Morningstar DBRS Confirms Credit Ratings on Cars Alliance Auto Leases France V 2020-1

DBRS Ratings GmbH (Morningstar DBRS) confirms its AAA (sf) credit ratings on the Class A and Class B Notes (the rated notes) issued by Cars Alliance Auto Leases France V 2020-1 (the Issuer).

The credit ratings address the timely payment of scheduled interest and the ultimate repayment of principal by the legal final maturity date in October 2036.

CREDIT RATING RATIONALE
The confirmations 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 August 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 rated notes to cover the expected losses at the AAA (sf) credit rating level.

The transaction is a securitisation collateralised by lease receivable instalments and specifically exclude, among others, the residual value component. The receivables relate to auto lease agreements granted by Diffusion Industrielle et l'Automobile par le Crédit SA (DIAC or the seller) to private lessees residing in France. The transaction closed in October 2020 and included a 21-month revolving period, which ended in August 2022.

PORTFOLIO PERFORMANCE
As of the July 2024 cut-off date, loans that were one to two months and two to three months delinquent represented 0.26% and 0.08% of the portfolio balance, respectively. Gross cumulative defaults amounted to 1.3% of the aggregate original portfolio balance, with cumulative principal recoveries of 39.1% to date.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
Morningstar DBRS conducted an analysis of the pool of receivables and updated its base case PD and LGD assumptions to 3.4% and 49.5%, respectively.

CREDIT ENHANCEMENT
The subordination of the respective junior obligations provides credit enhancement to the rated notes. As of the August 2024 payment date, credit enhancements to the Class A and Class B Notes were 45.8% and 25.6%, respectively, up from 19.4% and 10.9%, respectively, as of September 2023 payment date.

The transaction benefits from an amortising general reserve account, which is available to cover senior expenses and missed interest payments on the rated notes and, on the final maturity date, to repay principal on the rated notes. This account was funded at closing with EUR 10.4 million, and its target balance is equal to 1.0% of the aggregate principal balance of the notes. As of the August 2024 payment date, the account is at its target balance of EUR 2.0 million.

Additionally, upon the downgrade of the seller or servicer below investment grade, a performance and commingling reserve will also be funded.

BNP Paribas SA (BNP) acts as the account bank for the transaction. Based on Morningstar DBRS' reference credit rating of AA on BNP (which is one notch below its Morningstar DBRS Long Term Critical Obligations Rating of AA (high)), 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 assigned to the senior notes, as described in Morningstar DBRS' "Legal Criteria for European Structured Finance Transactions" methodology.

The Issuer entered into a swap agreement with DIAC to hedge the interest rate mismatch between the notes, indexed to one-month Euribor, and the fixed interest rate payments from the collateral portfolio. The structure also includes a standby swap agreement, where Société Générale, S.A. (SocGen) will provide a financial and operational guarantee to DIAC, specifically, if DIAC fails to meet its obligations as the swap counterparty, SocGen will step in to hedge the Issuer's exposure. The standby swap agreement defines downgrade provisions consistent with Morningstar DBRS' "Derivative 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's 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 factor(s) 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 the "Master European Structured Finance Surveillance Methodology" (6 August 2024), https://dbrs.morningstar.com/research/437540.

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 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 investor reports provided by EuroTitrisation 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 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 2 October 2023 when Morningstar DBRS confirmed its AAA (sf) credit rating on the Class A Notes and upgraded its credit rating on the Class B Notes to AAA (sf) from AA (sf).

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 https://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):

-- 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.
-- The base case PD and LGD of the current pool of loans for the Issuer are 3.4% and 49.5%, respectively.

The rated notes Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD, expected credit rating of AAA (sf)
-- 50% increase in PD, expected credit rating of AAA (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AAA (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of AAA (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: Alfonso Candelas, Associate Managing Director
Initial Rating Date: 23 September 2020

DBRS Ratings GmbH
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Tel. +49 (69) 8088 3500
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The credit rating methodologies used in the analysis of these transactions can be found at: https://dbrs.morningstar.com/about/methodologies.

-- Master European Structured Finance Surveillance Methodology (6 August 2024),
https://dbrs.morningstar.com/research/437540
-- Legal Criteria for European Structured Finance Transactions (28 June 2024),
https://dbrs.morningstar.com/research/435165
-- Derivative Criteria for European Structured Finance Transactions (6 September 2024), https://dbrs.morningstar.com/research/439043
-- Operational Risk Assessment for European Structured Finance Servicers (6 August 2024), https://dbrs.morningstar.com/research/437543
-- 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
-- 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.