Morningstar DBRS Upgrades and Confirms Credit Ratings on FACT S.A., acting in respect of its Compartment 2021-1

DBRS Ratings GmbH (Morningstar DBRS) took the following credit rating actions on the Class A and Class B Notes issued by FACT S.A., acting in respect of its Compartment 2021-1 (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 Class A and Class B Notes address the timely payment of interest and the ultimate repayment of principal by the legal final maturity date in July 2028.

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 June 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 Class A and Class B Notes to cover the expected losses at the AAA (sf) credit rating level.

The static transaction represents the issuance of notes backed by a portfolio of receivables related to both automotive lease (including those associated with the future sale of the associated leased vehicles) and loan contracts granted by Porsche Bank Aktiengesellschaft (Porsche Bank or the Seller) to private and commercial debtors in Austria. The receivables are secured by trust rights associated with vehicles and other collateral. Porsche Bank services the receivables.

PORTFOLIO PERFORMANCE
As of the June 2024 payment date, loans two to three months and more than three months in arrears represented 0.30% and 0.33% of the outstanding portfolio balance, respectively, up from 0.23% and 0.31%, respectively, at previous annual review; the cumulative default ratio remained at 0.0% in the same period.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
Morningstar DBRS conducted an analysis of the current pool of receivables and updated its base case PD and LGD assumptions to 1.2% and 34.8% respectively.

CREDIT ENHANCEMENT
The credit enhancement to the rated notes is provided by the subordination of the junior notes. As of the June 2024 payment date, the credit enhancement to the Class A Notes increased to 24.7%, up from 15.6% at the last annual review. The credit enhancement to the Class B Notes increased to 13.1% from 8.3% during this period.

The transaction benefits from a EUR 2.7 million nonamortising reserve fund. The reserve fund provides liquidity support and is only available to cover senior expenses and interest shortfalls on the rated notes.

The transaction also benefits from a commingling reserve fund to ensures protection in respect of the risk of commingling and loss of collections should an insolvency event occur in respect of Porsche Bank. The commingling reserve will be funded upon the occurrence of trigger events. The required amount of the commingling reserve represents scheduled collections from the following collection period plus 1.25% of the aggregate outstanding portfolio principal amount. However, the commingling reserve may be reduced as credit enhancement builds during the life of the transaction.

Elavon Financial Services DAC acts as the Issuer's account bank for the transaction. Based on Morningstar DBRS' private credit rating on Elavon Financial Services DAC, 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 of the notes, as described in Morningstar DBRS' "Legal Criteria for European Structured Finance Transactions" methodology.

Crédit Agricole CIB (CACIB) acts as the swap counterparty in this transaction. Morningstar DBRS privately rates CACIB and the hedging documents contain downgrade provisions consistent with 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 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" (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 Porsche Bank 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 14 July 2023 when Morningstar DBRS upgraded its credit rating on the Class B Notes to AA (high) (sf) from AA (sf) and confirmed its credit rating on the Class A Notes at AAA (sf).

The lead analyst responsibilities for this transaction have been transferred to Baran Cetin.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on 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 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.
-- Probability of default (PD) rate used: base case PD of 7.4% at the AAA (sf) stress level, a 25% and 50% increase on the base case PD was tested.
-- Losses given default (LGD) rates used: LGD of 57.6% at the AAA (sf) stress level, a 25% and 50% decrease in the base case recovery rate was tested.
-- Residual Value (RV) Loss rate: 27.0% at the AAA (sf) stress level. In both scenarios, a 25% and 50% increase in RV Loss was tested.

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

Class B Notes Risk Sensitivity:
-- 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 RV Loss, expected credit rating of AAA (sf)
-- 50% increase in RV Loss, expected credit rating of AAA (sf)
-- 25% increase in PD and LGD and 25% increase in RV Loss, expected credit rating of AAA (sf)
-- 25% increase in PD and LGD and 50% increase in RV Loss, expected credit rating of AAA (sf)
-- 50% increase in PD and LGD and 25% increase in RV Loss, expected credit rating of AAA (sf)
-- 50% increase in PD and LGD and 50% increase in RV Loss, expected credit rating of AA (high) (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: Baran Cetin, Senior Analyst
Rating Committee Chair: Alfonso Candelas, Associate Managing Director
Initial Rating Date: 15 June 2021

DBRS Ratings GmbH
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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
-- Legal Criteria for European Structured Finance Transactions (28 June 2024),
https://dbrs.morningstar.com/research/435165
-- Operational Risk Assessment for European Structured Finance Servicers (15 September 2023), https://dbrs.morningstar.com/research/420572
-- Interest Rate Stresses for European Structured Finance Transactions (28 June 2024), https://dbrs.morningstar.com/research/435278
-- Derivative Criteria for European Structured Finance Transactions (28 June 2024)
https://dbrs.morningstar.com/research/435260
-- 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 info-DBRS@morningstar.com.