Press Release

DBRS Morningstar Finalises Provisional Credit Ratings on FCT CA LEASING 2023-1

Consumer/Commercial Leases

November 15, 2023

DBRS Ratings GmbH (DBRS Morningstar) finalised its provisional credit ratings on the following classes of notes issued by FCT CA LEASING 2023-1 (the Issuer):

-- Class A Floating Rate Notes (the Class A Notes) at AAA (sf)
-- Class B Floating Rate Notes (the Class B Notes) at AA (sf)

DBRS Morningstar did not assign a credit rating to the Class C Notes (together with the Class A and Class B Notes, the Notes) also issued in this transaction.

The credit rating on the Class A Notes addresses the timely payment of scheduled interest and the ultimate repayment of principal by the legal maturity date. The credit rating on the Class B Notes addresses the ultimate repayment of interest (timely when it is the senior-most class of notes outstanding) and the ultimate repayment of principal by the legal maturity date.

The securitisation transaction constitutes the issuance of notes backed by a portfolio of approximately EUR 498.6 million worth of fixed lease receivable instalments and their ancillary rights (excluding the residual value component), related to equipment lease contracts granted by Lixxbail (the seller) to small and medium enterprises located in France. Crédit Agricole Leasing & Factoring (CAL&F, the servicer) services the portfolio.

DBRS Morningstar based its credit ratings on a review of the following analytical considerations:
-- The transaction’s structure, including the form and sufficiency of available credit enhancement to withstand stressed cash flow assumptions and repay the issuer’s financial obligations according to the terms under which the Class A and Class B Notes (collectively, the Rated Notes) are issued.
-- The credit quality of the seller’s portfolio, the industry concentration and characteristics of the collateral, its historical performance and DBRS Morningstar projected behaviour under various stress scenarios.
-- Lixxbail and CAL&F's capabilities with respect to originations, underwriting, servicing, and its position in the market and financial strength.
-- The operational risk review of CAL&F, which DBRS Morningstar deems to be an acceptable servicer.
-- The transaction parties’ financial strength with regard to their respective roles.
-- The consistency of the transaction’s legal structure with DBRS Morningstar’s “Legal Criteria for European Structured Finance Transactions” methodology.
-- The consistency of the transaction’s hedging structure with DBRS Morningstar’s “Derivative Criteria for European Structured Finance Transactions” methodology.
-- The sovereign rating on France, currently rated AA (high) with a Stable trend by DBRS Morningstar.

TRANSACTION STRUCTURE
The transaction’s cash flows follow separate interest and principal waterfalls. Both waterfalls allow for the fully sequential payment of both interest and principal on the Notes. Available revenue receipts can be used to cover principal deficiencies and, in certain scenarios, principal may be diverted to pay interest on the Rated Notes. The principal-to-interest mechanism is designed to cover senior interest shortfalls where there are insufficient available interest collections available to cover senior expenses and fees as well as interest on the most senior class of Rated Notes outstanding. Such principal-to-interest reclassifications, along with any defaults, are recorded on the applicable principal deficiency ledgers in a reverse-sequential order.

The transaction benefits from a general reserve, which will be fully funded on the closing date. Amounts standing to the credit of the general reserve will be available to cover senior expenses and fees and to pay interest on the Rated Notes. The general reserve is amortising and will be funded with an amount equal to 2.0% of the initial balance of the Rated Notes. It will then be funded with an amount equal to 2.0% of the Rated Notes’ outstanding balance, subject to a floor of 0.5% of the initial balance of the Rated Notes.

COUNTERPARTIES
CACEIS Bank SA has been appointed as the Issuer’s account bank for the transaction. DBRS Morningstar privately rates CACEIS Bank SA. The transaction documents contain downgrade provisions relating to the account bank that are consistent with DBRS Morningstar’s criteria.

Credit Agricole Corporate and Investment Bank (CA - CIB) has been appointed as the hedge counterparty for the transaction. DBRS Morningstar privately rates CA - CIB. The hedging documents contain downgrade provisions that are consistent with DBRS Morningstar’s criteria.

DBRS Morningstar’s credit ratings on the Class A and Class B Notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. For the Class A and Class B Notes, the associated financial obligations are the related Interest Amounts and the related Principal Payments.

DBRS Morningstar’s credit rating does 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:
All figures are in Euros unless otherwise noted.

The principal methodology applicable to the credit ratings is:
Rating European Consumer and Commercial Asset-Backed Securitisations (22 October 2023)
https://www.dbrsmorningstar.com/research/422276/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.

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/421590.

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 used for these credit ratings include
• Quarterly dynamic arrears data from Q1 2014 to Q2 2023;
• Quarterly dynamic prepayment data from Q1 2022 to Q2 2023;
• Quarterly static default data from Q1 2014 to Q1 2023;
• Quarterly static recovery data from Q1 2014 to Q1 2023;
• Quarterly dynamic default data from Q1 2014 to Q2 2023; and
• Lease-level portfolio breakdown as at 31 October 2023 and its related amortisation schedule.

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 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 rating, DBRS Morningstar considered the following stress scenarios as compared with the parameters used to determine the credit rating (the Base Case):

-- Expected default: 9.0%.
-- Expected recovery rate: 52.0%.
-- Loss given default (LGD): 63.6% for the AAA (sf) scenario, 61.5% for the AA (sf) scenario, 57.4% for the A (low) scenario, and 55.3% for the BBB (sf) scenario.

DBRS Morningstar modelled the following eight stress scenarios:

-- Scenario 1: A 25% increase in the expected default.
-- Scenario 2: A 50% increase in the expected default.
-- Scenario 3: A 25% increase in LGD.
-- Scenario 4: A 50% increase in LGD.
-- Scenario 5: A 25% increase in both the expected default and LGD.
-- Scenario 6: A 25% increase in the expected default and 50% increase in LGD.
-- Scenario 7: A 50% increase in the expected default and 25% increase in LGD.
-- Scenario 8: A 50% increase in both the expected default and LGD.

DBRS Morningstar concludes that the expected credit ratings under the eight stress scenarios will be:

-- Class A Notes: AAA (sf), AA (sf), AAA (sf), AA (high) (sf), AA (high) (sf), A (high) (sf), A (high) (sf), A (low) (sf)
-- Class B Notes: AA (low) (sf), A (high) (sf), AA (low) (sf), A (high) (sf), A (sf), BBB (high) (sf), BBB (high) (sf), BBB (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: Preben Cornelius Overas, Assistant Vice President, Credit Ratings
Rating Committee Chair: Gareth Levington, Managing Director
Initial Rating Date: October 13, 2023

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

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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