Morningstar DBRS Confirms Credit Ratings on the Class A Notes Issued by Cars Alliance Auto Leases

DBRS Ratings GmbH (Morningstar DBRS) confirmed its AAA (sf) credit ratings on the following outstanding Class A Notes (together, the Class A Notes) issued by Cars Alliance Auto Leases France Master (the Issuer):

-- EUR 231.2 million Class A 2024-51 Notes
-- EUR 10.0 million Class A 2024-52 Notes
-- EUR 287.9 million Class A 2024-53 Notes
-- EUR 210.4 million Class A 2024-54 Notes
-- EUR 115.1 million Class A 2024-55 Notes

The credit ratings on the Class A Notes address the timely payment of interest and the ultimate repayment of principal by the legal final maturity date in October 2038.

Morningstar DBRS does not rate the Class B Notes also issued in this transaction.

CREDIT RATING RATIONALE
The confirmations are based on the following analytical considerations:
-- An amendment to the transaction executed on 29 October 2024 (the Amendment); which includes an extension of the revolving period by five years and five months, to April 2030 from November 2024 previously;
-- The portfolio performance, in terms of level of delinquencies and cumulative defaults, as of the October 2024 payment date;
-- Updated probability of default (PD), loss given default (LGD), and expected loss assumptions for the collateral pool, considering the updated quarterly vintage performance data received in the context of the Amendment;
-- No Revolving Period Termination Events have occurred; and
-- The levels of credit enhancement to the Class A Notes to cover the expected losses at their AAA (sf) credit rating level.

The Issuer is a master trust securitisation backed by a pool of auto lease receivables related to new and used motor vehicles, and specifically exclude, among others, the residual value component. The leases are originated and serviced by Diac S.A. (DIAC), a French subsidiary of RCI Banque SA. The transaction's revolving period which was expected to end on the November 2024 payment date, has been extended by an additional five years and five months, until the April 2030 payment date. The revolving period is subject to certain portfolio conditions being met. During the revolving period, the Issuer may acquire additional receivables and issue further series of Class A Notes with different expected maturity dates.

The transaction closed on 28 October 2020. Since closing, replenishment of the underlying receivables has met the portfolio's revolving conditions on each payment date.

AMENDMENT
The Amendment to the transaction took effect on 29 October 2024 and mainly consists of:
-- Extension of the revolving period by five years and five months to April 2030 from November 2024 prior to the Amendment;
-- Decrease of the required credit enhancement (CE) from each product subset to determine the Class B Notes subordination ratio as follows:
-- Leases on new vehicles to 9.50% from 10.50%; and
-- Leases on used vehicles to 14.30% from 17.00%;
-- Extension of the period of no transfer of new receivables to six consecutive monthly payment dates, from four previously, in relation to a revolving termination event;
-- Increase of the account bank replacement period to 60 days, from 15 days previously, in case of an account bank replacement event; and
-- Change of the servicer collection account bank required rating trigger to BBB (low) from A previously.

PORTFOLIO PERFORMANCE
As of the October 2024 payment date, leases that were 30 to 60 days and 60 to 90 days delinquent represented 0.21% and 0.05% of the discounted portfolio balance, respectively. The cumulative gross default ratio was 1.01% of the aggregate original balance, with cumulative principal recoveries of 28.51% to date.

PORTFOLIO ASSUMPTIONS AND KEY CREDIT RATING DRIVERS
Morningstar DBRS updated its base case probability of default (PD) and loss given default (LGD) assumptions based on updated historical default and recovery data received from DIAC.

Morningstar DBRS analyses stress scenarios for two pool compositions: one pool composed of 100% new vehicles and another composed of 100% used vehicles.

Pool with 100% new vehicles:
-- Expected default: 2.3%
-- Expected recovery rate: 54.2%
-- Loss given default (LGD): 64.8% for the AAA (sf) scenario

Pool with 100% used vehicles:
-- Expected default: 4.3%
-- Expected recovery rate: 47.5%
-- LGD: 69.1% for the AAA (sf) scenario

The assumptions are based on the potential portfolio migration and the replenishment criteria set forth in the updated transaction legal documents.

CREDIT ENHANCEMENT
The subordination of the Class B Notes provides credit enhancement to the Class A Notes. As of the October 2024 payment date, credit enhancement to the Class A Notes stood at 11.53%.

The structure includes an amortising cash reserve account, which is available to cover senior expenses and missed interest payments on the Class A Notes. This account is currently funded with EUR 9.7 million, with a target balance equal to 1.0% of the notes' aggregate balance. In a stressed scenario where Morningstar DBRS assumes no collections, the cash reserve would cover approximately six months of senior fees and interest payments on the Class A Notes. Upon a downgrade of the seller or the servicer below investment grade, a performance and commingling reserve will also be funded.

BNP Paribas SA acts as the account bank for the transaction. Based on BNP Paribas SA's reference rating of AA (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 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 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 methodologies applicable to the credit ratings are: "Rating European Consumer and Commercial Asset-Backed Securitisations" (18 September 2024), https://dbrs.morningstar.com/research/439583 and "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 methodologies consistently and conducted a review of the transaction in accordance with the principal methodologies.

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.

Morningstar DBRS has conducted a review of the transaction's legal documents provided in the context of the Amendment. A review of any other 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 DBRS Morningstar 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 SA (the management company), loan-level data provided by the European DataWarehouse GmbH, and additional information and the following historical information received from the arranger, Société Générale S.A.:
-- Static quarterly cumulative gross loss data split by product subset from Q1 2017 to Q2 2024;
-- Static quarterly recovery data split by product subset from Q1 2017 to Q2 2024; and
-- Dynamic monthly delinquency and prepayment data on total portfolio from January 2017 to June 2024.

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 not 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 21 October 2024, when Morningstar DBRS assigned a AAA (sf) credit rating to the Class A 2024-55 Notes and discontinued its credit rating on the Class A 2024-50 Notes, due to their full repayment.

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):
-- Morningstar DBRS expected a base-case PD and LGD for the portfolio 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.

To assess the impact of changing the transaction parameters on the credit rating, Morningstar DBRS considered the following stress scenarios for two pool compositions, one pool composed of 100% new vehicles and the other composed of 100% used vehicles, as compared with the parameters used to determine the credit rating.

Pool with 100% new vehicles:
-- Expected default: 2.3%
-- Expected recovery rate: 54.2%
-- LGD: 64.8% for the AAA (sf) scenario

Pool with 100% used vehicles:
-- Expected default: 4.3%
-- Expected recovery rate: 47.5%
-- LGD: 69.1% for the AAA (sf) scenario

Scenario 1: a 25% increase in the expected default rate
Scenario 2: a 50% increase in the expected default rate
Scenario 3: a 25% increase in the LGD
Scenario 4: a 25% increase in the expected default rate and a 25% increase in the LGD
Scenario 5: a 50% increase in the expected default rate and a 25% increase in the LGD
Scenario 6: a 50% increase in the LGD
Scenario 7: a 25% increase in the expected default rate and a 50% increase in the LGD
Scenario 8: a 50% increase in the expected default rate and a 50% increase in the LGD

Morningstar DBRS concludes that the expected credit ratings under the eight stress scenarios will be:

Pool with 100% new vehicles:
-- Class A Notes: AAA (sf), AA (high) (sf), AAA (sf), AA (high) (sf), AA (high) (sf), AA (sf), AA (sf), AA (low) (sf)

Pool with 100% used vehicles:
-- Class A Notes: AA (sf), AA (low) (sf), AA (sf), AA (sf), AA (low) (sf), A (high) (sf), A (high) (sf), A (low) (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
Credit Rating Committee Chair: Alfonso Candelas, Associate Managing Director
Initial Credit Rating Date: 28 October 2020

DBRS Ratings GmbH
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Tel. +49 (69) 8088 3500
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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.
-- 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.
-- Rating European Consumer and Commercial Asset-Backed Securitisations (18 September 2024), https://dbrs.morningstar.com/research/439583.
-- Rating European Structured Finance Transactions Methodology (18 September 2024), https://dbrs.morningstar.com/research/439581.
-- 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/439604.

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.