Morningstar DBRS Assigns Provisional Credit Ratings to Red & Black Auto Germany 12 UG (haftungsbeschränkt)

DBRS Ratings GmbH (Morningstar DBRS) assigned provisional credit ratings to the following classes of notes (the Rated Notes) to be issued by Red & Black Auto Germany 12 UG (haftungsbeschränkt) (the Issuer):

-- Class A Notes at (P) AAA (sf)
-- Class B Notes at (P) AA (sf)
-- Class C Notes at (P) A (sf)

Morningstar DBRS did not assign a provisional credit rating to the Class D Notes (together with the Rated Notes, the Notes) also to be issued in this transaction.

The credit ratings on the Class A Notes and Class B Notes address the timely payment of scheduled interest and the ultimate repayment of principal by the legal final maturity date. The credit rating on the Class C Notes addresses the ultimate payment of scheduled interest (timely when most senior) and the ultimate repayment of principal by the final maturity date.

The transaction represents the issuance of notes backed by a portfolio of receivables related to auto loans granted by Bank Deutsches Kraftfahrzeuggewerbe GmbH (BDK, the Originator) to private borrowers residing in Germany for the purchase of new and used vehicles. BDK will also act as the initial servicer for the transaction (the Servicer).

CREDIT RATING RATIONALE
Morningstar DBRS based its provisional credit ratings on a review of the following analytical considerations:
-- The transaction's structure, including 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 Rated Notes are expected to be issued;
-- The credit quality of BDK's portfolio, the characteristics of the collateral, its historical performance, and Morningstar DBRS-projected behaviour under various stress scenarios;
-- BDK's capabilities with regard to originations, underwriting, and servicing, and its position in the market and financial strength;
-- The operational risk review of BDK, which Morningstar DBRS deems to be an acceptable Servicer;
-- The transaction parties' financial strength with regard to their respective roles;
-- The expected consistency of the transaction's structure with Morningstar DBRS' "Legal and Derivative Criteria for European Structured Finance Transactions" methodology; and,
-- Morningstar DBRS' sovereign credit rating on the Federal Republic of Germany, currently at AAA with a Stable trend.

TRANSACTION STRUCTURE
The transaction is static and begins to amortise immediately from the first payment date. The transaction incorporates a mixed pro rata/sequential amortisation mechanism, whereby the Notes will initially amortise sequentially until the Class A Notes' credit enhancement reaches the target level of 8.0%. Thereafter, the Notes will start to amortise pro rata until the breach of a sequential payment trigger, which will result in cash flows being allocated on a sequential basis. Sequential payment triggers include, amongst others, the breach of performance-related triggers or the Seller not exercising the call option.

The transaction benefits from a liquidity reserve that will be funded on the closing date. The liquidity reserve is available to the Issuer, until the Class C Notes are fully repaid, to cover the payment of senior expenses, swap payments, interest on the Class A Notes, and, if not subordinated, interest on the Class B Notes and Class C Notes. The initial size of liquidity reserve is set at 0.8% of the Rated Notes' balance at closing and floored at 0.1% of the Rated Notes' balance as at the closing date.

The transaction is exposed to interest rate risk because of the mismatch between the fixed-rate assets and the floating-rate liabilities. This risk is mitigated by interest rate swaps hedging the Rated Notes.

COUNTERPARTIES
The Bank of New York Mellon, Frankfurt Branch (BONY-FB) is expected to be appointed to act as the account bank for the transaction. Morningstar DBRS privately rates BONY-FB and concluded that the bank meets the criteria to act in this capacity. The transaction documents are expected to contain downgrade provisions consistent with Morningstar DBRS' criteria.

DZ BANK AG Deutsche Zentral-Genossenschaftsbank (DZ Bank) is expected to be appointed as the swap counterparty for the transaction. Morningstar DBRS has a Long-Term Senior Debt rating of AA (low) with a Stable trend and a Long Term Critical Obligations Rating of AA with a Stable trend on DZ Bank. The hedging documents are expected to contain downgrade provisions consistent with Morningstar DBRS' criteria.

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

Morningstar DBRS' credit ratings do not address nonpayment 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.

Morningstar DBRS analysed the transaction structure in Intex Dealmaker.

Notes:
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 Seller and its agents. Morningstar DBRS received the following:
-- Quarterly gross default and net recovery data from Q1 2015 to Q4 2024;
-- Monthly delinquency and prepayment data, originations, and outstanding balances from January 2015 to December 2024;
-- Default and recovery performance of historical transactions; and
-- Stratifications of the preliminary portfolio cut off as of 31 March 2025 and its related theoretical 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.

A provisional credit rating is not a final credit rating with respect to the above-mentioned securities and may change or be different than the final credit rating assigned or may be discontinued. The assignment of final credit ratings on the above-mentioned securities is subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalise the credit ratings.

These credit ratings concern expected-to-be-issued new financial instruments. These are the first Morningstar DBRS credit ratings on these financial instruments.

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: 1.4%
-- Expected recovery rate: 60.0%
-- Loss given default (LGD): 61.0% for the AAA (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: AAA (sf), AAA (sf), AAA (sf), AAA (sf), AAA (sf), AA (sf), AA (high) (sf), AA (sf)
-- Class B Notes: AA (low) (sf), A (sf), AA (low) (sf), A (sf), A (sf), A (sf), A (sf), BBB (high) (sf)
-- Class C Notes: A (low) (sf), BBB (sf), A (low) (sf), BBB (high) (sf), BBB (sf), BBB (low) (sf), BBB (low) (sf), BB (high) (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: Xiaoxi Sun, Assistant Vice President
Rating Committee Chair: Paolo Conti, Associate Managing Director
Initial Rating Date: 5 May 2025

DBRS Ratings GmbH
Neue Mainzer Straße 75
D-60311 Frankfurt am Main
Tel. +49 (69) 8088 3500
Geschäftsführung: Detlef Scholz, Marta Zurita Bermejo
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.

Other methodologies referenced in this transaction are listed below:
-- 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
-- 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.