DBRS Confirms the Ratings to Cars Alliance Warehouse Italy S.r.l.

DBRS Ratings Limited (“DBRS”) has reviewed and confirmed the ratings of the Class A Notes previously issued by Cars Alliance Warehouse Italy S.r.l. (“the Issuer”) at ‘AAA (sf)’.

The confirmation of the rating on the Class A Notes is based upon the following analytical considerations:

• Portfolio performance, in terms of defaults and delinquencies, as of the April 2014 payment date.
• Updated default, recovery and loss assumptions on the remaining balance of the collateral portfolio.
• Incorporation of a sovereign related stress component in the rating analysis to address the impact of macroeconomic variables on collateral performance given the long-term foreign and local currency rating of ‘A’ (low) for the Republic of Italy.
• Current available credit enhancement to the Class A Notes to cover the expected losses at the AAA (sf) rating level.

Cars Alliance Warehouse Funding Italy is a securitisation of a portfolio of auto loan receivables originated and serviced by RCI Banque S.A., acting through its branch in Italy. RCI Banque S.A.is a bank incorporated under le law of the French Republic and is fully owned by Renault SA. The deal follows the standard structure under the Italian Securitisation Law and closed in June 2012.

The transaction is about to conclude its two-year revolving period which terminates in May 2014. There are performance triggers and concentration limits to mitigate the potential portfolio performance deterioration. To date, all of them have passed.

The collateral has not showed substantial changes during the replenishment period. The pool comprises of loans extended to Italian individuals (92.94%) and corporates (7.06%) to buy new (95.61%) and used car (4.39%). Balloon loans account for 6.07% of the current portfolio.

The cumulative default ratio exhibited an increasing trend since rating but it is still relatively low at 0.89% (calculated on the initial collateral). The 90+ delinquency ratio has marginally increased on the last reporting date and reached the peak of 2.80% in April 2014. The remaining buckets of arrears have been stable and well below 2%.

The Class A Notes are supported by subordination of the Class J Notes. Credit enhancement for the Class A Notes (as a percentage of the performing portfolio) remained stable around 16.50% since rating in July 2012. Class J Notes were issued in excess of 2.02% of the original portfolio to fund the initial cash reserve of EUR 15.00 million. The cash reserve is available to pay senior items and interest on the Class A Notes and it will amortise over the life of the transaction at the lower of 2.02% of the aggregate balance of Class A and Class J Notes and EUR 15.00 million. The cash reserve is currently at its target level of EUR 15.00 million.

Crédit Agricole Corporate and Investment Bank, Milan branch serves as account bank for the transaction. The DBRS private ratings of Crédit Agricole Corporate and Investment Bank, Milan branch is at least equal to the Minimum Institution Rating given the rating assigned to the Class A Notes, as described in the DBRS Legal Criteria for European Structured Finance.

Notes:
All figures are in Euro unless otherwise noted.
The principal methodology applicable is the Master European Structured Finance Surveillance Methodology. Other methodologies and criteria referenced in this transaction are listed at the end of this press release.

This can be found on www.dbrs.com at:
http://www.dbrs.com/about/methodologies

For a more detailed discussion of sovereign risk impact on Structured Finance ratings, please refer to DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.

The sources of information used for this rating include payment reports and investor reports provided by Crédit Agricole Corporate and Investment Bank, Milan branch. as well as servicer reports provided by RCI Banque S.A., Italian branch. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

The last rating action on this transaction took place on 17 April 2013, when DBRS confirmed the ratings of the Class A Notes at ‘AAA (sf’ and removed the ratings from Under Review with Negative Implications.

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.

To assess the impact of the changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the “Base Case”):

• DBRS expected a Base Case Probability of Default (PD) and Loss Given Default (LGD) for the pool based on a review of the transaction performance. 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 receivables are 3.07% and 88.36%, respectively.
• The Risk Sensitivity overview below illustrates the ratings expected for the Class A Notes if the PD and LGD increase by a certain percentage over the Base Case assumption. For example, if the LGD increase by 50% the rating for the Class A Notes would be expected to be AA (sf), all else being equal. If the PD increases by 50% the rating for the Class A Notes would be expected to fall to AA (sf), all else being equal. If both the LGD and PD increase by 50%, the rating of the Class A Notes would be expected to fall to A (sf), all else being equal.

Class A Notes Risk Sensitivity:

• 25% increase in LGD, expected rating of AA (sf).
• 50% increase in LGD, expected rating of AA (sf).
• 25% increase in PD, expected rating of AA (sf).
• 50% increase in PD, expected rating of AA (sf).
• 25% increase in LGD and 25% increase in PD, expected rating of AA (sf).
• 25% increase in LGD and 50% increase in PD, expected rating of A (sf).
• 50% increase in LGD and 25% increase in PD, expected rating of AA (sf).
• 50% increase in LGD and 50% increase in PD, expected rating of A (sf).

For further information on DBRS historic default rates published by the European Securities and Markets Administration (“ESMA”) in a central repository, see:
http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Initial Lead Analyst: Paolo Conti
Initial Rating Date: 14 June 2012
Initial Rating Committee Chair: Claire Mezzanotte

Lead Surveillance Analyst: Elisa Scalco
Rating Committee Chair: Chuck Weilamann

DBRS Ratings Limited
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The rating methodologies and criteria used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies

• Legal Criteria for European Structured Finance Transactions.
• Master European Structured Finance Surveillance Methodology.
• Operational Risk Assessment for European Structured Finance Servicers.
• Unified Interest Rate Model for European Securitisations.
• Rating European Consumer and Commercial Asset-Backed Securitisations.