DBRS Morningstar Upgrades and Confirms Ratings on RevoCar 2019 and RevoCar 2021-1 UG

DBRS Ratings GmbH (DBRS Morningstar) took the following rating actions on the notes issued by RevoCar 2019 UG (haftungsbeschränkt) (RevoCar 2019) and RevoCar 2021-1 UG (haftungsbeschränkt) (RevoCar 2021-1):

RevoCar 2019:
-- Class A Notes confirmed at AAA (sf)
-- Class B Notes confirmed at AA (high) (sf)
-- Class C Notes upgraded to AA (high) (sf) from AA (sf)
-- Class D Notes upgraded to BB (high) (sf) from BB (sf)

The rating on the Class A Notes addresses the timely payment of interest and the ultimate payment of principal on or before the legal final maturity date in April 2033. The ratings on the Class B and Class C Notes address the timely payment of interest while the senior-most class outstanding otherwise the ultimate payment of interest and principal on or before the legal final maturity date, while the rating on the Class D Notes addresses the ultimate payment of interest and principal on or before the legal final maturity date.

RevoCar 2021-1:
-- Class A Notes confirmed at AAA (sf)
-- Class B Notes confirmed at A (sf)
-- Class C Notes confirmed at BBB (sf)
-- Class D Notes confirmed at BB (sf)

The rating on the Class A Notes addresses the timely payment of interest and the ultimate payment of principal on or before the legal final maturity date in May 2038. The rating on the Class B Notes addresses the timely payment of interest while the senior-most class outstanding otherwise the ultimate payment of interest and principal on or before the legal final maturity date, while the ratings on the Class C and Class D Notes address the ultimate payment of interest and principal on or before the legal final maturity date.

The rating actions follow an annual review of the transactions and are based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults, and losses, as of the March 2023 payment dates;
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables; and
-- Current available credit enhancement to the notes to cover the expected losses at their respective rating levels.

The transactions are securitisations of German auto loan receivables originated and serviced by Bank11 für Privatkunden und Handel GmbH (Bank11), granted primarily to private clients for the purchase of both new and used vehicles. RevoCar 2019 closed in April 2019 with an initial portfolio balance of EUR 400.0 million and included a 12-month revolving period, which ended on the April 2020 payment date. RevoCar 2021-1 closed in May 2021 with an initial portfolio of EUR 700.0 million and includes a 48-month revolving period.

PORTFOLIO PERFORMANCE
RevoCar 2019:
As of the March 2023 payment date, loans that were one to two months in arrears represented 0.9% and 0.3% of the outstanding portfolio balance, respectively, while loans that were three months in arrears represented 0.1%. Gross cumulative defaults amounted to 0.9% of the aggregate initial collateral balance, with cumulative recoveries of 47.8% to date.

RevoCar 2021-1:
As of the March 2023 payment date, loans that were one to two months in arrears represented 0.5% and 0.3% of the outstanding portfolio balance, respectively, while loans that were three months in arrears represented 0.1%. Gross cumulative defaults amounted to 0.3% of the aggregate initial collateral balance, with cumulative recoveries of 44.2% to date.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar received updated historical vintage data from the originator and conducted a loan-by-loan analysis of the remaining pools of receivables. For RevoCar 2019, DBRS Morningstar updated its base case PD and LGD assumptions to 1.3% and 53.6%, respectively. For RevoCar 2021-1, DBRS Morningstar updated its base case PD and LGD assumptions to 1.5% and 50.8%, respectively. Due to the revolving period in RevoCar 2021-1, DBRS Morningstar’s assumptions continue to be based on the potential portfolio migration and the replenishment criteria set forth in the transaction legal documents.

CREDIT ENHANCEMENT
The subordination of the respective junior obligations provides credit enhancement to the rated notes in the transactions.

As of the March 2023 payment date, credit enhancement to the Class A, Class B, Class C, and Class D Notes in RevoCar 2019 increased to 38.2%, 17.2%, 12.6%, and 4.6%, respectively, from 20.1%, 9.1%, 6.6%, and 2.4%, respectively, at the time of the last annual review 12 months ago.

Credit enhancement to the rated notes in RevoCar 2021-1 remained unchanged at 8.2% for the Class A Notes, 3.5% for the Class B Notes, 2.3% for the Class C Notes, and 1.3% for the Class D Notes since closing due to the revolving period.

The transactions benefit from an amortising liquidity reserve, which will only become available upon a servicer termination event, with a target balance equal to 0.70% of the outstanding collateral balance for RevoCar 2019 and 0.25% for RevoCar 2021-1. The reserve would be available to cover senior fees and expenses, swap payments (for RevoCar 2019), and interest payments on the respective Class A Notes. As of the March 2023 payment date, both reserves were at their target balance of EUR 0.62 million for RevoCar 2019 and EUR 1.75 million for RevoCar 2021-1.

The transactions additionally benefit from a commingling reserve funded by Bank11 at closing to EUR 10.00 million for RevoCar 2019 and EUR 1.65 million for RevoCar 2021-1. For RevoCar 2019, this reserve is maintained at a balance equal to the scheduled collections amount for the next collection period plus 0.5% of the outstanding performing collateral balance. For RevoCar 2021-1, the reserve is maintained at a balance equal to 15.0% of the scheduled collections amount for the next collection period minus the commingling reserve reduction amount. As of the March 2023 payment date, the reserves were at their target balance of EUR 5.0 million for RevoCar 2019 and EUR 2.1 million for RevoCar 2021-1, respectively.

The Bank of New York Mellon - Frankfurt Branch (BNYM-Frankfurt) acts as the account bank for the transactions. 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 structures, 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.

UniCredit Bank AG acts as the swap counterparty for RevoCar 2019. DBRS Morningstar's private rating on UniCredit Bank AG is consistent with the first rating threshold as described 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/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

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” (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 transactions 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 RevoCar 2021-1, the analysis continues to consider potential portfolio migration based on replenishment criteria set forth in the transaction legal documents.

A review of the transactions’ legal documents was not conducted as the legal documents have remained unchanged since the most recent rating actions.

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 Bank11 and loan-level data provided by the European DataWarehouse GmbH. Additionally, DBRS Morningstar was provided with updated historical performance data from of the originator as follows:
-- Monthly static default data from March 2016 to January 2023;
-- Monthly static recovery data from March 2016 to January 2023;
-- Monthly dynamic delinquency data from March 2016 to January 2023; and
-- Monthly static and dynamic prepayment data from March 2016 to January 2023.

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 RevoCar 2019 took place on 7 April 2022, when DBRS Morningstar upgraded its ratings on the Class B and Class C Notes to AA (high) (sf) and AA (sf) from AA (sf) and A (high) (sf), respectively, and confirmed its ratings on the Class A and Class D Notes at AAA (sf) and BB (sf), respectively.

The last rating action on RevoCar 2021-1 took place on 7 April 2022, when DBRS Morningstar confirmed its ratings on the Class A, Class B, Class C, and Class D Notes at AAA (sf), A (sf), BBB (sf), and BB (sf), respectively.

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 transactions’ 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.
-- For RevoCar 2019, the base case PD and LGD of the current pool of loans for the Issuer are 1.3% and 53.6%, respectively.
-- For RevoCar 2021-1, the base case PD and LGD of the current pool of loans for the Issuer are 1.5% and 50.8%, 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 RevoCar 2019 Class A Notes would be expected to remain at AAA (sf), ceteris paribus. If the PD increases by 50%, the rating on the RevoCar 2019 Class A Notes would be expected to remain at AAA (sf), ceteris paribus. Furthermore, if both the PD and LGD increase by 50%, the rating on the RevoCar 2019 Class A Notes would be expected to remain at AAA (sf).

RevoCar 2019:
Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD, expected rating of AAA (sf)
-- 50% increase in PD, expected rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of AAA (sf)

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

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

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

RevoCar 2021-1:
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)
-- 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 A (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of A (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of A (sf)

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

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

Class D 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 (high) (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 (sf)
-- 50% increase in PD and 25% increase in LGD, expected rating of B (sf)
-- 50% increase in PD and 50% increase in LGD, expected rating of B (low) (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: Daniel Rakhamimov, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Dates: 24 April 2019 (RevoCar 2019); 11 May 2021 (RevoCar 2021-1)

DBRS Ratings GmbH
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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 these transactions can be found at: https://www.dbrsmorningstar.com/about/methodologies.

-- Rating European Structured Finance Transactions Methodology (15 July 2022), https://www.dbrsmorningstar.com/research/399899/rating-european-structured-finance-transactions-methodology.
-- Legal Criteria for European Structured Finance Transactions (22 July 2022), https://www.dbrsmorningstar.com/research/400166/legal-criteria-for-european-structured-finance-transactions.
-- Master European Structured Finance Surveillance Methodology (7 February 2023), https://www.dbrsmorningstar.com/research/409485/master-european-structured-finance-surveillance-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.
-- 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.
-- 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.
-- 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.
-- Interest Rate Stresses for European Structured Finance Transactions (22 September 2022), https://www.dbrsmorningstar.com/research/402943/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.

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].