount of the Class A, Class B, and Class C Notes. The liquidity reserve is available to the Issuer only in a restricted scenario where the principal collections are not sufficient to cover the shortfalls in senior costs (servicer fees and operating expenses), interests on the liquidity reserve itself, swap payments, and interest on the Class A, Class B, and Class C Notes. The liquidity reserve required amount is equal to 0.7% of the outstanding principal balance of the Class A, Class B, and Class C Notes. Any excess amounts over the target level will be returned directly to CreditPlus outside the priority of payments. The reserve is currently at its target amount of EUR 6,650,000.

The Bank of New York Mellon, Frankfurt branch (BNYM Frankfurt) acts as the account bank for the transaction. Based on DBRS Morningstar’s private rating on BNYM Frankfurt, 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 rated notes, as described in DBRS Morningstar's "Legal Criteria for European Structured Finance Transactions”.

CreditPlus and Crédit Agricole Consumer Finance (CACF) are the swap counterparty and swap guarantor, respectively, for this transaction. DBRS Morningstar’s private rating on CACF is consistent with the first rating threshold defined in DBRS Morningstar’s “Derivative Criteria for European Structured Finance Transactions” methodology.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant impact on the credit analysis.

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/396929 (17 May 2022).

DBRS Morningstar analysed the transaction structure in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the ratings is the “Master European Structured Finance Surveillance Methodology” (19 May 2022).

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/401817/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 BNYM Frankfurt 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.

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

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.

Sensitivity Analysis: 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 1.5% and 59.3%, 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 of the Class A Notes would be expected to fall to AA (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating of the Class A Notes would be expected to fall to AA (high) (sf), assuming no change in the LGD. Furthermore, if both the PD and LGD increase by 50%, the rating of the Class A Notes would be expected fall to AA (low) (sf).

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

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

Class D Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of BBB (sf)
-- 50% increase in LGD, expected rating of BB (high) (sf)
-- 25% increase in PD, expected rating of BBB (sf)
-- 50% increase in PD, expected rating of BB (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of BB (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of BB (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of BB (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of B (high) (sf)

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

Class F Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of B (sf)
-- 50% increase in LGD, expected rating below B (sf)
-- 25% increase in PD, expected rating of B (high) (sf)
-- 50% increase in PD, expected rating of B (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating below B (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating below B (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating below B (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating below B (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: 29 October 2021

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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