DBRS Upgrades and Confirms Ratings on Bavarian Sky France, Compartment French Auto Leases 1

DBRS Ratings Limited (DBRS) has taken the following rating actions on the notes issued by Bavarian Sky France, Compartment French Auto Leases 1 (the Issuer):
-- EUR 204,760,091.25 Class A Notes confirmed at AAA (sf)
-- EUR 42,500,000 Class B Notes upgraded to AA (low) (sf) from A (sf)

The rating action reflects an annual review of the transaction, based upon the following analytical considerations:
-- Portfolio Performance, in terms of delinquencies and defaults, as of the May 2016 payment date.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms on which they have invested.
-- The current available credit enhancement to the notes to cover expected losses assumed in line with the AAA (sf) rating level for Class A Notes and AA (low) (sf) for Class B Notes.

The ratings on the Notes address the timely payment of interest and the ultimate payment of principal on or before the Legal Final Maturity Date in April 2024.

The Issuer is a fonds commun de titrisation established jointly by France Titrisation and BNP Paribas Securities Services SCA (BNP SS). The Notes are backed by a portfolio of lease receivables granted by BMW Finance SNC (BMW) in France. The transaction closed in May 2015 and follows the standard structure under French securitisation law.

The portfolio includes leases with and without a purchase option, exposing the transaction to Residual Value (RV) risk, which represented 64.77% of the portfolio balance as of May 2016 payment date.

The portfolio is performing in line with DBRS’s expectations. As of the May 2016 payment date, 31-60 day delinquencies and 61-90 day delinquencies were 0.27% and 0.12% of the Aggregate Discounted Lease Balance, respectively, while delinquencies greater than 90 days were 0.23%. Gross cumulative defaults were 0.70% of the original portfolio discounted balance, with cumulative recoveries of 13.33%.

Credit enhancement for the Class A Notes (37.08%) is provided by overcollateralisation (OC), the subordination of the Class B Notes and the Cash Reserve. Credit enhancement for the Class B Notes (23.72%) is provided by OC and the Cash Reserve.

The transaction structure includes a Cash Reserve Ledger, available to cover senior expenses and missed interest payments on the Class A and Class B Notes. The Cash Reserve Ledger is currently funded at its target level of EUR 4,515,700.

A swap structure is in place to hedge the interest rate mismatch between the Notes, indexed to 1-month Euribor, and the fixed interest rate payments from the collateral portfolio. DZ BANK AG Deutsche Zentral-Genossenschaftsbank is the Counterparty of the Swap Agreement; the DBRS rating of DZ BANK AG Deutsche Zentral-Genossenschaftsbank at A (high) complies with the First Rating Threshold defined in DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology.

BNP Paribas SA is the Issuer Account Bank for this transaction. The Issuer Account Bank reference rating of AA – being one notch below the DBRS Long Term Critical Obligations Rating of BNP Paribas SA at AA (high) – complies with the Minimum Institution Rating, given the rating assigned to the Notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is “Master European Structured Finance Surveillance Methodology”.

DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

A review of the transaction’s legal documents was not conducted, as the documents have remained unchanged since the most recent rating action.

Other methodologies referenced in this transaction are listed at the end of this press release. This may be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies.

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

The sources of information used for this rating include monthly investor reports provided by France Titrisation (the Management Company) and BMW.

DBRS does not rely upon third-party due diligence in order to conduct its analysis.

DBRS was not supplied with third-party assessments; however, this did not impact the rating analysis.

DBRS considers the information available to it for the purposes of providing these ratings 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.

This is the first rating action since the Initial Rating Date.

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

To assess the impact of the changing transaction parameters on the rating, DBRS considered the following stress scenarios, as compared with the parameters used to determine the rating (the base case):

-- DBRS expected a base case probability of default (PD) and loss given default (LGD) and Residual Value Loss for the portfolio 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 receivables are 4.07% and 36.34%, respectively.
-- Residual Value Loss: For Class A Notes, a stressed residual value of 36.32% and for Class B Notes a stressed value of 27.88%.

DBRS concludes that for the Class A Notes:
-- A hypothetical increase of the base case PD and LGD by 25%, ceteris paribus, would lead to the Class A Notes maintaining a AAA (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 50%, ceteris paribus, would lead to the Class A Notes maintaining a AAA (sf) rating.
-- A hypothetical increase of the base case Residual Value Loss by 25%, ceteris paribus, would lead to the Class A Notes maintaining a AAA (sf) rating.
-- A hypothetical increase of the base case Residual Value Loss by 50%, ceteris paribus, would lead to the Class A Notes maintaining a AAA (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 25% and a hypothetical increase of the Residual Value Loss by 25%, ceteris paribus, would lead to the Class A Notes maintaining a AAA (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 50% and a hypothetical increase of the Residual Value Loss by 25%, ceteris paribus, would lead to the Class A Notes maintaining a AAA (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 25% and a hypothetical increase of the Residual Value Loss by 50%, ceteris paribus, to the Class A Notes maintaining a AAA (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 50% and a hypothetical increase of the Residual Value Loss by 50%, ceteris paribus, would lead to a downgrade of the Class A Notes to A (low) (sf).

DBRS concludes that for the Class B Notes:
-- A hypothetical increase of the base case PD and LGD by 25%, ceteris paribus, would lead to the Class B Notes maintaining a AA (low) (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 50%, ceteris paribus, would lead to a downgrade of the Class B Notes to A (high) (sf).
-- A hypothetical increase of the base case Residual Value Loss by 25%, ceteris paribus, would lead to the Class B Notes maintaining a AA (low) (sf) rating.
-- A hypothetical increase of the base case Residual Value Loss by 50%, ceteris paribus, would lead to a downgrade of the Class B Notes to CCC (high) (sf).
-- A hypothetical increase of the base case PD and LGD by 25% and a hypothetical increase of the Residual Value Loss by 25%, ceteris paribus, would lead to a downgrade of the Class B Notes to A (sf).
-- A hypothetical increase of the base case PD and LGD by 50% and a hypothetical increase of the Residual Value Loss by 25%, ceteris paribus, would lead to a downgrade of the Class B Notes to BBB (low) (sf).
-- A hypothetical increase of the base case PD and LGD by 25% and a hypothetical increase of the Residual Value Loss by 50%, ceteris paribus, would lead to a downgrade of the Class B Notes to CCC (high) (sf).
-- A hypothetical increase of the base case PD and LGD by 50% and a hypothetical increase of the Residual Value Loss by 50%, ceteris paribus, would lead to a downgrade of the Class B Notes to CCC (high) (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: David Sanchez Rodriguez
Final Lead Analyst: Eric Levassor
Initial Rating Date: 30 April 2015
Initial Rating Committee Chair: Chuck Weilamann

Lead Surveillance Analyst: Vito Natale, Senior Vice President
Rating Committee Chair: Diana Turner, Senior Vice President

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Registered in England and Wales: No. 7139960

The rating methodologies 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
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Derivative Criteria for European Structured Finance Transactions
-- Unified Interest Rate Model for European Securitisations

A description of how DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at http://www.dbrs.com/research/278375.