Morningstar DBRS Assigns Provisional Credit Ratings to Auto ABS Spanish Loans 2024-1 FT

DBRS Ratings GmbH (Morningstar DBRS) assigned provisional credit ratings to the following classes of notes (the Rated Notes) to be issued by Auto ABS Spanish Loans 2024-1 FT (the Issuer):

-- Class A Notes at AA (sf)
-- Class B Notes at A (sf)
-- Class C Notes at BBB (sf)
-- Class D Notes at BB (high) (sf)
-- Class E Notes at BB (low) (sf)

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

The provisional credit rating on the Class A Notes addresses the timely payment of scheduled interest and the ultimate repayment of principal by the final maturity date. The provisional credit ratings on the Class B Notes, Class C Notes, Class D Notes, and Class E Notes address the ultimate payment of interest (timely when they are the most senior class of Notes outstanding) and the ultimate repayment of principal by the final maturity date.

CREDIT RATING RATIONALE
The Rated Notes are backed by a portfolio of fixed-rate receivables related to amortising and balloon auto loans granted by Stellantis Financial Services España, E.F.C., S.A (SFSE; the Originator or the Seller) to private individuals residing in Spain for the acquisition of new or used vehicles. SFSE will also service the portfolio (the Servicer). The Class F Notes are not collateralised and are expected to be issued to fund the cash reserve at closing.

The balloon loans include a component related to guaranteed future values (GFV). The GFV afford the borrower an option to hand back the underlying vehicle at contract maturity as an alternative to repaying or refinancing the final balloon payment. Morningstar DBRS understands that this feature directly exposes the Issuer to residual value (RV) risk.

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 SFSE's portfolio, the characteristics of the collateral, its historical performance, and Morningstar DBRS-projected behaviour under various stress scenarios;
-- SFSE's capabilities with respect to originations, underwriting, servicing, and its position in the market and financial strength.
-- The operational risk review of SFSE, 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; and,
-- The sovereign rating on the Kingdom of Spain, currently rated "A" with a Positive trend by Morningstar DBRS.

TRANSACTION STRUCTURE
The transaction allocates payments on separate interest and principal priorities of payments and benefits from an amortising cash reserve funded at closing to an amount equal to 1.0% of the Rated Notes' outstanding balance and floored at 0.425% of the Rated Notes' initial balance. The cash reserve is part of the available funds and covers senior costs, swap payments, and interest payments on the Rated Notes, as long as there is no interest deferral.

The transaction includes a three-month revolving period. The repayment of the Rated Notes will start on the first amortisation payment date in January 2025 on a pro rata basis unless certain events, such as a breach of performance-related triggers or replacement of the Servicer, occur. Under these circumstances, the principal repayment of the Rated Notes will become fully sequential, and the switch is not reversible.

All underlying contracts are fixed rate while the Notes pay a floating rate. The Notes are indexed to one-month Euribor. The interest rate risk is mitigated through an interest rate swap for the Rated Notes.

COUNTERPARTIES
Société Générale, Sucursal en España (SG) is expected to be appointed as the Issuer's account bank for the transaction. Morningstar DBRS holds a private rating on SG and has a Long-Term Issuer Rating of A (high) with a Stable trend on Société Générale, S.A. Morningstar DBRS has concluded that SG meets the minimum criteria to act in its capacity as account bank. The transaction documents are expected to contain downgrade provisions related to the account bank consistent with Morningstar DBRS' criteria.

Banco Santander S.A. (Banco Santander) is expected to be appointed as the swap counterparty. Morningstar DBRS' public Long Term Critical Obligations Rating on Banco Santander is AA (low) with a Stable trend, which meets Morningstar DBRS' criteria to act in its capacity as swap counterparty. The hedging documents are expected to contain downgrade provisions 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. For the Rated Notes, the associated financial obligations are the related interest payments amounts and the related principal outstanding balances.

Morningstar DBRS' credit rating does 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 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 (22 August 2024), https://dbrs.morningstar.com/research/438224.

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 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 Originator and it agents. Morningstar DBRS received:
-- Static quarterly gross loss and recovery data covering Q12013 up to Q22024, split between loans granted to finance new and used vehicles (new subset also split in standard and balloon loans);
-- Dynamic delinquencies and originations quarterly data going back to Q12013 up to Q22024;
-- Dynamic prepayments quarterly data going back to Q12013 up to Q12023;
-- Detailed stratification tables related to the asset provisional portfolio selected by SFSE as at 4 July 2024;
-- Loan-by-loan provisional portfolio selected by SFSE as at 4 July 2024; and
-- Related amortisation profile.

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 the final credit ratings on the above-mentioned securities are subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalise the credit ratings.

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 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: 2.5%
-- Expected recovery rate: 60.0%
-- Loss given default (LGD): 60.8% for the AA (sf) scenario, 56.0% for the A (sf) scenario, 51.2% for the BBB (sf) scenario, 48.0% for the BB (high) (sf) scenario, and 44.8% for the BB (low) (sf) scenario.
-- RV Loss: 29.7% for the AA (sf) scenario, 22.8% for the A (sf) scenario, 14.1% for the BBB (sf) scenario, 7.9% for the BB (high) (sf) scenario, and 3.5% for the BB (low) (sf) scenario.

Scenario 1: 25% increase in RV Loss
Scenario 2: 50% increase in RV Loss
Scenario 3: 25% increase in PD and LGD
Scenario 4: 50% increase in PD and LGD
Scenario 5: 25% increase in PD and LGD and 25% increase in RV Loss
Scenario 6: 25% increase in PD and LGD and 50% increase in RV Loss
Scenario 7: 50% increase in PD and LGD and 25% increase in RV Loss
Scenario 8: 50% increase in PD and LGD and 50% increase in RV Loss

Morningstar DBRS concludes that the expected credit ratings under the eight stress scenarios would be:
-- Class A Notes: AA (low) (sf), A (sf), AA (low) (sf), A (high) (sf), A (high) (sf), A (sf), A (sf), and A (low) (sf)
-- Class B Notes: A (low) (sf), BBB (high) (sf), A (sf), A (low) (sf), BBB (high) (sf), BBB (high) (sf), BBB (high) (sf), and BBB (sf)
-- Class C Notes: BB (high) (sf), BB (high) (sf), BBB (low) (sf), BB (high) (sf), BB (high) (sf), BB (high) (sf), BB (high) (sf), and BB (high) (sf)
-- Class D Notes: BB (sf), BB (sf), BB (sf), BB (sf), BB (sf), BB (sf), BB (low) (sf), and BB (low) (sf)
-- Class E Notes: BB (low) (sf), B (high) (sf), B (high) (sf), B (sf), B (high) (sf), B (high) (sf), B (sf), and B (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: Jose Escandell, Senior Analyst
Rating Committee Chair: Paolo Conti, Associate Managing Director
Initial Rating Date: 9 September 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 (22 August 2024)
https://dbrs.morningstar.com/research/438224.
-- Rating European Structured Finance Transactions Methodology (25 June 2024),
https://dbrs.morningstar.com/research/434970.
-- Legal Criteria for European Structured Finance Transactions (28 June 2024),
https://dbrs.morningstar.com/research/435165.
-- 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 dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.