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

DBRS Ratings Limited (DBRS) has today confirmed the rating of AAA (sf) on the EUR 43,882,302.75 Class A Notes issued by Bavarian Sky France, Compartment French Auto Leases 1 (the Issuer). DBRS has also upgraded the rating on the EUR 42,500,000 Class B Notes (together, the Notes) to AA (high) (sf) from AA (low) (sf).

These rating actions reflect an annual review of the transaction and are based on the following analytical considerations:
-- The overall portfolio performance as of the May 2017 payment date, in particular with regard to low levels of cumulative net loss and delinquencies.
-- A review of default, recovery and loss assumptions on the remaining receivables and update of the residual value haircut
-- The current levels of credit enhancement (CE) available to the rated notes to cover expected losses.

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.

Bavarian Sky France, Compartment French Auto Leases 1 is a securitisation of auto lease receivables originated in France by BMW Finance SNC (BMW Finance). As of May 2017, the EUR 171.0 million portfolio comprises leases for the purpose of new (90.8%) and used (9.2%) vehicles, granted to both commercial (34.3%) and private individuals (65.7%). The residual value associated with the auto leases has been securitised and comprises 85.3% of the current portfolio. The transaction envisages no revolving period and has been amortising since it closed in May 2015.

PORTFOLIO PERFORMANCE
As of the May 2017 payment date, 30- to 60-day delinquencies were 0.2% of the outstanding discounted lease balance and 60- to 90-day delinquencies were 0.3% while delinquencies greater than 90 days were 0.2%. The gross cumulative default ratio as a percentage of the original portfolio was 1.4% as of May 2017, 25.9% of which 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 77.0% in May 2017 from 21.8% at closing while the CE for the Class B Notes increased to 52.1% from 12.3%.

The transaction benefits from a non-amortising Cash Reserve available to cover senior fees and the interest due on the Notes, funded at closing with part of the proceeds of a subordinated loan. In the event of Issuer default, it can also be used to cover principal payments on the Notes. It has been at its target level of EUR 4.5 million since closing.

A swap structure is in place to hedge the interest rate mismatch between the Notes, indexed to one-month Euribor, and the fixed interest rate payments from the collateral portfolio. DZ BANK AG Deutsche Zentral-Genossenschaftsbank (DZ BANK AG) is the Counterparty of the Swap Agreement; the DBRS Issuer Rating of DZ BANK AG 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 account bank reference rating of AA, which is 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 to the rating is the 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 legal 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 data and information used for this rating include monthly investor reports provided by France Titrisation (the Management Company) and BMW Finance.

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

At the time of the initial rating DBRS was not supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS considers the data and information available to it for the purposes of providing this rating to be of satisfactory quality.

DBRS does not audit or independently verify the data or information it receives in connection with the rating process.

The last rating action on this transaction took place on 27 May 2016, when DBRS confirmed the Class A Notes at AAA (sf) and upgraded the Class B Notes to AA (low) (sf) from A (sf).

The lead analyst 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 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 PD and 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 3.9% and 35.7%, respectively.
-- Residual Value Loss: For Class A and Class B Notes, a stressed residual value of 34.2% and 31.2%, respectively.

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 the Class A Notes maintaining a AAA (sf) rating.

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 (high) (sf) rating.
-- A hypothetical increase of the base case PD and LGD by 50%, ceteris paribus, would lead to the Class B Notes maintaining a AA (high) (sf) rating.
-- A hypothetical increase of the base case Residual Value Loss by 25%, ceteris paribus, would lead to the Class B Notes maintaining a AA (high) (sf) rating.
-- A hypothetical increase of the base case Residual Value Loss by 50%, ceteris paribus, would lead to the Class B Notes maintaining a AA (high) (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 B Notes maintaining a AA (high) (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 B Notes maintaining a AA (high) (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, would lead to the Class B Notes maintaining a AA (high) (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 the Class B Notes maintaining a AA (high) (sf) rating.

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.

Lead Analyst: Joana Seara da Costa, Senior Financial Analyst
Rating Committee Chair: Vito Natale, Senior Vice President
Initial Rating Date: 30 April 2015

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