Morningstar DBRS Assigns Provisional Credit Ratings to Bavarian Sky French Auto Leases 5

DBRS Ratings GmbH (Morningstar DBRS) assigned provisional credit ratings to the following classes of notes (the Rated Notes) to be issued by Bavarian Sky French Auto Leases 5 (the Issuer):
-- Class A Notes at (P) AAA (sf)
-- Class B Notes at (P) AA (low) (sf)

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

The credit ratings on the Rated Notes address the timely payment of scheduled interest and the ultimate repayment of principal by the legal final maturity date.

The transaction is a securitisation of a portfolio of fixed-rate receivables related to passenger vehicle and motorcycle lease contracts granted by BMW Finance S.N.C. (BMW Finance or the Seller), to private and commercial lessees resident or incorporated in France. The transaction is managed by IQ EQ Management and the portfolio is serviced by BMW Finance (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 BMW Finance's portfolio, the characteristics of the collateral, its historical performance, and Morningstar DBRS-projected behaviour under various stress scenarios;
-- BMW Finance's capabilities with regard to originations, underwriting, and servicing, and its position in the market and financial strength;
-- The operational risk review of BMW Finance, 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 legal structure with Morningstar DBRS' "Legal and Derivative Criteria for European Structured Finance Transactions" methodology; and
-- Morningstar DBRS' sovereign credit rating on the Republic of France, currently at AA (high) with a Negative trend.

TRANSACTION STRUCTURE
The transaction is static and begins to amortise from the issue date. The transaction incorporates a combined waterfall that facilitates the distribution of the available distribution amount consisting of, inter alia, collections representing lease instalment, recoveries, vehicle sale proceeds. The Notes will amortise sequentially, and all available distribution amounts including excess spread are made available to pay down the most senior class of Notes outstanding.

The Notes benefit from a cash reserve that will be funded on the closing date. The cash reserve is available to cover senior fees, senior net interest rate swap payments, and interest on the Notes.

The transaction is exposed to interest rate risk because of the mismatch between the fixed-rate assets and the floating-rate Class A Notes. This risk is mitigated by an interest rate swap hedging the Class A Notes.

COUNTERPARTIES
BNP Paribas (acting through its Securities Services business) (BNP) will be the account bank for the transaction. Morningstar DBRS has a Long-Term Issuer Rating of AA (low) with a Stable trend on BNP which meets the criteria to act in this capacity. The transaction documents are expected to contain downgrade provisions consistent with Morningstar DBRS' criteria.

Skandinaviska Enskilda Banken AB (SEB) will be the swap counterparty for the transaction. Morningstar DBRS has a Long-Term Critical Obligations Rating of AA (high) with a Stable trend on SEB, which meets the criteria to act in such capacity. 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 are the Rated Notes 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
Environmental (E) Factors

The transaction's exposure to battery electric vehicles (BEVs) is approximately 30.3% of the current portfolio balance. Morningstar DBRS received residual value (RV) performance data over a limited time horizon and lease-level data with contractual RV information for the provisional portfolio. Morningstar DBRS has independently validated the RV setting policy of BMW Finance using third-party market data, and derived fuel-type specific embedded loss assumptions. Morningstar DBRS assumed higher embedded losses for BEVs and deems the exposure to BEVs to be a significant Environmental factor within its analysis; namely the factor "Carbon and Greenhouse Gas (GHG) Costs". Had Morningstar DBRS not assumed comparably higher embedded losses for the BEV subset, the rating assigned to the Class B Notes would have been one notch higher.

There were no Social or 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, https://dbrs.morningstar.com/research/454196.

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 Seller and its agents. Morningstar DBRS received:
-- Quarterly origination and gross default data from Q1 2018 to Q4 2024;
-- Quarterly net loss data from Q1 2018 to Q4 2024;
-- Monthly delinquency data from January 2016 to April 2025;
-- Monthly prepayment data from January 2016 to December 2024;
-- Lease-level residual value date and portfolio-level historical residual value performance until 2021; and
-- Portfolio stratification tables 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 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.

A provisional credit rating is not a final credit rating with respect to the above-mentioned security and may change or be different than the final credit rating assigned or may be discontinued. The assignment of a final credit rating 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 rating.

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: 2.2%
-- Expected recovery rate: 69.0%
-- Loss given default (LGD):
55.1% for the AAA (sf) scenario
50.3% for the AA (low) (sf) scenario
-- RV loss:
35.0% for the AAA (sf) scenario
26.7% for the AA (low) (sf) scenario

Scenario 1: 25% increase in expected default and LGD
Scenario 2: 50% increase in expected default and LGD
Scenario 3: 25% increase in RV loss
Scenario 4: 25% increase in expected default and LGD and 25% increase in RV loss
Scenario 5: 50% increase in expected default and LGD and 25% increase in RV loss
Scenario 6: 50% increase in RV loss
Scenario 7: 25% increase in expected default and LGD and 50% increase in RV loss
Scenario 8: 50% increase in expected default and LGD and 50% increase in RV loss

Morningstar DBRS concludes that the expected credit ratings under the eight stress scenarios, respectively, would be:
-- Class A Notes: AAA (sf), AA (high) (sf), AAA (sf), AA (high) (sf), AA (sf), AA (high) (sf), AA (sf), and AA (low) (sf)
-- Class B Notes: A (high) (sf), A (sf), A (high) (sf), A (sf), A (low) (sf), A (low) (sf), BBB (high) (sf), and BBB (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: 23 June 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 (16 May 2025),
https://dbrs.morningstar.com/research/454196

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.