Morningstar DBRS Assigns Provisional Credit Ratings to Auto1Car Funding S.a.r.l acting with respect to its Compartment FinanceHero 2024-1

DBRS Ratings GmbH (Morningstar DBRS) assigned provisional credit ratings to the notes (the Rated Notes) to be issued by Auto1Car Funding S.a.r.l acting with respect to its Compartment FinanceHero 2024-1 (the Issuer) as follows:

-- Class A Notes at AAA (sf)
-- Class B Notes at AA (low) (sf)
-- Class C Notes at A (low) (sf)
-- Class D Notes at BBB (low) (sf)

Morningstar DBRS did not assign a provisional credit rating to the Class E Notes (together with the Rated Notes, the Notes) also to be issued in this transaction.

For the Class A Notes, the credit rating addresses the timely payment of scheduled interest and the ultimate repayment of principal by the legal final maturity date. For the Class B Notes, Class C Notes, and Class D Notes, the credit ratings address the ultimate payment of scheduled interest while subordinated and timely when they become most senior and the ultimate repayment of principal by the legal final maturity date.

CREDIT RATING RATIONALE
The transaction represents the issuance of Notes backed by a pool of auto loan receivables related to auto loan contracts granted to private individuals residing in the Federal Republic of Germany for the purchase of used cars, originated by Autohero GmbH (Autohero; the Seller or the Originator). The transaction receivables will be serviced by Autohero (the Servicer).

Morningstar DBRS' provisional credit ratings are based on 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 Rated Notes are expected to be issued;
-- The credit quality of Autohero's portfolio, the characteristics of the collateral, its historical performance, and the Morningstar DBRS-projected behaviour under various stress scenarios;
-- Autohero's capabilities with respect to originations, underwriting, servicing, market position, and financial strength;
-- The operational risk review of Autohero's, which Morningstar DBRS deems a below average servicer;
-- The appointment of HmcS, Gesellschaft für Forderungsmanagement mbH (HmcS) as back-up servicer (BUS) from day one by way of a hot BUS agreement.
-- The transaction parties' financial strength with regard to their respective roles;
-- The expected consistency of the transaction's legal structure with Morningstar DBRS' "Legal Criteria for European Structured Finance Transactions" methodology;
-- The expected consistency of the transaction's hedging structure with Morningstar DBRS' "Derivative Criteria for European Structured Finance Transactions" methodology; and,
-- The sovereign credit rating on the Federal Republic of Germany, currently rated at AAA with a Stable trend by Morningstar DBRS.

TRANSACTION STRUCTURE
The transaction is static and will begin amortising since the first interest payment date on August 2024. The transaction allocates payments on separate interest and principal priorities. The Notes repay sequentially and benefit from a principal deficiency ledger (PDL) mechanism to capture excess spread to cure principal deficiencies.

The Class A Notes benefit from a liquidity reserve, which covers senior fees, net swap payments, and interest payment shortfalls on the Class A Notes throughout the life of the transaction. The Seller will initially fund the general reserve, which will amortise to a target defined as 1.5% of the outstanding balance of the Class A Notes and floored at EUR 300,000. The excess funds over the target reserve fund balance will be released in the interest priority of payments in each period that the reserve amortises.

Once the Class A Notes are fully redeemed the remaining Class A liquidity reserve amount can be used to sequentially fund the Class B, Class C, and Class D Notes liquidity reserves. The Class B Notes, Class C Notes, and Class D Notes liquidity reserves cover senior fees, net swap payments, and interest payment shortfalls on the respective class of Notes. The liquidity reserves have a target equal to 1.0% of their respective outstanding Notes balance. The excess funds over the target reserve fund balances are available through the interest priority of payments.

The transaction also benefits from a fully funded commingling reserve equal to the amount of scheduled collections and expected prepayments (assuming a 10% constant prepayment rate) for the collection period immediately following the cut-off date immediately preceding the relevant payment date. This reserve will amortise throughout the life of the transaction and released amounts will be credited back to the Seller outside the priority of payments.

COUNTERPARTIES
Citibank Europe plc, Germany Branch has been appointed as the Issuer's account bank for the transaction. Morningstar DBRS publicly rates the parent company (Citibank Europe plc) with a Long-Term Issuer Rating of AA (low) with a Stable trend. The transaction documents are expected to contain downgrade provisions relating to the account bank consistent with Morningstar DBRS' criteria.

Citibank Europe plc is expected to be appointed as the swap counterparty for the transaction. Morningstar DBRS publicly rates Citibank Europe plc with a Long-Term Issuer Rating of AA (low) with a Stable trend. The swap agreement is expected to contain downgrade provisions with respect to the swap counterparty that are consistent with Morningstar DBRS' criteria.

Morningstar DBRS' 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 are the related interest and principal amounts.

Morningstar DBRS' credit ratings do not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) 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 rating is Rating European Consumer and Commercial Asset-Backed Securitisations (8 January 2024), https://dbrs.morningstar.com/research/426219.

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.

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 the Seller and its agents. Morningstar DBRS received the following data for the period January 2021 to January 2024:
-- Monthly dynamic outstanding portfolio balances;
-- Quarterly static gross loss and recovery data;
-- Monthly dynamic prepayment data;
-- Monthly dynamic delinquency data;
-- Monthly dynamic default data;
-- Arrears roll-rate data;
-- Detailed stratification tables as of 28 May 2024; and
-- A theoretical amortisation for the portfolio.

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

Morningstar DBRS was not supplied with third-party assessments. However, this did not affect the credit rating analysis.

Morningstar DBRS considers the data and information available to it for the purposes 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.

A provisional credit rating is not a final credit rating with respect to the above-mentioned securities and may change or be different than the final credit rating assigned or may be discontinued. The assignment of a final credit rating on the above-mentioned securities is subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalise the credit rating.

These credit ratings concern expected-to-be-issued new financial instruments. These are the first Morningstar DBRS credit ratings on these financial instruments.

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

-- Expected default rate: 6.0%
-- Expected recovery rate: 40%
-- Loss given default (LGD): 76.0% for the AAA (sf) scenario.

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.

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

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: Ricardo Garcia, Vice President
Rating Committee Chair: Paolo Conti, Associate Managing Director
Initial Credit Rating Date: 9 July 2024

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

-- Rating European Consumer and Commercial Asset-Backed Securitisations (8 January 2024),
https://dbrs.morningstar.com/research/426219
-- Rating European Structured Finance Transactions Methodology (25 June 2024),
https://dbrs.morningstar.com/research/434970
-- 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 Originators (7 March 2024),
https://dbrs.morningstar.com/research/429054
-- Derivative Criteria for European Structured Finance Transactions (18 September 2023),
https://dbrs.morningstar.com/research/420754
-- Interest Rate Stresses for European Structured Finance Transactions (15 September 2023),
https://dbrs.morningstar.com/research/420602
-- 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 https://dbrs.morningstar.com or contact us at [email protected].