Press Release

Morningstar DBRS Confirms Credit Rating on Silver Arrow Athlon NL 2021-1 B.V.

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May 20, 2024

DBRS Ratings GmbH (Morningstar DBRS) confirmed its AAA (sf) credit rating on the Class A Notes issued by Silver Arrow Athlon NL 2021-1 B.V. (the Issuer).

The credit rating on the Class A Notes addresses the timely payment of interest and ultimate payment of principal on or before the legal final maturity date in April 2031.

The credit rating confirmation follows an annual review of the transaction and is based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies, defaults, and losses, as of the April 2024 payment date;
-- Probability of default (PD), loss given default (LGD), residual value (RV) haircut, and expected loss assumptions on the remaining receivables; and
-- Current available credit enhancement to the Class A Notes to cover the expected losses at the AAA (sf) credit rating level.

The transaction is a securitisation of lease instalments and residual value claims (vehicle realisation proceeds) related to operational lease agreements granted by Athlon Car Lease Nederland B.V. (Athlon) to corporate, small and medium-sized enterprise, and entrepreneurial clients in the Netherlands for the purpose of leasing passenger and commercial vehicles. The transaction incorporated a 12-month revolving period, during which the Issuer purchased additional receivables that met the eligibility and replenishment criteria outlined in the transaction documents. The revolving period ended as scheduled with the July 2022 payment date.
PORTFOLIO PERFORMANCE
As of the April 2024 payment date, loans that were two to three months delinquent represented 0.0% of the portfolio balance, while loans more than three months delinquent represented 0.01%. Gross cumulative defaults amounted to 0.08% of the aggregate original and subsequent portfolios.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
Morningstar DBRS conducted a loan-by-loan analysis of the remaining pool of the receivables and maintained its one-year base case PD and base case LGD assumption at 0.7% and 31.6%, respectively. Morningstar DBRS updated its lifetime default assumptions to 1.2% at B (low) credit rating level and RV haircut to 23.6% at AAA credit rating level.

CREDIT ENHANCEMENT
The credit enhancement to the Class A Notes is provided by the subordination of the Class B Notes. Because of the end of the revolving period and the amortisation of the Class A Notes, the credit enhancement to the Class A Notes increased to 56.8%, up from 33.0% at the last annual review.

The transaction benefits from a general reserve fund of EUR 2.0 million, which provides liquidity support to the Class A Notes. The general reserve fund is currently at its target amount, equal to 0.5% of the Class A Notes’ balance with a floor of EUR 2.0 million.

The transaction also benefits from a commingling reserve fund to ensure protection in respect of the risks associated with commingling and the loss of collections if an insolvency event of Athlon occurs. The commingling reserve will be funded upon the occurrence of trigger events and will equal to 100.0% of the expected next month’s lease interest and principal collections and scheduled monthly sale of purchased vehicles (vehicle realisation proceeds), reduced by the commingling reserve reduction amount.

The transaction also benefits from a maintenance reserve fund, which ensures the continued provision of maintenance services embedded in the vehicle leases. It will be funded upon the occurrence of trigger events and will equal to 1.5% of the outstanding aggregate discounted balance, subject to a floor of 1.0% of the initial aggregate discounted balance.

The maintenance and commingling reserves (if funded) do not form part of the available funds but can be used only if the relevant counterparties’ obligations are breached.

Elavon Financial Services DAC (Elavon) acts as the account bank for the transaction. Based on the Morningstar DBRS private credit rating of Elavon, 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 rating assigned to the Class A Notes, as described in Morningstar DBRS' "Legal Criteria for European Structured Finance Transactions" methodology.

Skandinaviska Enskilda Banken AB (Skandinaviska) acts as the swap counterparty for the transaction. Morningstar DBRS' public Long Term Critical Obligations Rating on Skandinaviska of AA (high) is above the first rating threshold as described in 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, 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-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

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/master-european-structured-finance-surveillance-methodology.

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

The sources of data and information used for this credit rating include investor reports provided by Athlon Car Lease Nederland B.V., 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 rating, Morningstar DBRS was supplied with third-party assessments. However, this did not impact the rating analysis.

Morningstar DBRS considers the data and information available to it for the purpose of providing this credit rating 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 23 May 2023, when Morningstar DBRS confirmed the credit rating of the Class A Notes at AAA (sf).

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 of the current pool of loans for the Issuer are 1.2% and 31.6%, respectively. The RV haircut at the AAA (sf) credit rating level is 23.6%.
-- The risk sensitivity overview below illustrates the credit ratings expected if the PD, LGD, and RV haircut increase by a certain percentage over the base case assumption.

Class A Notes 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 & LGD, expected credit rating of AAA (sf) -- 50% increase in PD & LGD, expected credit rating of AAA (sf) -- 25% increase in PD & LGD and 25% increase in RV haircut, expected credit rating of AAA (sf) -- 25% increase in PD & LGD and 50% increase in RV haircut, expected credit rating of AAA (sf) -- 50% increase in PD & LGD and 25% increase in RV haircut, expected credit rating of AAA (sf) -- 50% increase in PD & LGD and 50% increase in RV haircut, expected credit rating of AAA (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.

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

Lead Analyst: Shalva Beshia, Assistant Vice President
Rating Committee Chair: Mark Wilder, Senior Vice President
Initial Rating Date: 10 May 2021

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.

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.

Ratings

Date Issued	Debt Rated	Rating	Trend	Action	Attributesi
20-May-24	Class A Notes	AAA (sf)	--	Confirmed	EU U

Silver Arrow Athlon NL 2021-1 B.V.

Class A Notes

Date Issued:May 20, 2024
Rating Action:Confirmed
Ratings:AAA (sf)
Trend:--
Rating Recovery:
Issued:EUU

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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