Morningstar DBRS Finalises Provisional Credit Ratings on Asset-Backed European Securitisation Transaction Twenty-Five S.r.l.

DBRS Ratings GmbH (Morningstar DBRS) finalised its provisional credit ratings on the following classes of notes (collectively, the Notes) issued by Asset-Backed European Securitisation Transaction Twenty-Five S.r.l. (the Issuer):

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

The finalised credit ratings on the Class D and Class E Notes are one notch higher and the finalised credit rating on the Class X Notes is three notches higher than the provisional credit ratings Morningstar DBRS initially assigned. The combined effect of the overall lower margins of the Notes and the lower swap fixed leg improved the cash flow analysis on the Class D, Class E, and Class X Notes in their respective credit rating stress scenarios.

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

CREDIT RATING RATIONALE
The transaction represents the issuance of Notes backed by a pool of auto loan receivables related to standard, amortising auto loan contracts granted to private consumers and legal persons residing or incorporated in the Republic of Italy for the purchase of new and used passenger cars, granted by CA Auto Bank S.p.A. (CAAB; the Originator or the Servicer). Only the Class A Notes to Class M Notes are collateralised, while the Class X Notes were issued to fund the cash reserve at closing.

Morningstar DBRS' 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 Notes were issued;
-- The credit quality of CAAB's portfolio, the characteristics of the collateral, its historical performance, and Morningstar DBRS-projected behaviour under various stress scenarios;
-- CAAB's capabilities with respect to originations, underwriting, servicing, and its position in the market and financial strength;
-- The operational risk review of CAAB, which Morningstar DBRS deems to be an acceptable Servicer;
-- The transaction parties' financial strength with regard to their respective roles;
-- The consistency of the transaction's legal and hedging structure with Morningstar DBRS' Legal and Derivative Criteria for European Structured Finance Transactions methodology; and
-- Morningstar DBRS' sovereign credit rating on the Republic of Italy, currently at BBB (high) with a Positive trend.

TRANSACTION STRUCTURE
The transaction will amortise on a fully sequential basis until the sixth payment date falling in July 2025. Following the initial sequential amortisation period, and subject to no sequential redemption event triggers being breached, the Class A Notes to Class M Notes will amortise on a pro rata basis. Sequential redemption events include, among others, the breach of performance-related triggers as well as the termination of the Servicer's appointment. The Class X Notes are only redeemed through available excess spread.

The Class A Notes to Class E Notes benefits benefit from a fully funded, nonamortising cash reserve equal to 1.1% of the Class A Notes to Class E Notes' initial balance. The cash reserve is available to cover shortfalls in senior fees and expenses and interest payments on the Class A Notes to Class E Notes and provides ultimate credit enhancement to the Class A Notes to Class E Notes.

The transaction benefits from a hedging structure to protect the Issuer against interest rate risk arising from the mismatch between the interest payable on the fixed-rate loans in the portfolio and the floating rate associated with the coupon on the Notes.

COUNTERPARTIES
The Bank of New York Mellon SA/NV - Milan Branch (BNYM) has been appointed as the Issuer's account bank for the transaction. Morningstar DBRS has a Long-Term Senior Debt and a Long-Term Deposits rating of AA (high) on BNYM and considers BNYM to meet the relevant criteria to act in this capacity. The transaction documents contain downgrade provisions relating to the account bank consistent with Morningstar DBRS' criteria.

CAAB has been appointed as the swap counterparty for the transaction, and Crédit Agricole Corporate & Investment Bank (CACIB) has been appointed as standby swap counterparty for the transaction. Morningstar DBRS privately rates CAAB and CACIB. If CAAB fails to make any due payment under its swap agreement, CACIB will replace CAAB as the swap counterparty on the following payment date, and the existing swap transaction with CAAB will terminate. In exchange, CACIB will receive an intermediation fee. The hedging and standby hedging documents contain downgrade provisions consistent with Morningstar DBRS' criteria.

Morningstar DBRS' credit ratings on the Notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the related principal amount outstanding and the related interest amounts.

Morningstar DBRS' credit ratings do 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 (18 September 2024), https://dbrs.morningstar.com/research/439583.

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.

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 Originator and its agents. Morningstar DBRS was provided with historical information, as follows:

-- Monthly cumulative static gross defaults split into FCA/Not FCA, New/Used, SME/Self-Employed subsets covering January 2016 to August 2024;
-- Monthly cumulative static recoveries split into FCA/Not FCA, New/Used, SME/Self-Employed subsets covering January 2016 to July 2024;
-- Monthly dynamic delinquency data split into FCA/Not FCA, New/Used, SME/Self-Employed subsets covering January 2016 to July 2024;
-- Monthly dynamic prepayment data for previous securitisation transactions originated by CAAB (or FCA Bank), covering January 2010 to August 2024; and
-- Loan-by-loan portfolio as of 10 November 2024, related stratification tables, and its amortisation schedule.

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.

These credit ratings concern newly issued financial instruments. These are the first Morningstar DBRS credit ratings on these financial instruments.

This is the first credit rating action since the Initial Credit Rating Date.
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: 4.4%.
-- Expected recovery rate: 40.0%.
-- Loss given default (LGD): 76.0% for the AAA (sf) scenario, 72.8% for the AA (low) (sf) scenario, 70.7% for the A (sf) scenario, 68.5% for the BBB (high) (sf) scenario, 66.4% for the BBB (low) (sf) scenario, 63.2% for the BB (low) (sf) scenario.

Scenario 1: 25% increase in LGD.
Scenario 2: 50% increase in LGD.
Scenario 3: 25% increase in probability of default (PD).
Scenario 4: 50% increase in PD.
Scenario 5: 25% increase in PD and 25% increase in LGD.
Scenario 6: 25% increase in PD and 50% increase in LGD.
Scenario 7: 50% increase in PD and 25% increase in LGD.
Scenario 8: 50% increase in PD and 50% increase in LGD.

Morningstar DBRS concludes that the expected credit ratings under the eight stress scenarios would be:
-- Class A Notes: AA (high) (sf), AA (sf), AA (high) (sf), AA (sf), AA (low) (sf), AA (low) (sf), A (high) (sf), A (sf).
-- Class B Notes: A (high) (sf), A (high) (sf), A (high) (sf), A (sf), A (sf), A (low) (sf), BBB (high) (sf), BBB (sf).
-- Class C Notes: A (low) (sf), BBB (high) (sf), A (sf), BBB (high) (sf), BBB (sf), BBB (low) (sf), BBB (low) (sf), BB (high) (sf).
-- Class D Notes: BBB (sf), BB (high) (sf), BBB (sf), BB (high) (sf), BB (high) (sf), BB (low) (sf), BB (sf), B (sf).
-- Class E Notes: BB (high) (sf), BB (sf), BB (high) (sf), BB (sf), BB (low) (sf), B (sf), B (sf), Below B (low) (sf).
-- Class X Notes: B (sf), B (low) (sf), B (sf), below B (low) (sf), below B (low) (sf), below B (low) (sf), below B (low) (sf), below B (low) (sf).

Morningstar DBRS did not conduct risk sensitivities on the Class M Notes.

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: Daniele Canestrari, Assistant Vice President
Rating Committee Chair: Paolo Conti, Associate Managing Director
Initial Rating Date: 19 November 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.

-- Rating European Structured Finance Transactions Methodology (19 November 2024),
https://dbrs.morningstar.com/research/443199
-- Legal and Derivative Criteria for European Structured Finance Transactions (19 November 2024), https://dbrs.morningstar.com/research/443196
-- Operational Risk Assessment for European Structured Finance Originators and Servicers (18 September 2024), https://dbrs.morningstar.com/research/439571
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2024), https://dbrs.morningstar.com/research/439913
-- 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.