Press Release

DBRS Morningstar Finalises Provisional Credit Ratings on AutoNoria Spain 2023, FT

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September 25, 2023

DBRS Ratings GmbH (DBRS Morningstar) finalised its provisional credit ratings on the following classes of notes (the Rated Notes) issued by AutoNoria Spain 2023, FT (the Issuer):

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

The rating assigned to the Class D Notes, Class E Notes and Class F Notes differs from the provisional ratings previously assigned of AA (low) (sf), BB (high) (sf) and BB (low) (sf) respectively, due to the lower than previously expected margins across all notes and lower than expected fixed leg of the swap, which resulted in higher available funds and improved the cash flow analysis of the Class D Notes, Class E Notes and Class F Notes in DBRS Morningstar’s rating stress scenarios.

The credit rating on the Class A Notes and the Class B Notes addresses the timely payment of interest and the ultimate repayment of principal by the final maturity date. The credit ratings on the Class C Notes, Class D Notes, Class E Notes, and Class F Notes address the ultimate repayment of interest (timely when most senior) and the ultimate repayment of principal by the final maturity date.

CREDIT RATING RATIONALE
The transaction represents the securitisation of receivables relating to a pool of retail auto loan receivables originated by Banco Cetelem, S.A.U. (Banco Cetelem; the Seller and Servicer) to Spanish borrowers. The initial pool of receivables comprises only classic amortising loans for the purchase of new (62.4%), semi-new (16.8%), and used cars (10.1%), as well as for recreational vehicles (3.4%) and motorbikes (7.3%). The transaction includes a six-month revolving period.

DBRS Morningstar based its credit ratings on a review of the following analytical considerations:
-- The transaction’s capital structure, including form and sufficiency of available credit enhancement;
-- Relevant credit enhancement in the form of subordination and a liquidity reserve fund;
-- Credit enhancement levels that are sufficient to support DBRS Morningstar’s projected cumulative net loss under various stressed cash flow assumptions for the Rated Notes;
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms under which they have invested;
-- Banco Cetelem’s capabilities with regard to originations, underwriting, and 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;
-- The sovereign rating on the Kingdom of Spain, currently at “A” 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 six-month revolving period; during this time, the originator may offer additional receivables that the Issuer can purchase provided that the eligibility criteria and concentration limits set out in the transaction documents are satisfied. The revolving period may end earlier than scheduled if certain events occur, such as the breach of performance triggers, the default of the Seller, or a Servicer termination event.

The transaction features separate waterfalls for interest and principal. At the end of the scheduled revolving period, the transaction incorporates a mixed pro rata/potentially sequential amortisation mechanism. Prior to a sequential redemption event, principal is allocated to Rated Notes on a pro rata basis. Following a sequential redemption event, which is link to a Class G PDL debit amount greater than 0.50% of the aggregate principal loan balance, amongst others, principal is allocated on a sequential basis. Once the amortisation becomes sequential, it cannot switch back to pro rata.

The transaction benefits from an amortising liquidity reserve funded at closing to an amount equal to 1.5% of the Class A to Class F Notes and floored at 0.60% of the Class A to Class F Notes' initial balance as at the closing date. The reserve is available to the Issuer only in restricted scenarios where the interest and principal collections are not sufficient to cover the shortfalls in senior expenses, interest on the Class A Notes and, if not deferred, interest payments on other classes of Rated Notes.

Principal available funds may be used to cover certain senior expenses and interest shortfalls that would be recorded in the transaction’s principal deficiency ledger (PDL) in addition to the defaulted receivables. The transaction includes a mechanism to capture excess available revenue amounts to cure PDL debits and also interest deferral triggers on the subordinated classes of Rated Notes, conditional on the PDL debit amount and seniority of the Rated Notes.

COUNTERPARTIES
BNP Paribas, S.A., Spanish Branch (BNPP Spain) has been appointed to act as the account bank for the transaction. Based on DBRS Morningstar’s private rating on BNPP Spain and the downgrade provisions outlined in the transaction documents, DBRS Morningstar considers the risk arising from the exposure to the account bank to be consistent with the ratings assigned, as described in DBRS Morningstar's criteria.

The swap counterparty for the transaction will be Banco Cetelem and will benefit from a swap guarantee provided by BNP Paribas SA (BNPP). DBRS Morningstar currently does not rate Banco Cetelem but DBRS Morningstar has a Long Term Critical Obligations Rating of AA (high) with a Stable trend on BNPP, which meets DBRS Morningstar’s criteria to act in such capacity. DBRS Morningstar’s rating on the chosen swap guarantor counterparty and the downgrade provisions referenced in the hedging documents are consistent with DBRS Morningstar’s criteria.

DBRS Morningstar’s credit ratings on the Rated Notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations for each of the Rated Notes are the related Interest Amounts and the Initial Principal Amount Outstanding.

DBRS Morningstar’s credit ratings do not address non-payment 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 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/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:
The principal methodology applicable to the credit ratings 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. Due to 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.

The sources of data and information received from Banco Cetelem and its agent, used for these credit ratings include:
-- Quarterly default and recovery vintage performance from March 2014 to March 2023;
-- Monthly dynamic originations data from March 2014 to March 2023;
-- Monthly dynamic prepayment and arrears data from April 2014 and January 2015, respectively, to March 2023;
-- A loan-level pool cut and its related stratification tables as at 7 August 2023; and
-- A theoretical amortisation profile of the selected pool.

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

DBRS Morningstar was supplied with 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 these credit ratings 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.

These credit ratings concern newly issued financial instruments. These are the first DBRS Morningstar credit ratings on these financial instruments.

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

Information regarding DBRS Morningstar credit 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 ratings, DBRS Morningstar considered the following stress scenarios as compared with the parameters used to determine the credit ratings (the base case):

-- Expected default rate: 2.7%
-- Expected recovery rate: 23.7%
-- Loss given default (LGD): 84.6% for the AAA (sf) scenario, 84.0% for the AA (high) (sf) scenario, 82.9% for the AA (low) (sf) scenario, 79.0% for the BB (high) (sf) scenario, 77.9% for the BB (low) (sf) scenario

Scenario 1: 25% increase in LGD
Scenario 2: 50% increase in LGD
Scenario 3: 25% increase in probability of default (PD)
Scenario 4: 50% increase in PD
Scenario 5: 25% increase in PD and 25% increase in LGD
Scenario 6: 25% increase in PD and 50% increase in LGD
Scenario 7: 50% increase in PD and 25% increase in LGD
Scenario 8: 50% increase in PD and 50% increase in LGD

DBRS Morningstar concludes that the expected credit ratings under the eight stress scenarios would be:
-- Class A Notes: AAA (sf), AAA (sf), AAA (sf), AA (high) (sf), AA (high) (sf), AA (high) (sf), AA (sf), and AA (sf)
-- Class B Notes: AAA (sf), AAA (sf), AA (high) (sf), AA (high) (sf), AA (high) (sf), AA (sf), AA (sf), and AA (sf)
-- Class C Notes: AA (sf), AA (high) (sf), AA (sf), A (high) (sf), A (high) (sf), AA (low) (sf), A (sf), and A (sf)
-- Class D Notes: A (high) (sf), A (high) (sf), AA (low) (sf), A (sf), A (sf), A (sf), BBB (high) (sf), and BBB (high) (sf)
-- Class E Notes: BB (high) (sf), BB (high) (sf), BB (high) (sf), BB (sf), BB (low) (sf), BB (high) (sf), B (sf), and B (sf)
-- Class F Notes: BB (low) (sf), BB (low) (sf), BB (sf), B (low) (sf), B (low) (sf), B (high) (sf), below B (low) (sf), and below 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://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.

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

Lead Analyst: Ricardo García, Vice President
Rating Committee Chair: David Lautier, Senior Vice President
Initial Rating Date: 1 September 2023

DBRS Ratings GmbH, Sucursal en España
Paseo de la Castellana 81
Plantas 26 & 27
28046 Madrid, Spain
Tel. +34 (91) 903 6500

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 credit 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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