Morningstar DBRS Confirms Credit Ratings on the Class A Notes Issued by Cars Alliance Auto Loans France Master, Following Amendment

DBRS Ratings GmbH (Morningstar DBRS) confirmed its AAA (sf) credit ratings on the following outstanding series of Class A notes (together, the Class A Notes) issued by Cars Alliance Auto Loans France Master (the Issuer):

-- EUR 138.3 million Series 2024-03 a, Class A
-- EUR 138.2 million Series 2024-03 b, Class A
-- EUR 97.3 million Series 2024-04, Class A
-- EUR 195.0 million Series 2024-05, Class A
-- EUR 170.4 million Series 2024-06, Class A

The credit ratings on the Class A Notes address the timely payment of interest and the ultimate repayment of principal by the legal final maturity date in August 2039.

Morningstar DBRS does not rate the Class B Notes also issued in this transaction.

CREDIT RATING RATIONALE
The confirmations are based on the following analytical considerations:
-- An amendment to the transaction executed on 9 July 2024 (the Amendment); which includes an extension of the revolving period by five years to July 2029 from July 2024;
-- The portfolio performance, in terms of level of delinquencies and cumulative defaults, as of the June 2024 payment date;
-- Updated probability of default (PD), loss given default (LGD), and expected loss assumptions for the collateral pool, considering the updated quarterly vintage performance data received in the context of the Amendment;
-- No Revolving Period Termination Events have occurred; and
-- The levels of credit enhancement to the Class A Notes to cover the expected losses at their AAA (sf) credit rating level.

The Issuer is a master trust securitisation backed by a pool of auto loan receivables related to new and used motor vehicles originated and serviced by Diac S.A. (DIAC), a French subsidiary of RCI Banque SA. The transaction's revolving period which was expected to end on the July 2024 payment date, has been extended by an additional five years, until the July 2029 payment date. The revolving period is subject to certain portfolio conditions being met, which have also been amended in the context of the Amendment. During the revolving period, the Issuer may acquire additional receivables and issue further series of Class A Notes with different expected maturity dates.

The transaction closed on 25 May 2012. Since closing, replenishment of the underlying receivables has met the portfolio's revolving conditions on each payment date.

AMENDMENT
The Amendment to the transaction took effect on 9 July 2024 and mainly consists of:
-- Extension of the revolving period by five years to July 2029 from July 2024 earlier;
-- Extension of the final legal maturity to 21 August 2039 from 21 August 2034;
-- Decrease of the required credit enhancement (CE) from each product subset to determine the Class B notes subordination ratio as follows:
-- CE from amortising loans on new cars to 5.25% from 6.50%;
-- CE from amortising loans on used cars to 12.75% from 14.50%;
-- CE from balloon loans on new cars to 12.25% from 17.00%; and
-- CE from balloon loans on used cars to 14.75% from 18.50%;
-- Changes to portfolio limits: such as the removal of the used car ratio of 80%, removal of the balloon loan used car ratio of 20%, removal of the balloon loan car ratio of 40%, removal of the minimum weighted average seasoning of 9 months condition, and removal of the restriction on purchase of electric vehicles;
-- Extension of the period of no transfer of new receivables to six consecutive monthly payment dates, from four previously, in relation to a revolving termination event;
-- Change of the servicer collection account bank required rating trigger to BBB (low) from A previously; and
-- Increase of the account bank replacement period to 60 days, from 15 days previously, in case of an account bank replacement event.

PORTFOLIO PERFORMANCE
As of the June 2024 payment date, loans that were one to two months delinquent and two to three months delinquent represented 0.7% and 0.2% of the portfolio discounted balance, respectively. The cumulative gross default ratio was 1.7% of the original portfolio and cumulative transferred receivables, with principal cumulative recoveries of 78.1% so far. The recoveries include repurchased amounts.

PORTFOLIO ASSUMPTIONS AND KEY CREDIT RATING DRIVERS
Morningstar DBRS updated its base case probability of default (PD) and loss given default (LGD) assumptions based on updated historical default and recovery data received from DAIC. Morningstar DBRS analyses four different cash flow scenarios to take the dynamic credit enhancement mechanism into consideration. Morningstar DBRS assumes the subordination of the Class B notes to range from 5.3% to 14.8%, the PD assumptions to range from 2.3% to 3.6%, and the LGD assumptions to range from 53.0% to 55.9%. The assumptions are based on the potential portfolio migration and the replenishment criteria set forth in the updated transaction legal documents.

Morningstar DBRS opted to elect midrange core multiples. The inclusion of incremental balloon stresses means the derived adjusted multiple is above the higher range used at the AAA (sf) level.

CREDIT ENHANCEMENT
The subordination of the Class B Notes and a general reserve fund provides credit enhancement to the outstanding series of Class A Notes. The current credit enhancement available to the Class A Notes is 14.5%.

The structure includes an amortising cash reserve account, which is available to cover senior expenses and missed interest payments on the Class A Notes. This account is currently funded with EUR 8.55 million, with a target balance equal to 1.0% of the Class A and B Notes' aggregate balance.

Société Générale, S.A. acts as the account bank for the transaction. Based on the reference credit rating on Société Générale, S.A. at AA (low) (which is one notch below its Morningstar DBRS Long Term Critical Obligations Rating of AA), 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 Société Générale, S.A. 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.

Morningstar DBRS' credit ratings on the Class A 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 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 methodologies applicable to the credit ratings are: "Rating European Consumer and Commercial Asset-Backed Securitisations" (8 January 2024), https://dbrs.morningstar.com/research/426219 and "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 methodologies consistently and conducted a review of the transaction in accordance with the principal methodologies.

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.

Morningstar DBRS has conducted a review of the transaction's legal documents provided in the context of the Amendment. A review of any other 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 EuroTitrisation SA (the management company), loan-level data provided by the European DataWarehouse GmbH, and additional information and the following historical information received from the arranger, Société Générale S.A.:
-- Static quarterly cumulative gross loss data split by product subset from Q1 2015 to Q1 2024;
-- Static quarterly recovery data split by product subset from Q1 2015 to Q1 2024; and
-- Dynamic monthly delinquency and prepayment data on total portfolio from January 2015 to December 2023.

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 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 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 21 June 2024, when Morningstar DBRS assigned a AAA (sf) credit rating to the Series 2024-06, Class A notes and discontinued its AAA (sf) credit rating on the Series 2024-02, Class A notes due to their full repayment.

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 base-case PD and LGD for the portfolio 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 3.6% and 55.8%, respectively. They are based on portfolio migration and Morningstar DBRS' most constraining cash flow scenario.
-- 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 Notes Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of AA (sf)
-- 50% increase in LGD, expected credit rating of AA (sf)
-- 25% increase in PD, expected credit rating of AA (sf)
-- 50% increase in PD, expected credit rating of AA (low) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AA (low) (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of A (high) (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of A (high) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of A (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: Pascale Kallas, Assistant Vice President
Credit Rating Committee Chair: Alfonso Candelas, Associate Managing Director
Initial Credit Rating Date: 25 May 2012

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.

-- Legal Criteria for European Structured Finance Transactions (28 June 2024), https://dbrs.morningstar.com/research/435165.
-- Master European Structured Finance Surveillance Methodology (7 March 2024), https://dbrs.morningstar.com/research/429051.
-- Operational Risk Assessment for European Structured Finance Originators (7 March 2024), https://dbrs.morningstar.com/research/429054.
-- 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.
-- Rating European Structured Finance Transactions Methodology (25 June 2024), https://dbrs.morningstar.com/research/434970.
-- 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 [email protected].