DBRS Upgrades and Confirms Ratings on Cars Alliance Auto Loans Germany V 2013-1

DBRS Ratings Limited (DBRS) has today taken the following rating actions on the Class A and Class B notes (the Notes) issued by Cars Alliance Auto Loans Germany V 2013-1 (the Issuer):

-- EUR 244,120,320 Class A notes confirmed at AAA (sf)
-- EUR 56,799,239 Class B notes upgraded to AA (sf) from A (high) (sf)

The above-mentioned rating actions reflect an annual review of the transaction and are based on the following analytical considerations, as described more fully below:
-- The overall portfolio performance as of the October 2016 payment date, in particular with regard to low levels of cumulative net loss and delinquencies.
-- The ability of the transaction to withstand stressed cash flow assumptions and repay investors according to the terms and conditions of the Notes.
-- The increased levels of credit enhancement available to the Notes to cover expected losses assumed in line with their respective rating levels.

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

Cars Alliance Auto Loans Germany V 2013-1 is a securitisation of German auto loans originated by RCI Banque S.A. Niederlassung Deutschland (RCI Banque-German Branch). The EUR 352.9 million portfolio as of the October 2016 payment date comprises loans for the purpose of new (83.7%) and used (16.3%) vehicles, granted entirely to retail customers. The transaction’s initial 12-month revolving period ended on the January 2015 payment date.

As of the October 2016 payment date, 30-60 day delinquencies were 0.81% of the outstanding discounted balance and 60-90 day delinquencies were 0.25%, while delinquencies greater than 90 days were 0.14%. The gross cumulative default ratio (as a percentage of the original portfolio and cumulative transferred receivables) was 0.85% as of October 2016, of which 69.2% has been recovered.

Credit Enhancement (CE) for the Notes is provided by overcollateralisation, subordination of the respective junior obligations and the Cash Reserve. CE for the Class A notes increased to 31.7% in October 2016 from 12.9% at closing in December 2013, and the CE for the Class B notes increased to 15.6% from 6.7%.

The transaction benefits from a Cash Reserve to cover senior fees and the interest due on the Class A and Class B Notes. In the event of an Issuer default, it can also be used to cover principal payments on the rated Notes. At closing it was funded with EUR 8.57 million. It amortises in accordance with Notes amortisation and has a target level of 1.0% of the aggregate principal outstanding of the Class A and Class B Notes at which it has remained throughout the life of the transaction.

A swap agreement with RCI Banque-German Branch is in place to hedge the interest rate mismatch between the Class A Notes, indexed to one-month Euribor, and the fixed interest rate payments from the collateral portfolio. Two Stand-by Swap Providers, HSBC France S.A. and Crédit Agricole Corporate and Investment Bank, guarantee the financial and operational terms of the swap agreements. Should RCI Banque-German Branch fail to meet its obligations as Swap Counterparty, HSBC France S.A. and Crédit Agricole Corporate and Investment Bank will step in. The Stand-by Swap Agreements define collateral posting provisions in line with DBRS’s “Derivative Criteria for European Structured Finance Transactions” methodology.

HSBC France S.A. acts as Account Bank for the transaction. Its DBRS private rating 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 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.

These 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 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 investor reports provided by Eurotitrisation and data from the European DataWarehouse GmbH.

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 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 the ratings of the Class A and Class B Notes were confirmed at AAA (sf) and A (high) (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, is 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 portfolio based on a review of the current assets and the transaction’s replenishment criteria. Adverse changes to asset performance may cause stresses to base case assumptions and, therefore, have a negative effect on credit ratings.

-- The Base Case of PD and LGD of the current pool of assets of receivables, without any additional stresses, are 2.9% and 47.8%, respectively.

-- The Risk Sensitivity overview below illustrates the ratings expected for the 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 ratings for the Class A and Class B Notes would be expected to remain at AAA (sf) and AA (sf), respectively, ceteris paribus. If the PD increases by 50%, the ratings for the Class A and Class B Notes would be expected to remain at AAA (sf) and AA (sf), respectively, ceteris paribus. Furthermore, if both the PD and LGD increase by 50%, the ratings for the Class A and Class B Notes would be expected to decrease to AA (high) (sf) and A (sf), respectively, ceteris paribus.

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 (sf)
-- 50% increase in LGD, expected rating of AA (sf)
-- 25% increase in PD, expected rating of AA (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 historical 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: Paolo Conti
Initial Rating Date: 14 November 2013
Initial Rating Committee Chair: Chuck Weilamann

Lead Surveillance Analyst: Joana Seara da Costa, Senior Financial Analyst
Rating Committee Chair: Christian Aufsatz, Senior Vice President

DBRS Ratings Limited
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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

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

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