Morningstar DBRS Confirms Credit Rating on Koromo S.A., acting on behalf and for the account of its Compartment 3

DBRS Ratings GmbH (Morningstar DBRS) confirmed its AAA (sf) credit rating on the Class A Notes issued by Koromo S.A., acting on behalf and for the account of its Compartment 3 (the Issuer).

The credit rating on the Class A Notes addresses the timely payment of scheduled interest and the ultimate repayment of principal by the legal maturity date in October 2033.

CREDIT RATING RATIONALE
The credit rating confirmation follows an annual review of the transaction and is based on the following analytical considerations:
-- Portfolio performance, in terms of delinquencies and defaults, as of the September 2024 payment date;
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions on the receivables;
-- Absence of revolving termination events; and
-- Current available credit enhancement to the Class A Notes to cover the expected losses assumed at their AAA (sf) credit rating level.

The Issuer is a public limited liability company (société anonyme) incorporated under the laws of the Grand Duchy of Luxembourg and is governed by Luxembourg's Securitisation Law, acting as a special-purpose entity specifically incorporated for the purpose of this transaction.

The rated Class A Notes and the unrated Class B Notes are backed by a pool of new and used passenger vehicle loan receivables originated in the Federal Republic of Germany by Toyota Kreditbank GmbH (TKG). TKG also acts as servicer to the transaction. The transaction closed in October 2020 and includes a five-year revolving period where additional receivables may be added to the pool until October 2025, subject to the occurrence of an early amortisation event. No early amortisation event has occurred so far.

PORTFOLIO PERFORMANCE
As of September 2024, loans two to three months in arrears represented 0.2% of the outstanding portfolio balance, the 90+-day delinquency ratio was 0.2%, and the cumulative default ratio stood at 0.7%.

PORTFOLIO ASSUMPTIONS AND KEY DRIVERS
Morningstar DBRS conducted an analysis of the current pool of receivables and, because of the transaction's revolving period, maintained its base case PD and LGD assumptions at 2.1% and 39.7% at the B (low) (sf) credit rating level, respectively, considering potential portfolio migration based on replenishment criteria set forth in the transaction legal documents.

CREDIT ENHANCEMENT AND RESERVES
As of the September 2024 payment date, credit enhancement to the Class A Notes was 10.0%, unchanged from closing, since the transaction is still in the revolving period. The credit enhancement is provided by subordination of the junior notes.

The transaction benefits from a fully funded nonamortising general reserve of EUR 1 million. The general reserve provides liquidity support to the transaction.

Additionally, upon Morningstar DBRS' downgrade of the servicer's parent, Toyota Financial Services Corporation, below BBB or upon the dilution of the 100% share ownership of TKG by its parent, a commingling reserve will be funded.

BNP Paribas Frankfurt Branch acts as the account bank for the transaction. Based on Morningstar DBRS' private credit rating on the account bank, 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 Class A Notes, as described in Morningstar DBRS' "Legal Criteria for European Structured Finance Transactions" methodology.

Morningstar DBRS' credit rating on the Class A Notes addresses 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 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 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 rating 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.

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 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 TKG 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 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 transaction took place on 20 October 2023, when Morningstar DBRS confirmed its credit rating on the Class A Notes at AAA (sf).

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 for a worst-case pool composition, as compared with the parameters used to determine the credit rating:

-- Expected default: 2.1% at the B (low) (sf) rating level.
-- Expected recovery rate: 60.3% at the B (low) (sf) rating level.
-- LGD: 60.8% for the AAA (sf) scenario.

Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of AA (high) (sf)
-- 50% increase in LGD, expected credit rating of AA (sf)
-- 25% increase in PD, expected credit rating of AA (high) (sf)
-- 50% increase in PD, expected credit rating of AA (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AA (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of AA (low) (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of AA (low) (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of A (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: Helvia Meana, Assistant Vice President
Rating Committee Chair: Mark Wilder, Senior Vice President
Initial Rating Date: 22 October 2020

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 (6 August 2024),
https://dbrs.morningstar.com/research/437540
-- Rating European Structured Finance Transactions Methodology (18 September 2024),
https://dbrs.morningstar.com/research/439581
-- Rating European Consumer and Commercial Asset-Backed Securitisations (18 September 2024), https://dbrs.morningstar.com/research/439583
-- Legal Criteria for European Structured Finance Transactions (28 June 2024),
https://dbrs.morningstar.com/research/435165
--Operational Risk Assessment for European Structured Finance Originators and Servicers (18 September 2024), https://dbrs.morningstar.com/research/439571
-- 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.