DBRS Morningstar Upgrades and Confirms Ratings on Auto ABS French Leases 2021

DBRS Ratings GmbH (DBRS Morningstar) took the following rating actions on the Class A and Class B Notes (collectively, the Rated Notes) issued by Auto ABS French Leases 2021 (the Issuer):

-- Class A Notes confirmed at AAA (sf)
-- Class B Notes upgraded to AA (high) (sf) (sf) from AA (sf)

The ratings address the timely payment of interest and the ultimate payment of principal on or before the legal final maturity date in June 2033.

The rating actions follow an annual review of the transaction and are based on the following analytical considerations:
-- The portfolio performance, in terms of delinquencies, defaults, and losses as of the April 2023 payment date;
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables;
-- Current available credit enhancement to the Rated Notes to cover the expected losses at their current rating levels; and
-- No revolving termination events to date.

The transaction is a securitisation of lease receivables related to auto lease agreements including residual value (RV) contracts granted by Compagnie Générale de Crédit aux Particulier S.A. to private and commercial lessees in France. The transaction included an initial 12-month revolving period, which ended on the 29 June 2022 payment date.

PORTFOLIO PERFORMANCE
As of the April 2023 payment date, leases that were one to two months and two to three months delinquent represented 0.14% and 0.07% of the portfolio balance, respectively, while leases more than three months delinquent represented 0.11%. Gross cumulative defaults amounted to 0.8% of the aggregate original balance, 58.7% of which has been recovered so far.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
DBRS Morningstar conducted a loan-by-loan analysis on the remaining pool of receivables and updated its base case PD and LGD assumptions to 2.4% and 28.7%, respectively. DBRS Morningstar maintained the RV loss rates at 34.7% at the AAA (sf) rating level and 30.6% at the AA (high) (sf) rating level.

CREDIT ENHANCEMENT
The subordination of the junior notes and the cash reserve provides credit enhancement to the Class A Notes while the subordination of the Class C Notes provides credit enhancement to the Class B Notes. As of the April 2023 payment date, credit enhancement to the Class A and Class B Notes was 27.8% and 18.5%, respectively, up from 20.5% and 14.0% at closing, respectively.

The transaction benefits from an amortising cash reserve account, which is available to cover senior expenses and missed interest payments on the Rated Notes. This account was funded at closing with EUR 6.95 million and its target balance is equal to 0.8% of the outstanding principal on the Rated Notes, with a floor of EUR 1.0 million. The reserve currently stands at its target amount of EUR 5.2 million.

Banco Santander SA (Santander) acts as the account bank for the transaction. Based on the account bank reference rating of at A (high) on Santander (which is one notch below its DBRS Morningstar Long Term Critical Obligations Rating (COR) of AA (low)), 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" methodology.

Santander also acts as the swap counterparty for the transaction. DBRS Morningstar's Long Term COR of AA (low) on Santander 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 effect 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.

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 investor reports provided by France Titrisation 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.

The last rating action on this transaction took place on 23 June 2022, when DBRS Morningstar confirmed its ratings on the Class A and Class B Notes at AAA (sf) and AA (sf), respectively.

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 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 2.4% and 28.7%, respectively.
-- A RV loss of 34.7% and 30.6% was applied at the AAA (sf) and AA (high) (sf) rating levels, respectively.
-- The Risk Sensitivity overview below illustrates the ratings expected if the PD, LGD, and RV haircut increase by a certain percentage over the base case assumption. For example, if the PD and the LGD increases by 50%, the rating on the Class A Notes would be expected to remain at AAA (sf), assuming no change in the RV. If the RV increases by 50%, the rating on the Class A Notes would be expected to remain at AAA (sf), assuming no change in the PD nor the LGD. Furthermore, if the RV, PD and LGD increase by 50%, the rating on the Class A Notes would also be expected to fall to AA (sf).

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

Class B Notes Risk Sensitivity:
-- 25% increase in RV loss, expected rating of AA (high) (sf)
-- 50% increase in RV loss, expected rating of AA (low) (sf)
-- 25% increase in both PD and LGD, expected rating of AA (high) (sf)
-- 50% increase in both PD and LGD, expected rating of AA (sf)
-- 25% increase in both PD and LGD, and 25% increase in RV, expected rating of AA (sf)
-- 25% increase in both PD and LGD, and 50% increase in RV, expected rating of AA (low) (sf)
-- 50% increase in both PD and LGD, and 25% increase in RV, expected rating of AA (low) (sf)
-- 50% increase in both PD and LGD, and 50% increase in RV, 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: 2 June 2021

DBRS Ratings GmbH
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60311 Frankfurt am Main Deutschland
Tel. +49 (69) 8088 3500
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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.

-- 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.
-- 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.
-- 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.
-- 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].