Morningstar DBRS Confirms Credit Ratings on Ginkgo Auto Loans 2022

DBRS Ratings GmbH (Morningstar DBRS) confirmed its credit ratings on the notes issued by Ginkgo Auto Loans 2022 (the Issuer) as follows:

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

The credit ratings on the Class A, Class B, and Class C notes address the timely payment of interest and the ultimate repayment of principal by the legal final maturity date. The credit ratings on the Class D, Class E, and Class F notes address the ultimate payment of scheduled interest while the class is subordinated and the timely payment of scheduled interest while the class is the most senior class of notes outstanding, and the ultimate repayment of principal by the legal final maturity date.

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

The transaction is a securitisation collateralised by a portfolio of fixed-rate, unsecured, amortising auto loans granted to individuals domiciled in France for the purchase of new and used vehicles, originated and serviced by Crédit Agricole Consumer Finance (CACF). The transaction is currently in its revolving period, which is scheduled to end on the payment date in March 2024. During this period, the Issuer may purchase additional receivables, 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 or servicer termination. No termination event has occurred to date.

The legal final maturity date of the transaction is in July 2043.

PORTFOLIO PERFORMANCE
As of the December 2023 payment date, loans that were one to two months and two to three months delinquent represented 0.4% and 0.2% of the portfolio balance, respectively, while loans more than three months delinquent represented 0.3%.

As per the transaction definition, the cumulative gross loss amounts include any loan that has either become a defaulted receivable, has an overindebted borrower, or has a late delinquent receivable. According to this definition, as of the December 2023 payment date, the cumulative gross loss amount represented 1.8% of the original balance, 20.3% of which has been recovered to date.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
Morningstar DBRS maintained its base case PD and LGD assumption at 7.0% and 54.6%, respectively. The assumptions continue to be based on the replenishment criteria set forth in the transaction legal documents.

CREDIT ENHANCEMENT
Credit enhancement (CE) to the notes consists of the subordination of the respective junior notes. As the transaction is still in its revolving period, the CEs have remained unchanged since closing. As of the December 2023 payment date, the CE on the notes stood as follows:
-- CE to the Class A notes at 28.1%
-- CE to the Class B notes at 20.6%
-- CE to the Class C notes at 15.1%
-- CE to the Class D notes at 10.9%
-- CE to the Class E notes at 7.2%
-- CE to the Class F notes at 5.7%

The transaction includes Class A and Class B liquidity reserves that are available to the Issuer during the revolving period and the normal redemption period in restricted scenarios where the interest and principal collections are not sufficient to cover the shortfalls in senior expenses, swap payments, and interests on the Class A notes (available from both the Class A and Class B liquidity reserves) and the Class B notes (only available from the Class B liquidity reserve). The Class A and the Class B liquidity reserve fund were both at their target levels of EUR 6.3 million and EUR 6.0 million, respectively, as of the December 2023 payment date.

CACF acts as the account bank for the transaction. Based on Morningstar DBRS’ private credit rating on CACF, the downgrade provisions outlined in the transaction documents, and other mitigating factors inherent in the transaction structure, Morningstar DBRS considers the risk arising from the exposure to the account bank to be consistent with the credit ratings assigned to the notes, as described in Morningstar DBRS’ “Legal Criteria for European Structured Finance Transactions” methodology.

CACF also acts as the swap counterparty for the transaction. Morningstar DBRS’ private credit rating on CACF and the downgrade provisions outlined in the transaction documents are consistent with Morningstar DBRS’ “Derivative Criteria for European Structured Finance Transactions” methodology.

Morningstar DBRS’ credit rating on the notes addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents.

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

Morningstar DBRS’ long-term credit ratings provide opinions on risk of default. Morningstar DBRS 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, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the “Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings” at https://dbrs.morningstar.com/research/427030.

Morningstar DBRS 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 the “Master European Structured Finance Surveillance Methodology” (11 December 2023), https://dbrs.morningstar.com/research/425148.

Other methodologies referenced in this transaction are listed at the end of this press release.

Morningstar DBRS 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 continues to consider potential portfolio migration based on replenishment criteria set forth in the transaction legal documents.

A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent credit rating action.

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 Morningstar DBRS Credit Ratings of the “Global Methodology for Rating Sovereign Governments” at: https://dbrs.morningstar.com/research/421590.

The sources of data and information used for these credit ratings include investor reports provided by Eurotitrisation and loan-level data provided by European Datawarehouse GmbH.

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

At the time of the initial credit ratings, Morningstar DBRS was supplied with third-party assessments. However, this did not impact the credit rating analysis.

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

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

The last credit rating action on this transaction took place on 27 March 2023, when Morningstar DBRS confirmed its credit ratings on the notes as follows:
-- Class A notes at AAA (sf)
-- Class B notes at AA (high) (sf)
-- Class C notes at AA (low) (sf)
-- Class D notes at A (low) (sf)
-- Class E notes at BBB (low) (sf)
-- Class F notes at B (high) (sf)

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on https://dbrs.morningstar.com.

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

-- Morningstar DBRS expected a lifetime base case PD and LGD for a hypothetical migration of the portfolio according to the replenishment criteria. 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 7.0% and 54.6%, respectively.
-- The risk sensitivity overview below illustrates the credit ratings expected if the PD and LGD increase by a certain percentage over the base case assumption.

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

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

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

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

Class E Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of BB (high) (sf)
-- 50% increase in LGD, expected credit rating of BB (low) (sf)
-- 25% increase in PD, expected credit rating of BB (sf)
-- 50% increase in PD, expected credit rating of B (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of B (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of B (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of B (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating below B (low) (sf)

Class F Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of B (sf)
-- 50% increase in LGD, expected credit rating below B (low) (sf)
-- 25% increase in PD, expected credit rating of B (low) (sf)
-- 50% increase in PD, expected credit rating below B (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating below B (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating below B (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating below B (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating below B (low) (sf)

For further information on Morningstar DBRS 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 Morningstar DBRS 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
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 30 March 2022

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://dbrs.morningstar.com/about/methodologies.

-- Master European Structured Finance Surveillance Methodology (11 December 2023), https://dbrs.morningstar.com/research/425148
-- Legal Criteria for European Structured Finance Transactions (30 June 2023), https://dbrs.morningstar.com/research/416730
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2023), https://dbrs.morningstar.com/research/420572
-- Operational Risk Assessment for European Structured Finance Originator (15 September 2023), https://dbrs.morningstar.com/research/420573
-- Interest Rate Stresses for European Structured Finance Transactions (15 September 2023), https://dbrs.morningstar.com/research/420602
-- Derivative Criteria for European Structured Finance Transactions (18 September 2023), https://dbrs.morningstar.com/research/420754
-- Rating European Consumer and Commercial Asset-Backed Securitisations (8 January 2024), https://dbrs.morningstar.com/research/426219
-- Rating European Structured Finance Transactions Methodology (11 December 2023), https://dbrs.morningstar.com/research/425149
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (23 January 2024),
https://dbrs.morningstar.com/research/427030

A description of how Morningstar DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/278375.

For more information on this credit or on this industry, visit dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.