DBRS Takes Rating Actions on Cars Alliance Auto Loans France V 2014-1

DBRS Ratings Limited (DBRS) has today taken the following rating actions on the Class A Notes and Class B Notes (the Rated Notes) issued by Cars Alliance Auto Loans France V 2014-1 (the Issuer):
-- EUR 287,726,220 Class A Notes confirmed at AAA (sf)
-- EUR 44,000,000 Class B Notes upgraded to AA (high) (sf) from AA (low) (sf)

The ratings on the Rated Notes address the timely payment of interest and the ultimate payment of principal on or before the Legal Maturity Date in January 2026.

The above-mentioned rating actions reflect an annual review of the transaction and are based on the following analytical considerations:
-- The overall portfolio performance as of September 2016 payment date, particularly with regard to the low levels of delinquencies and gross cumulative defaults.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms and conditions of the Notes.
-- The current available credit enhancement to the Class A and Class B Notes to cover expected losses assumed in line with the AAA (sf) and AA (high) (sf) rating levels, respectively.

The Issuer is a securitisation collateralised by a pool of auto loan receivables granted by Diac SA (DIAC), Renault Nissan Alliance’s captive lender in France, to retail and corporate customers resident in France. The transaction closed in October 2014 and had a 12-month revolving period that ended in October 2015.

The portfolio is performing within DBRS’s expectations. As of the September 2016 payment date, one- to two-month delinquencies and two- to three-month delinquencies were 0.57% and 0.26% of the portfolio discounted balance, respectively. The cumulative gross default ratio was 1.48% of the aggregated original balance, with cumulative recoveries of 49.90%.

Credit enhancement for the Class A Notes (22.33%) is provided by the subordination of the more junior obligations (the Class B Notes, Class C Notes and the Residual Units) and the General Reserve Account. Credit enhancement for the Class B Notes (10.30%) is provided by the subordination of the Class C Notes, the Residual Units and the General Reserve Account.

The transaction structure includes a General Reserve Account that is available to cover senior expenses and missed interest payments on the Rated Notes and, as soon as the portfolio balance is reduced to zero or on the final maturity date, to repay principal on the Notes. This account was funded at closing with EUR 6.78 million, and its target balance is equal to 1.00% of the aggregate principal balance of the Notes.

The Issuer entered into a Swap Agreement with DIAC in order to hedge the interest rate mismatch between the Rated Notes, indexed to 1-month Euribor, and the fixed interest rate payments from the collateral portfolio. The structure also includes a Stand-by Swap, where BNP Paribas SA provides financial and operational guarantee to DIAC; if DIAC fails to meet its obligations as Swap Counterparty, BNP Paribas SA will step in to hedge the Issuer’s exposure. The FCT Stand-by Swap Agreement defines downgrade provisions in line with DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology.

Société Générale, S.A. is the Account Bank for this transaction, and Crédit Industriel et Commercial acts as Servicer Collection Account Bank. The Account Bank reference rating of AA (low) – being one notch below the DBRS Long Term Critical Obligations Rating of Société Générale, S.A. at AA - complies with the Minimum Institution Rating, given the rating assigned to the Class A 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 Eurotitrisation (the Management Company).

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 to be 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 22 October 2015, when DBRS confirmed the ratings assigned to the Class A and Class B Notes at AAA (sf) and AA (low) (sf), respectively.

The lead responsibilities for this transaction have been transferred to Joana Seara da Costa.

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

To assess the impact of changing transaction parameters on the rating, at closing DBRS considered the following stress scenarios 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) 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 4.57% and 49.56%, respectively.

-- The Risk Sensitivity below illustrates the ratings expected for the Rated Notes if the PD and LGD increase by a certain percentage over the base case assumptions. For example, if the LGD increases by 50%, the rating for the Class A Notes would be expected to remain at AAA (sf) and the rating for the Class B Notes would be expected to decrease to AA (sf), all else being equal. If the PD increases by 50%, the rating for the Class A Notes would be expected to remain at AAA (sf) and the rating for the Class B Notes would be expected to decrease to AA (sf), all else being equal. Furthermore, if both the PD and LGD increase by 50%, the rating for the Class A Notes would be expected to decrease to AA (high) (sf) and the rating for the Class B Notes would be expected to decrease to A (sf), all else being equal.

Class A Notes 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);
-- 25% increase in PD and 25% increase in LGD, expected rating of AAA (sf);
-- 25% increase in PD and 50% increase in LGD, expected rating of AAA (sf);
-- 50% increase in PD, expected rating of AAA (sf);
-- 50% increase in PD and 25% increase in LGD, expected rating of AAA (sf);
-- 50% increase in PD and 50% increase in LGD, expected rating of AA (high) (sf).

Class B Notes risk sensitivity:
-- 25% increase in LGD, expected rating of AA (high) (sf);
-- 50% increase in LGD, expected rating of AA (sf);
-- 25% increase in PD, expected rating of AA (high) (sf);
-- 25% increase in PD and 25% increase in LGD, expected rating of AA (sf);
-- 25% increase in PD and 50% increase in LGD, expected rating of A (high) (sf);
-- 50% increase in PD, expected rating of AA (sf);
-- 50% increase in PD and 25% increase in LGD, expected rating of A (high) (sf);
-- 50% increase in PD and 50% increase in LGD, expected rating of A (sf).

For further information on DBRS historic default rates published by the European Securities and Markets Authority (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: 24 September 2014
Initial Rating Committee Chair: Chuck Weilamann

Lead Surveillance Analyst: Joana Seara da Costa, Senior Financial Analyst
Rating Committee Chair: Chuck Weilamann, Managing Director

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

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

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