DBRS Morningstar Finalises Provisional Credit Rating on Bumper NL 2023-1 B.V.

DBRS Ratings GmbH (DBRS Morningstar) finalised its provisional credit rating of AAA (sf) on the Class A Notes (the Notes) issued by Bumper NL 2023-1 B.V. (the Issuer).

The credit rating assigned to the Notes addresses the timely payment of scheduled interest and the ultimate repayment of principal by the legal final maturity date.

CREDIT RATING RATIONALE
The transaction represents the issuance of notes backed by lease receivables and residual value (RV) claims related to auto lease agreements granted by LeasePlan Nederland N.V. (LPNL; the Originator, the Seller, and the Servicer) to corporate, small and medium-size enterprise (SME) and private lessees in the Netherlands. The underlying receivables represent the right to receive payment of regular lease instalments and the RV receivables are linked to the rights to receive all proceeds from the sale of the underlying vehicles. LPNL services the receivables.

DBRS Morningstar based its credit rating 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 that 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;
-- LPNL’s capabilities with regard to origination, 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 portfolio;
-- DBRS Morningstar’s sovereign rating on the Kingdom of the Netherlands, currently at AAA with a Stable trend; 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 includes a 12-month revolving period wherein the Issuer may purchase additional receivables subject to eligibility criteria and portfolio concentration limits. The transaction incorporates a single waterfall that outlines the allocation of the available distribution amount consisting of, inter alia, collections representing interest, principal, and recoveries. The Notes amortise according to the required principal redemption amount.

The transaction benefits from a liquidity reserve that is fully funded on the closing date. The liquidity reserve is available to cover senior fees, interest rate swap payments, and interest on the Notes during both the revolving and amortisation periods. The liquidity reserve is initially set at 1.86% of the Notes.

COUNTERPARTIES
ABN AMRO Bank N.V. is the account bank for the transaction. The Issuer’s accounts include the transaction account and the swap replacement account. The transaction documents envisage downgrade provisions consistent with DBRS Morningstar’s criteria.

The transaction is exposed to interest rate risk because of the mismatch between the fixed interest rate assets and the floating-rate liabilities. The risk is mitigated by an interest rate swap with ING Bank N.V. The transaction documents envisage downgrade provisions consistent with DBRS Morningstar’s criteria.

DBRS Morningstar’s credit rating on the Notes addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. For the Notes the associated financial obligations are the related interest payments and the related required principal redemption amounts.

DBRS Morningstar’s credit rating does not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations.

DBRS Morningstar’s long-term credit ratings provide opinions on risk of default. DBRS Morningstar considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.

ENVIRONMENTAL, SOCIAL, GOVERNANCE (ESG) CONSIDERATIONS
Environmental Factors
The line-by-line sale proceeds data, which is used to derive the RV loss assumption, includes a limited number of observations related to electric vehicles; although, exposure to electric vehicles comprises a considerable portion of the initial pool. DBRS Morningstar notes that the leases related to hybrid and electric vehicles have outperformed vehicles equipped with internal combustion engines in recent years as a result of prudent RV policies. DBRS Morningstar considers that the exposure to electric vehicles is a credit positive relevant Environmental factor within its analysis, namely the factor “Carbon and Greenhouse Gas (GHG) Costs”.

There were no Social or 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/416784/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 credit rating is: 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.

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. Because of 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 credit 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.

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 this credit rating included the arranger (LeasePlan Corporation N.V.) and its agents. DBRS Morningstar received the following data and information:
-- Static cumulative default data covering Q1 2018 to Q4 2022;
-- Static recovery data split by cash and sales recoveries going back to Q1 2018 and up to Q4 2022;
-- Dynamic monthly delinquency data from January 2018 to May 2023;
-- Early termination data in annual vintages from Q1 2018 to Q4 2022;
-- Dynamic monthly originations and outstanding balances from January 2018 to May 2023;
-- Lease-level RV and realisation data from January 2018 to May 2023;
-- A theoretical amortisation schedule as at the end of 31 August 2023; and
-- A lease-level data tape and detailed stratification tables related to the portfolio selected as of 31 August 2023.

DBRS Morningstar did not rely upon third-party due diligence in order to conduct its analysis.

DBRS Morningstar was supplied with one or more third-party assessments. However, this did not impact the credit rating analysis.

DBRS Morningstar considers the data and information available to it for the purposes of providing this credit rating to be of satisfactory quality.

DBRS Morningstar does not audit or independently verify the data or information it receives in connection with the credit rating process.

This credit rating concerns a newly issued financial instrument. This is the first DBRS Morningstar credit rating on this financial instrument.

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.

Sensitivity Analysis: To assess the impact of changing the transaction parameters on the credit rating, DBRS Morningstar considered the following stress scenarios as compared with the parameters used to determine the credit rating (the base case):

-- Expected default rate: 2.0%
-- Expected recovery rate: 75.0%
-- Loss given default (LGD): 55.0% for the AAA (sf) scenario
-- RV Loss: 39.1% for the AAA (sf)

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

DBRS Morningstar concludes that the expected credit ratings under the eight stress scenarios would be:
-- The Notes: AA (high) (sf), AA (low) (sf), AA (high) (sf), AA (low) (sf), A (high) (sf), AA (low) (sf), A (high) (sf), and A (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://registers.esma.europa.eu/cerep-publication. 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.

This credit rating is endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Guglielmo Panizza, Vice President, Credit Ratings
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 31 August 2023

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 credit rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

-- 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 CLOs Backed by Loans to European SMEs (10 June 2022) and DBRS Morningstar SME Diversity Model v2.6.1.2,
https://www.dbrsmorningstar.com/research/398252/rating-european-structured-finance-transactions-methodology.
-- 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 (30 June 2023),
https://www.dbrsmorningstar.com/research/416730/legal-criteria-for-european-structured-finance-transactions.
-- 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
-- Derivative Criteria for European Structured Finance Transactions (16 June 2023),
https://www.dbrsmorningstar.com/research/415976/derivative-criteria-for-european-structured-finance-transactions.
-- 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 (4 July 2023), https://www.dbrsmorningstar.com/research/416784/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].