Morningstar DBRS Assigns Provisional Credit Ratings to Cars Alliance Auto Loans France V 2024-1

DBRS Ratings GmbH (Morningstar DBRS) assigned provisional credit ratings to the Class A Notes and Class B Notes (together, the Rated Notes) to be issued by Cars Alliance Auto Loans France V 2024-1 (the Issuer) as follows:

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

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

The credit ratings on the Rated Notes address the timely payment of scheduled interest and 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 granted to private individuals and commercial clients in France, originated by the DIAC S.A. (DIAC or the Seller) through its brand Mobilize Financial Services. The portfolio of approximately EUR 949 million will comprise both balloon and standard amortising loans granted for the purchase of new and used vehicles. DIAC will also service the collateral portfolio. DIAC is a wholly owned subsidiary of RCI Banque S.A.(RCI) which is a wholly owned subsidiary of Renault S.A. The transaction is managed by Eurotitrisation S.A.

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 DIAC's portfolio, the characteristics of the collateral, its historical performance, and Morningstar DBRS-projected behaviour under various stress scenarios.
-- DIAC's capabilities with respect to originations, underwriting, servicing, and its position in the market and financial strength.
-- The operational risk review of DIAC, which Morningstar DBRS deems to be an acceptable servicer.
-- 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.
-- The sovereign rating on the Republic of France, currently rated at AA (high) with a Stable trend by Morningstar DBRS.

TRANSACTION STRUCTURE
The transaction includes a twelve-month revolving period during which the Issuer shall purchase additional collateral. During this period, the transaction will be subject to receivables eligibility criteria and concentration limits designed to limit the potential deterioration of the portfolio quality, with which the Issuer will have to comply.

The transaction incorporates a single waterfall that facilitates the distribution of the available distribution amount, and the Notes will amortise sequentially during the amortization period.

The Seller will fund an amortising general reserve account equal to 1.25% of the outstanding principal balance of the Rated Notes on the closing date that will be available to the transaction. The general reserve provides liquidity support to the Rated Notes and is available to pay senior transaction fees, swap payments, and interest payments on the Rated Notes. The general reserve also ultimately provides credit enhancement to the Rated Notes.

The Rated Notes pay a floating rate plus a margin while the receivables pay a fixed rate. The transaction benefits from two interest rate swaps to mitigate interest rate risk.

COUNTERPARTIES
Crédit Agricole Corporate and Investment Bank S.A. (CACIB) has been appointed as the Issuer's account bank for the transaction. Morningstar DBRS maintains a private credit rating on CACIB and concluded that CACIB meets Morningstar DBRS' minimum criteria to act in its capacity, and the transaction is expected to contain downgrade provisions relating to the account bank consistent with Morningstar DBRS' criteria.

DIAC is the swap counterparty for the transaction while CACIB is the standby swap counterparty. Morningstar DBRS rates DIAC and CACIB privately. The swap agreements are expected to contain downgrade provisions with respect to the Issuer standby 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 of the Rated Notes 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 Factors in Credit Ratings at https://dbrs.morningstar.com/research/437781.

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 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.

An asset and a cash flow analysis were both conducted. Due to the inclusion of a revolving period in the transaction, the analysis considers potential portfolio migration based on replenishment criteria set forth in the transaction legal documents.

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 these credit ratings include the Seller and its agents. Morningstar DBRS received the following data:
-- Static quarterly gross loss data from Q1 2015 to Q1 2024;
-- Static quarterly recovery data from Q1 2015 to Q1 2024;
-- Dynamic monthly prepayment data from January 2015 to December 2023;
-- Dynamic monthly delinquency data from January 2015 to June 2024;
-- Portfolio stratification tables for the provisional portfolio as of 30 June 2024; and
-- A theoretical amortisation profile of the provisional portfolio.

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

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 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.

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 final credit ratings 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 finalize the credit ratings.

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

-- Expected default rate: 3.6%
-- Expected recovery rate: 43.2%
-- Loss given default (LGD): 69.7% for the AAA (sf) scenario and 67.1% for the AA (low) (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 (sf), AA (sf), AA (low) (sf), AA (low) (sf), A (high) (sf), A (high) (sf), A (low) (sf)
-- Class B Notes: A (sf), A (low) (sf), A (sf), BBB (high) (sf), BBB (high) (sf), BBB (sf), BBB (sf), BB (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: Pascale Kallas, Assistant Vice President
Rating Committee Chair: Paolo Conti, Associate Managing Director
Initial Rating Date: 27 August 2024

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.
-- Rating European Structured Finance Transactions Methodology (25 June 2024), https://dbrs.morningstar.com/research/434970.
-- Derivative Criteria for European Structured Finance Transactions (28 June 2024), https://dbrs.morningstar.com/research/435260.
-- Interest Rate Stresses for European Structured Finance Transactions (28 June 2024), https://dbrs.morningstar.com/research/435278.
-- Operational Risk Assessment for European Structured Finance Servicers (6 August 2024), https://dbrs.morningstar.com/research/437543.
-- Operational Risk Assessment for European Structured Finance Originators (6 August 2024), https://dbrs.morningstar.com/research/437541.
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August 2024), https://dbrs.morningstar.com/research/437781.

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 info-DBRS@morningstar.com.