Morningstar DBRS Confirms Credit Rating on FCT Cars Alliance DFP France

DBRS Ratings GmbH (Morningstar DBRS) confirmed its AA (sf) credit rating on the Series 2023-1 T1 Notes (the Notes) issued by FCT Cars Alliance DFP France (CA France or the Issuer).

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

The confirmation follows an annual review of the transaction and is based on the following analytical considerations:
-- Portfolio performance, in terms of realised losses, principal payment rates, and yield, as of the June 2024 payment date.
-- Current available credit enhancement to the Notes to cover the expected losses at the AA (sf) credit rating level in various dealer concentration and liquidation scenarios.
-- No early amortisation events have occurred.

CA France is a securitisation of auto wholesale receivables originated in France by Mobilize Financial Services France (previously known as Diac S.A.), a subsidiary of Mobilize Financial Services, part of the automobile group Renault S.A. The portfolio consists of term loans and revolving credit lines to Renault, Nissan, and Mitsubishi dealers in France, which are secured by new vehicles (including demonstration vehicles), used vehicles, and spare parts.

The transaction is currently in its revolving period, scheduled to terminate in July 2028, and its legal maturity date is on the payment date in July 2033.

PORTFOLIO PERFORMANCE
As of the June 2024 payment date, the three-month average principal payment rate was 47.2% and the annualised portfolio yield was 9.9% (including additional interest income generated through the discount mechanism). Realised losses were zero. As of the June 2024 payment date, the subordination factor to the Notes was 17.5%.

The collateral is subject to certain concentration limits on the product type securing the receivables (spare parts, second-hand vehicles). As of the June 2024 payment date, all the limits had been met. The limit option for the dealer group concentration was 3.5% of the portfolio balance. Morningstar DBRS has addressed the concentration risk in its analysis.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
The key rating drivers are the base case probability of default (PD) of 5.8%, a yield of 3.0%, an increase in the default rate up to 41.7% at the AA (sf) credit rating level, and a decline of the payment rate by 53.3% at the AA (sf) credit rating level. The base case PD corresponds to the most constraining dealer group concentration limit option of 2.5% for the transaction cash flow analysis.

CREDIT ENHANCEMENT
The subordination to the Notes is subject to a minimum level, calculated as a percentage of the Notes balance, and depends on the three-month average payment rate on the portfolio and the dealer group concentration limit option used. As of the June 2024 payment date, the required subordination represented 21.2% of the Notes balance, corresponding to subordination factor of 17.5%. The general reserve provides liquidity support and can be used to repay the Notes principal at the legal final maturity date. As of the June 2024 payment date, the general reserve was at its target amount of approximately EUR 10.9 million.

Commingling risk in the transaction is limited, as the collections are transferred to the account bank on a daily basis. A minimum overcollateralisation level driven by the amounts standing in the dealers' factory accounts held at the manufacturer acts as a mitigant for the set-off risk in the transaction.

Société Générale, S.A. (Société Générale) acts as the account bank for the transaction. Based on Morningstar DBRS' account bank reference credit rating of Société Générale at AA (low), which is one notch below the 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 the account bank to be consistent with the credit rating assigned to the Notes, as described in Morningstar DBRS' "Legal Criteria for European Structured Finance Transactions" methodology.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

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 (23 January 2024) https://dbrs.morningstar.com/research/427030 .

Morningstar DBRS analysed the transaction structure in proprietary Excel-based cash flow engine.

Notes:
All figures are in Euros unless otherwise noted.

The principal methodology applicable to the credit rating is: "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.

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.

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 Credit Ratings on Other Morningstar DBRS Credit Ratings" of the "Global Methodology for Rating Sovereign Governments" at: https://dbrs.morningstar.com/research/436000.

The sources of data and information used for this credit rating include investor reports provided by Eurotitrisation and loan-level data provided by 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 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.

The last credit rating action on this issuer took place on 20 July 2023 when Morningstar DBRS assigned its final credit rating of AA (sf) to Series 2023-1 T1 Notes and discontinued its credit rating of AA (sf) on the Series 2018-1 FCT Notes following repayment in full, following a structural amendment to the transaction.

The lead analyst responsibilities for this transaction have been transferred to Pascale Kallas.

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

Series 2023-1 T1 Notes Sensitivity:
-- Loss rate (LR): Base case of 5.8%, stressed with a 25% and 50% increase
-- Monthly principal payment rate (MPPR): Base case of 15.0%, stressed with a 25% and 50% decrease
-- Yield: Base case of 3.0%, stressed with a 25% and 50% decrease

While holding the MPPR and the yield constant:
-- 25% increase in loss rate, expected credit rating of A (sf)
-- 50% increase in loss rate, expected credit rating of BBB (sf)

While holding the LR and the yield constant:
-- 25% decrease in MPPR, expected credit rating of BBB (high) (sf)
-- 50% decrease in MPPR, expected credit rating of B (high) (sf)

While holding the MPPR and the LR constant:
-- 25% decrease in yield, expected credit rating of AA (sf)
-- 50% decrease in yield, 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.

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

Lead Analyst: Pascale Kallas, Assistant Vice President,
Rating Committee Chair: Alfonso Candelas, Associate Managing Director
Initial Rating Date: 20 July 2023

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 Auto Wholesale Securitisations (28 June 2024)
https://dbrs.morningstar.com/research/435289
--Rating European Structured Finance Transactions Methodology (25 June 2024)
https://dbrs.morningstar.com/research/434970
--Interest Rate Stresses for European Structured Finance Transactions (28 June 2024)
https://dbrs.morningstar.com/research/435278
--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
--Operational Risk Assessment for European Structured Finance Originators (15 September 2023)
https://dbrs.morningstar.com/research/420573
--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.