Morningstar DBRS Upgrades and Confirms Credit Ratings on Bumper FR 2022-1

DBRS Ratings GmbH (Morningstar DBRS) took the following credit rating actions on the Class A and Class B notes (together, the Notes) issued by Bumper FR 2022-1 (the Issuer):

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

The credit ratings on the Notes address the timely payment of interest and the ultimate payment of principal on or before the legal final maturity date in April 2032.

The credit rating actions 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 February 2024 payment date;
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables; and
-- Current available credit enhancement to the Notes to cover the expected losses at their respective credit rating levels.

The transaction is a securitisation of auto lease agreements granted and serviced by LeasePlan France S.A.S. (LPFR) to corporate, small and medium-size enterprises (SMEs), retail, and public-sector clients in France. The residual value (RV) claims related to the auto leases are securitised in the transaction. The transaction included a 12-month revolving period, which ended with the April 2023 payment date.

PORTFOLIO PERFORMANCE
As of the February 2024 payment date, leases that were two to three months and more than three months in arrears represented 0.0% and 0.1% of the outstanding portfolio balance, respectively, up from 0.0% in February 2023. In the same period, cumulative defaults increased to 1.1% of the total receivables, up from 0.6%.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
Morningstar DBRS conducted a loan-by-loan analysis of the remaining pool of receivables and updated its base case PD to 1.4% as of the February 2024 payment date from 1.7% at closing and maintained its base case LGD assumption at 31.6%. Morningstar DBRS also updated its RV haircut of 31.2% at the AAA (sf) credit rating level.

CREDIT ENHANCEMENT
The credit enhancement to the Notes consists of the subordination of their respective junior class of notes. As of the February 2024 payment date, credit enhancement to the Class A and Class B notes increased to 33.6% and 27.4%, respectively, up from 25.9% and 21.1%, respectively, at the last annual review due to the end of the revolving period.

The transaction benefits from a liquidity reserve. The liquidity reserve covers senior fees, swap payments, and interest payments on the Notes. The liquidity reserve is currently at its target amount of EUR 3.0 million and amortises together with the Notes, with the target level of 0.75% of the outstanding balance of the Notes. The liquidity reserve is subject to a floor of EUR 2.5 million.

The transaction also benefits from a commingling reserve, a set-off reserve, and a maintenance reserve, which will be funded upon a breach of the reserve trigger event, which had not occurred at the February 2024 payment date.

BNP Paribas SA (BNPP) acts as the account bank for the transaction. Based on the account bank reference credit rating of AA on BNPP (which is one notch below its Morningstar DBRS Long Term Critical Obligations Rating (COR) of AA (high), 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.

ABN AMRO Bank N.V. (ABN AMRO) acts as the swap counterparty for the transaction. Morningstar DBRS' Long Term COR of AA on ABN AMRO is above the first credit rating threshold as described in Morningstar DBRS' "Derivative Criteria for European Structured Finance Transactions" methodology.

Morningstar DBRS’ credit ratings on the Notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents.

Morningstar DBRS’ credit ratings do not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transactions documents that are not financial obligations.

Morningstar DBRS’ long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of defaults to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the term 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 rating is the “Master European Structured Finance Surveillance Methodology” (7 March 2024), https://dbrs.morningstar.com/research/429051.

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.

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 DBRS Morningstar 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 LPFR and loan-level data provided by the 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 purpose 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 4 April 2023, when Morningstar DBRS confirmed its credit ratings on the Class A and Class B notes at AAA (sf) and AA (high) (sf), respectively.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available at dbrs.morningstar.com.

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

-- Morningstar DBRS 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 assumptions, and the RV haircut assumption at the AAA (sf) credit rating level are PD of 1.4%, LGD of 31.6%, and RV haircut at AAA (sf) of 31.2%.

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

Class B Risk Sensitivity:
-- 25% increase in RV haircut, expected credit rating of AAA (sf)
-- 50% increase in RV haircut, expected credit rating of AA (high) (sf)
-- 25% increase in PD and LGD, expected credit rating of AAA (sf)
-- 50% increase in PD and LGD, expected credit rating of AAA (sf)
-- 25% increase in PD and LGD, and 25% increase in RV haircut, expected credit rating of AA (high) (sf)
-- 25% increase in PD and LGD, and 50% increase in RV haircut, expected credit rating of AA (high) (sf)
-- 50% increase in PD and LGD, and 25% increase in RV haircut, expected credit rating of AA (high) (sf)
-- 50% increase in PD and LGD, and 50% increase in RV haircut, expected credit rating of AA (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: Shalva Beshia, Assistant Vice President
Rating Committee Chair: Alfonso Candelas, Senior Vice President
Initial Rating Date: 21 March 2022

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

-- Master European Structured Finance Surveillance Methodology (7 March 2024),
https://dbrs.morningstar.com/research/429051
-- Rating European Structured Finance Transactions Methodology (11 December 2023),
https://dbrs.morningstar.com/research/425149
-- 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
-- Rating European Consumer and Commercial Asset-Backed Securitisations (8 January 2024), https://dbrs.morningstar.com/research/426219
-- 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
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (23 January 2024), https://dbrs.morningstar.com/research/427030
-- Rating CLOs Backed by Loans to European SMEs (23 February 2024) and SME Diversity Model v.2.6.1.4,
https://dbrs.morningstar.com/research/428543

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 [email protected].