DBRS Morningstar Confirms Ratings on the Notes Issued by Cars Alliance Auto Loans France Master

DBRS Ratings GmbH (DBRS Morningstar) confirmed its AAA (sf) ratings on the following remaining outstanding series of Class A Notes (the Rated Notes) issued by Cars Alliance Auto Loans France Master (the Issuer):

-- EUR 191.1 million Series 2022-12, Class A
-- EUR 166.2 million Series 2023-01, Class A
-- EUR 150.2 million Series 2023-02, Class A
-- EUR 140.2 million Series 2023-03, Class A

The rating on the Class A Notes in each series addresses the timely payment of interest and the ultimate repayment of principal by the legal final maturity date in August 2034.

The rating confirmations follow an annual review of the transaction and are based on the following analytical considerations:
-- Portfolio performance, in terms of level of delinquencies and defaults, as of the March 2023 payment date.
-- No Revolving Period Termination Events have occurred.
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions on the portfolio.
-- Current available credit enhancement to the outstanding series of the Class A Notes to cover the expected losses assumed in line with their AAA (sf) rating level.

The transaction is a master trust securitisation backed by a pool of auto loan receivables related to new and used motor vehicles originated and serviced by Diac S.A., a French subsidiary of RCI Banque SA. The transaction’s revolving period extends until the July 2024 payment date, subject to certain portfolio conditions being met. During the revolving period, the Issuer may acquire additional receivables and issue a further series of Class A Notes with a different expected maturity date.

The transaction closed on 25 May 2012. Since closing, replenishment of the underlying receivables has met the portfolio’s revolving conditions on each payment date.

PORTFOLIO PERFORMANCE
As of the March 2023 payment date, loans that were 30 to 60 days delinquent and 60 to 90 days delinquent represented 0.5% and 0.2% of the portfolio net discounted balance, respectively. The cumulative gross default ratio was 1.6% of the aggregate original portfolio balance, with cumulative principal recoveries of 77.9% to date.

PORTFOLIO ASSUMPTIONS AND KEY RATING DRIVERS
DBRS Morningstar received updated historical vintage data and updated its base case PD and LGD assumptions in eight different cash flow scenarios to take the dynamic credit enhancement mechanism into consideration. DBRS Morningstar estimates the subordination of the Class B Notes to range from 6.5% to 15.9%, the PD assumptions to range from 2.1% to 3.8%, and the LGD assumptions to range from 51.5% to 57.2%. The assumptions are based on the potential portfolio migration and the replenishment criteria set forth in the transaction legal documents.

DBRS Morningstar opted to elect mid-range core multiples. The inclusion of incremental balloon stresses means the derived adjusted multiple is above the higher range used at the AAA (sf) level.

CREDIT ENHANCEMENT
The subordination of the Class B Notes and the cash reserve provides credit enhancement to the Class A Notes. As of the March 2023 payment date, credit enhancement to the Class A Notes was 14.4%.

The structure includes an amortising cash reserve account, which is available to cover senior expenses and missed interest payments on the Class A Notes. This account is currently funded with EUR 7.5 million, with a target balance equal to 1.0% of the notes’ aggregate balance. In a stressed scenario where DBRS Morningstar assumes no collections, the cash reserve would cover approximately 14 months of senior fees and interest payments on the Class A Notes.

Société Générale, S.A. acts as the account bank for the transaction. Based on the reference rating of Société Générale, S.A. at AA (low) (which is one notch below its DBRS Morningstar Long Term Critical Obligations Rating 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 Société Générale, S.A. to be consistent with the ratings assigned to the notes, as described in DBRS Morningstar’s “Legal 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.

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: “Master European Structured Finance Surveillance Methodology” (7 February 2023), https://www.dbrsmorningstar.com/research/409485/master-european-structured-finance-surveillance-methodology.

Other methodologies referenced in this transaction are listed at the end of this press release.

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 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 monthly investor reports provided by EuroTitrisation (the Management Company) 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 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.

The last rating action on this transaction took place on 21 March 2023, when DBRS Morningstar assigned a AAA (sf) rating to the Series 2023-03, Class A Notes and discontinued its AAA (sf) rating on the Series 2022-11b, Class A Notes.

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available on 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 base case PD and LGD for the portfolio 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 are 3.5% and 54.4%, respectively. They are based on portfolio migration and DBRS Morningstar’s most constraining cash flow scenario.
-- 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 (high) (sf), assuming no change in the PD. If the PD increases by 50%, the rating on the Class A Notes would be expected to fall to AA (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 (high) (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 (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 (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. For further information on DBRS Morningstar historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

These ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Preben Cornelius Overas, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 25 May 2012

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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 (7 February 2023), https://www.dbrsmorningstar.com/research/409485/master-european-structured-finance-surveillance-methodology.
-- Legal Criteria for European Structured Finance Transactions (22 July 2022), https://www.dbrsmorningstar.com/research/400166/legal-criteria-for-european-structured-finance-transactions.
-- Operational Risk Assessment for European Structured Finance Originators (15 September 2022), https://www.dbrsmorningstar.com/research/402773/operational-risk-assessment-for-european-structured-finance-originators.
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2022), https://www.dbrsmorningstar.com/research/402774/operational-risk-assessment-for-european-structured-finance-servicers.
-- Rating European Consumer and Commercial Asset-Backed Securitisations (19 October 2022), https://www.dbrsmorningstar.com/research/404212/rating-european-consumer-and-commercial-asset-backed-securitisations.
-- Rating European Structured Finance Transactions Methodology (15 July 2022), https://www.dbrsmorningstar.com/research/399899/rating-european-structured-finance-transactions-methodology.
-- DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (17 May 2022), https://www.dbrsmorningstar.com/research/396929/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].