Morningstar DBRS Takes Credit Rating Actions on Cars Alliance Auto Loans Germany Master

DBRS Ratings GmbH (Morningstar DBRS) assigned AAA (sf) credit ratings to the EUR 5.0 million Series 2025-05, Class A notes and to the EUR 215.8 million Series 2025-06 Class A notes issued by Cars Alliance Auto Loans Germany Master (the Issuer). Morningstar DBRS assigned the credit ratings following the notes issuance on the 18 February 2025 payment date. As of the same payment date, all portfolio revolving conditions had been met. Additionally, Morningstar DBRS discontinued its AAA (sf) credit rating on the EUR 151.9 million Series 2025-01, Class A notes due to their full repayment, and confirmed its AAA (sf) credit ratings on the following remaining outstanding series (collectively, the Class A Notes):

-- EUR 204.9 million Series 2025-02, Class A Notes
-- EUR 79.4 million Series 2025-03, Class A Notes
-- EUR 178.8 million Series 2025-04, Class A 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 March 2039.

The credit rating actions follow a review of the transaction and are based on the following analytical considerations:
-- The portfolio performance, in terms of delinquencies and defaults, as of the February 2025 payment date;
-- Probability of default (PD), loss given default (LGD), and expected loss assumptions on the remaining receivables;
-- No revolving period termination events; and
-- The levels of credit enhancement to the Class A Notes to cover their expected losses at their AAA (sf) credit rating level.

The transaction is a master trust securitisation backed by a pool of auto loan receivables related to new and used motor vehicles originated in Germany by RCI Banque SA Niederlassung Deutschland, a German subsidiary of RCI Banque SA. The transaction's revolving period extends until the March 2026 payment date, 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 maturities based on the amortisation profile of the additional receivables.

The transaction closed on 18 March 2014. Since closing, replenishment of the underlying receivables has met the portfolio revolving conditions on each payment date.

As of the February 2025 payment date, the aggregate balance of the outstanding series of the Class A Notes was EUR 683.9 million and the balance of the Class B Notes was EUR 51.0 million. The EUR 727.4 million securitised portfolio (excluding defaulted receivables) consisted of auto loans granted to finance the purchase of new (78.6%) and used vehicles (21.4%).

REVOLVING PERIOD
At its setup date on 18 March 2014, the transaction featured a four-year revolving period, which was extended by four years twice. The revolving period is expected to end in March 2026. During the revolving period, the Issuer may acquire additional receivables and issue further series of notes with different expected maturities based on the amortisation profile of the additional receivables. The purchase of new receivables and the issuance of new series of notes is subject to certain conditions and limitations, including certain concentration limits and performance triggers in the portfolio and a minimum subordination ratio for the outstanding notes. The revolving period will end prematurely if these conditions are not met or in other events, such as the insolvency of the seller.

PORTFOLIO PERFORMANCE
As at the February 2025 payment date, loans that were one to two months delinquent and two to three months delinquent represented 0.4% and 0.2% of the portfolio net discounted balance, respectively, while delinquencies greater than three months were 0.1%. The cumulative gross default ratio was 0.7% of the original portfolio and cumulative transferred receivables, with principal cumulative recoveries of 83.1% so far.

PORTFOLIO ASSUMPTIONS AND KEY CREDIT RATING DRIVERS
Morningstar DBRS maintained its base-case probability of default (PD) and loss given default (LGD) assumptions based on the worst-case portfolio composition at 1.5% and 38.9%, respectively. The portfolio analysis continues to consider potential portfolio migration based on replenishment criteria set forth in the transaction legal documents.

Morningstar DBRS elected mid-range core multiples. The inclusion of incremental balloon stresses means the derived adjusted multiple is above the higher range used at the AAA (sf) level.

CREDIT ENHANCEMENT
Credit enhancement to the outstanding series of Class A Notes is provided by the subordination of the Class B Notes and a general reserve fund. The current credit enhancement available to the Class A Notes is 7.7%, unchanged from last month.
The transaction also benefits from an amortising general 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 5.5 million and its target balance is equal to 0.75% of the notes' aggregate balance.

The structure also includes a commingling reserve account and a set-off reserve account, which will be funded if certain triggers are breached. To date, these reserves continue to be unfunded.

HSBC Continental Europe SA acts as the account bank for the transaction. Based on Morningstar DBRS' private credit rating on HSBC Continental Europe SA, the downgrade provisions outlined in the transaction documents, and structural mitigants, Morningstar DBRS considers the risk arising from the exposure to HSBC Continental Europe SA to be consistent with the credit ratings assigned to the notes as described in Morningstar DBRS' "Legal and Derivative Criteria for European Structured Finance Transactions" methodology.

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 for the Class A Notes are the related Interest Payment Amounts and the related Class Balances.

Morningstar DBRS' credit ratings do not address non-payment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) 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.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the credit ratings is: "Master European Structured Finance Surveillance Methodology" (4 February 2025), https://dbrs.morningstar.com/research/447080.

Other methodologies referenced in this transaction are listed at the end of this press release.

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 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 SA (the management company) 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 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.

This credit rating concerns newly issued financial instruments. This is the first Morningstar DBRS credit rating on this financial instrument.

The last credit rating action on this transaction took place on 20 January 2025, when Morningstar DBRS assigned a AAA (sf) credit rating to the Series 2025-04, Class A Notes and discontinued its AAA (sf) credit rating on the Series 2024-12, Class A Notes. The last annual review took place on 19 February 2024, when Morningstar DBRS assigned a AAA (sf) credit rating to the Series 204-02, Class A Notes, confirmed the credit ratings on the Series 2023-11, 2023-12 and 2024-01, Class A Notes and discontinued the credit rating on the Series 2023-10, Class A Notes.

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 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 1.5% and 38.9%, respectively.
-- The risk sensitivity overview below illustrates the credit ratings expected if the PD and LGD increase by a certain percentage over the base-case assumption.

Class A Notes Risk Sensitivity:
-- 25% increase in LGD, expected credit rating of AAA (sf)
-- 50% increase in LGD, expected credit rating of AA (high) (sf)
-- 25% increase in PD, expected credit rating of AAA (sf)
-- 50% increase in PD, expected credit rating of AA (high) (sf)
-- 25% increase in PD and 25% increase in LGD, expected credit rating of AA (high) (sf)
-- 25% increase in PD and 50% increase in LGD, expected credit rating of AA (sf)
-- 50% increase in PD and 25% increase in LGD, expected credit rating of AA (sf)
-- 50% increase in PD and 50% increase in LGD, expected credit rating of AA (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
Rating Committee Chair: Alfonso Candelas, Associate Managing Director
Initial Rating Date: 18 March 2014

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.

-- Legal and Derivative Criteria for European Structured Finance Transactions (19 November 2024),
https://dbrs.morningstar.com/research/443196.
-- Master European Structured Finance Surveillance Methodology (4 February 2025),
https://dbrs.morningstar.com/research/447080
-- 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 (19 November 2024),
https://dbrs.morningstar.com/research/443199.
-- 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.