DBRS Confirms Rating on Cars Alliance Auto Loans Italy 2015 S.r.l.

DBRS Ratings Limited (DBRS) has today confirmed its rating of AAA (sf) on the Class A Notes issued by Cars Alliance Auto Loans Italy 2015 S.r.l. (the Issuer).

The rating action is based on the following analytical considerations, as described more fully below:
-- Portfolio performance, in terms of delinquencies and defaults, as of the June 2016 payment date.
-- Actual default rate, recovery rate and expected losses are within DBRS’s expectations.
-- Current available credit enhancement for the Class A Notes to cover the expected losses at the AAA (sf) rating level.

Cars Alliance Auto Loans Italy 2015 is a securitisation of auto loan receivables to both retail and commercial clients originated in Italy by the Italian branch of RCI Banque S.A. (RCI). The receivables in the portfolio comprise loans for purchasing new or used vehicles. The transaction closed in July 2015 and is currently in its 30-month revolving period that is scheduled to terminate in January 2018. There are eligibility criteria, concentration limits and performance triggers in place to mitigate any potential portfolio deterioration.

As of the June 2016 payment date the 90+ delinquency ratio is at 0.11% of the performing balance and the cumulative gross default ratio (calculated on the initial portfolio plus each additional portfolio) reached 0.31%.

The Class A Notes are supported by subordination of the Class J Notes. The credit enhancement for the Class A Notes is at 22.63%. The transaction benefits from a Cash Reserve fully funded at closing with the issuance proceeds of the Class J Notes in excess of the total collateral. The Required Reserve Amount is equal to EUR 12.45 million during the Revolving Period and, thereafter, to 1% of the Principal Amount Outstanding of the Notes with a floor equal to EUR 1 million. The Reserve is used to cover any shortfalls in the fees, expenses and interest on the Class A Notes during the life of the transaction. The reserve is currently at the required level of EUR 12.45 million.

Credit Agricole Corporate and Investment Bank, Milan branch is the Account Bank for the transaction. The DBRS private rating of Credit Agricole Corporate and Investment Bank, Milan branch complies with the Minimum Institution Rating given the rating assigned to the Class A Notes, as described in the DBRS “Legal Criteria for European Structured Finance Transactions” methodology.

Notes:
All figures are in euros unless otherwise noted.

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

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

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. However, due to the inclusion of a revolving period in the transaction, and no change in assumptions, the initial analysis based on worst-case replenishment criteria set forth in the transaction legal documents was assumed.

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

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 investor reports provided by Zenith Service S.p.A.

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 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.

This is the first rating action since the Initial Rating Date. The lead responsibilities for this transaction have been transferred to Antonio Di Marco.

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

To assess the impact of 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 3.60% and 90.50%, 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 increases by 50% the rating for the Class A Notes would be expected to fall at BB (sf), all else being equal. If the PD increases by 50% the rating for the Class A Notes would be expected to drop to BB (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 drop to CCC (sf), all else being equal.

Class A Risk Sensitivity:
-- 25% increase in LGD, expected rating of AAA (sf).
-- 50% increase in LGD, expected rating of AAA (sf).
-- 25% increase in PD, expected rating of AAA (sf).
-- 50% increase in PD, expected rating of AA (high) (sf).
-- 25% increase in LGD and 25% increase in PD, expected rating of AA (high) (sf).
-- 25% increase in LGD and 50% increase in PD, expected rating of AA (sf).
-- 50% increase in LGD and 25% increase in PD, expected rating of AA (high) (sf).
-- 50% increase in LGD and 50% increase in PD, expected rating of AA (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: Eric Levassor
Initial Rating Date: 23 July 2015
Initial Rating Committee Chair: Chuck Weilamann

Lead Surveillance Analyst: Antonio Di Marco, Senior Financial Analyst
Rating Committee Chair: Chuck Weilamann, Managing Director

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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 Originators
-- Operational Risk Assessment for European Structured Finance Servicers
-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- 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.